TVHD Explains HMO Decisions
TVHD Explains HMO Decisions
By: Raymond Hino
Topics: hospital
Posted by RaymondHino Fri Sep 22, 2006 16:42:46 PDT
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In the upcoming election for the Board of Directors for the Tehachapi Valley Healthcare District it has become apparent that one of the key campaign issues will be TVHD’s HMO contracting policies. I would like to take a few moments to explain, for the benefit of all the candidates and especially the general public, why some HMO contracts have been terminated in the past.
It is very important to note that we at the Hospital District would dearly love to have a contract with every major HMO plan including GEMCare, BFMC and Kaiser so that no person from the Tehachapi area would ever have to drive 50 miles or more for a service that is routinely provided locally. And it is my hope that eventually we will have these contracts. Because HMO contracting is different from the way that most business is conducted, I am going to try to explain our policies by using a bakery as an example.
Let’s say for illustration purposes that TVHD is the owner of a bakery instead of a hospital. In our bakery we sell donuts, cookies, cakes and the usual assortment of baked goods. One day a negotiator approachs our TVHD bakery and makes the following offer: “I represent 5 major supermarkets in your area and they would like to purchase your baked goods. If you sign up with me, I will make sure that your baked goods are on the shelfs of all 5 supermarkets.”
That sounds good and we may be very tempted to do that. However then the negotiator tells us the following: “You will have to agree to sell your donuts to the grocery stores for 2 cents each.” Our jaws drop open because we know that it costs us 10 cents each to make each donut. The negotiator says to us “Hostess cupcakes sells donuts to us for 2 cents each so you should be able to do it too.” We realize that Hostess cupcakes has a huge factory and sells donuts all over the country. We cannot compete with their price.
By the way, we also know that the supermarkets need our donuts because they are so popular and by not signing the negotiated agreement, they will pay us 15 cents per donut. But we will end up selling less donuts. The above example is an oversimplified example of why TVHD discontinued contracts with the negotiators (GEMCare and BFMC). We asked to be paid our costs for providing services. They refused. The current hospital board has been put in the very difficult position of having to refuse these contracts in order to be responsible fiscal sheepherders of our public dollars.
If the people of our area truly want their HMO plan to contract with our hospital then they can help most by going to their health plans and demand that they contract with Tehachapi Hospital for a fair price.
The Federal government recognizes the plight of small rural hospitals such as Tehachapi and it agreed nearly 10 years ago to pay critical access hospitals 100% of their costs to provide services to Medicare beneficiaries. We even got a raise in 2004. We are now paid 101% of our costs.
Regardless of who is elected to the hospital board, I hope that they will continue to put the finances of our hospital first and demand fair pricing for services. Using our current strategy we have secured several very good contracts and in the very near future we are going to be able to announce a new HMO and PPO contract with a major National Health Plan. As soon as we are given the go ahead to make the announcement, we will make it.
It is very important to note that we at the Hospital District would dearly love to have a contract with every major HMO plan including GEMCare, BFMC and Kaiser so that no person from the Tehachapi area would ever have to drive 50 miles or more for a service that is routinely provided locally. And it is my hope that eventually we will have these contracts. Because HMO contracting is different from the way that most business is conducted, I am going to try to explain our policies by using a bakery as an example.
Let’s say for illustration purposes that TVHD is the owner of a bakery instead of a hospital. In our bakery we sell donuts, cookies, cakes and the usual assortment of baked goods. One day a negotiator approachs our TVHD bakery and makes the following offer: “I represent 5 major supermarkets in your area and they would like to purchase your baked goods. If you sign up with me, I will make sure that your baked goods are on the shelfs of all 5 supermarkets.”
That sounds good and we may be very tempted to do that. However then the negotiator tells us the following: “You will have to agree to sell your donuts to the grocery stores for 2 cents each.” Our jaws drop open because we know that it costs us 10 cents each to make each donut. The negotiator says to us “Hostess cupcakes sells donuts to us for 2 cents each so you should be able to do it too.” We realize that Hostess cupcakes has a huge factory and sells donuts all over the country. We cannot compete with their price.
By the way, we also know that the supermarkets need our donuts because they are so popular and by not signing the negotiated agreement, they will pay us 15 cents per donut. But we will end up selling less donuts. The above example is an oversimplified example of why TVHD discontinued contracts with the negotiators (GEMCare and BFMC). We asked to be paid our costs for providing services. They refused. The current hospital board has been put in the very difficult position of having to refuse these contracts in order to be responsible fiscal sheepherders of our public dollars.
If the people of our area truly want their HMO plan to contract with our hospital then they can help most by going to their health plans and demand that they contract with Tehachapi Hospital for a fair price.
The Federal government recognizes the plight of small rural hospitals such as Tehachapi and it agreed nearly 10 years ago to pay critical access hospitals 100% of their costs to provide services to Medicare beneficiaries. We even got a raise in 2004. We are now paid 101% of our costs.
Regardless of who is elected to the hospital board, I hope that they will continue to put the finances of our hospital first and demand fair pricing for services. Using our current strategy we have secured several very good contracts and in the very near future we are going to be able to announce a new HMO and PPO contract with a major National Health Plan. As soon as we are given the go ahead to make the announcement, we will make it.
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