SMDC to drop some insurance plans

Patrick Garmoe

Jul. 29, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- Beginning next year, SMDC Health System will no longer accept private fee-for-service Medicare Advantage insurance plans, which could mean increased medical bills for some.

The move will affect 6,000 people, according to officials with the Duluth-based health-care provider, or about 14.2 percent of Medicare patients who use the health system.

SMDC patients on private fee-for-service Medicare Advantage plans will have to switch to either an SMDC-approved health maintenance organization plan or preferred provider organization plan.

While SMDC officials say over the year many patients will face more expensive premiums, those will be offset by lower medical costs under those plans.

But Jean Sedin, who represented independent clinics at negotiations with HMOs and PPOs as the former executive director of Northstar Physicians in Duluth and is one of the seniors affected, said SMDC's move will end up costing rank-and-file policyholders at least an extra $100 a month in premiums. And she doesn't believe, in many cases, that the additional cost will be offset by cheaper visits to the doctor.

"I'm kind of outraged on behalf of all the seniors that don't have the knowledge," Sedin said. She said people who haven't spent their lives working with health-care financing won't easily realize how much this might ultimately cost them.

Both the private fee-for-service plans and HMO and PPO plans work essentially the same way as traditional Medicare, but instead are run by private insurers paid by the government. The plans typically offer extra benefits and have lower co-payments than traditional Medicare, and sometimes include prescription drug coverage.

While private fee-for-service plans simply pay a fee each time a Medicare user visits the hospital, HMOs and PPOs pay a flat contracted rate with the hospital for a number of patients each year.

SMDC officials said the decision to quit accepting private fee-for-service insurance grew out of failures of some of the private fee-for-service companies to pay their bills on time or, sometimes, at all.

"It doesn't serve us well. We're incurring ... higher costs for less benefit to ourselves," said John Smylie, chief administrative officer for SMDC.

SMDC is the third hospital in the state to eliminate accepting the plans -- after HealthPartners' Regions Hospital in St. Paul and Park Nicollet Health Services Methodist Hospital in St. Louis Park.

St. Luke's hospital and the Superior Health Center clinics in Duluth both said they honor private fee-for-service plans and have no plans to discontinue them.

Smylie estimated SMDC has lost or is fighting for hundreds of thousands of dollars in revenue owed to the system.

Unlike with HMOs and PPOs, hospitals can't legally have contracts with the private fee-for-service companies. That, Smylie said, has led to bills constantly not being paid and no easy way for the hospital system to recoup its costs.

Medicare pays those companies a lump sum to insure patients, and they in turn pay for certain services hospitals provide. Under HMO and PPO plans, hospitals work much more closely with the insurance companies and provide continued care plans, not just individual services, Smylie said.

HMO and PPO plans sometimes pay SMDC better than some of the private fee-for-service companies. Cathy VonRueden, director of business services at SMDC Health System, said that's because they are providing much more for clients than they are expected to under the private fee-for-service programs.

Adam Gundry, an insurance agent in Superior, said he alone has 2,000 clients affected by the change.

While the hospital might say having an HMO or PPO is just as good as a private fee-for-service policy, Gundry said his 21 years of experience in insurance doesn't suggest that.

"We just never have found that to be the best fit for the client," Gundry said. "Everyone's going to pay more in premiums than they used to."

Many Medicare patients in the area have no choice but to come to an SMDC doctor for certain procedures, Sedin said, and therefore must enroll in the HMO or PPO options. In addition, many people aren't going to want to lose their doctor and therefore will feel compelled to go with one of the HMOs or PPOs, she said.

"I don't feel safe going to a new doctor and establishing that relationship when I have a doctor I'm happy with," Sedin said. She figures she'll go from paying $29 a month now to a minimum of $116 under a new plan.

In August, SMDC will send out a letter to all of its Medicare patients outlining the changes.

In the meantime, people with questions can call (800) 985-4675 or (218) 786-3333. Patients needing TTY services can call (218) 786-6650.

Newstex ID: KRTB-0055-27002149