Senate OKs community networks HMOs, insurers call new scheme unfair competition; House kills similar bill; Groups of doctors, hospitals could offer workplace contracts


The Maryland Senate last night unanimously approved a bill to license a new type of health care plan that would allow hospitals and doctors' groups to compete directly with health maintenance organizations and insurance companies.

Under the legislation, which passed 44-0, the state would license and regulate so-called community health networks.

The bill, which is the top legislative priority of the Maryland Hospital Association, would allow networks created by hospitals or groups of doctors to contract with employers to provide health care. The main point of controversy has been whether such networks are so similar to HMOs that they should operate under HMO regulations, or whether they are different and need different rules of operation.

Hospitals have been pushing similar legislation in other states and at the federal level as a response to a health care marketplace now dominated by HMOs and other managed-care insurers.

"Hospitals figure, 'We're providing the care, so why shouldn't we be managing the care?' " said Helen Leeds, a researcher at the Intergovernmental Health Policy Project of George Washington University in Washington.

The hospitals already have networks of physicians and clinics that contract with managed-care insurers. Hospital officials say the legislation would let them cut out the insurance middleman -- who typically takes about 20 percent of the insurance dollar -- and give the hospitals more control over patient care.

HMOs and some insurance companies see the networks as potential -- and unfair -- competitors, and generally oppose separate licensing. Only a handful of states have passed network legislation, Ms. Leeds said.

Supporters say the networks would provide medical care at lower cost than HMOs or traditional health insurers. "The goal is to provide more health care to those who don't have it," said Sen. Arthur Dorman, the Prince George's Democrat who sponsored the bill.

But opponents say the networks put patients at risk because the networks would not have to meet financial solvency and consumer protection requirements as stringent as those that apply to HMOs.

"These [networks] run the risk of going belly up and having subscribers out there with nowhere to go -- and being unable to get their care after having paid for it," said J. William Pitcher, lobbyist for the Maryland Association of Health Maintenance Organizations Inc.

Nancy Fiedler, senior vice president of the Maryland Hospital Association, said that, just as HMOs needed their own regulatory structure because they were different from traditional health insurance, the new networks also need their own rules.

Initially, the bill was opposed by state Insurance Commissioner Dwight K. Bartlett III, who argued that there is no clear distinction between community health networks and HMOs, and that they should be subject to the same regulatory framework.

In response, the Senate Finance Committee amended the bill to bring the new rules closer to those under which HMOs operate.

Although the bill cleared a major hurdle in the Senate, it faces an uphill fight in the House of Delegates. The House Economic Matters Committee killed a similar community health networks bill Friday.

House panels rarely reconsider an issue after they have defeated it. But committee Chairman Michael E. Busch, an Annapolis Democrat, said, "If the senators put a lot of work into it, we will look at what they've done. If they show us something we haven't seen, we will take it up and deal with it seriously."

However, Mr. Busch said his committee did not dismiss the House bill "in a cavalier fashion," nor does it expect the issue to fade away.

The Senate bill contains 12 pages of amendments, although it's not clear if they alter the bill enough to satisfy the House.

Baltimore County Sen. Thomas L. Bromwell, chairman of the Senate Finance Committee, said, "The Senate put a lot of long, hard work into the bill."

A tangential issue in the debate has been what the health network legislation might do for Johns Hopkins, which sold its HMO to Prudential several years ago and signed an agreement to not compete with Prudential in the HMO business until after the year 2000.

Elizabeth Misek, president of Prudential Health Care Plans of the Mid-Atlantic, said Prudential supported an unsuccessful amendment in the Senate that said the legislation would not permit the abrogation of any previous agreements. Without that amendment, she said, she is afraid that Hopkins would attempt to offer HMO-like services under a different name.

Elaine Freeman, a Hopkins spokeswoman, said, "If the legislation passes, we would take a look at it," to see how Hopkins might proceed, but there is "no initiative now under way" to compete with Prudential.

Pub Date: 3/26/96

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