“We at United HealthCare are committed to the improvement and well-being of our members,” began the Nov. 3, 1997, letter to patients of Chatham Health Service, a clinic serving about 1,800 mostly African American residents on Chicago’s South Side.

The letter said that Chatham, 8300 S. Cottage Grove Ave., had terminated its contract with United HealthCare of Illinois, the state’s second-largest health maintenance organization. To remain insured, Chatham’s patients–”including many Medicaid recipients–”would have to go to a clinic on the other side of town, Perfect Managed Care Inc., 4527 N. Pulaski Road. The letter also gave instructions for choosing a different site, if patients desired.

United HealthCare of Illinois, the state’s second-largest HMO, has a Chicago office at 1 S. Wacker Drive. United is grappling with strained relationships with doctors groups and is losing Medicaid HMO patients. (Photo by Jerry Gholson)

The letter was triggered by a contract dispute between United and Chatham, but they never ended their relationship, said Chatham owner Dr. Ronald Hickombottom, who gave a copy of a patient’s letter to The Chicago Reporter.

The incident is an example of United’s effort to force black doctors out of business, Hickombottom said. The HMO also has double- and triple-billed Hickombottom for patient services from other providers, he said.

Citing privacy issues, Dr. Kaveh Safavi, United’s vice president of medical affairs, would not comment on Hickombottom’s charges. He also said he didn’t know the specifics about United’s marketing of Chatham, but he conceded “it could certainly happen.”

Safavi said he understands why Hickombottom and others could construe that sending patients from Chicago’s South Side to the Northwest Side could be seen as racially motivated and said United is trying to do a better job of matching members with doctors closer to their homes.

But the HMO’s strained relationship with Chatham and other doctors groups has nothing to do with race, or even medicine, Safavi said. It’s about money. United pays its doctors a monthly fee to cover patients’ medical expenses, but the HMO has imposed financial controls on clinics that have fallen behind on reimbursements for blood tests, X-rays and other subcontracted services.

“It is true that some physician organizations had some trouble managing that piece of their business,” Safavi said. “It’s totally unrelated to taking care of patients, because we could pay them directly to take care of patients. That’s never been on the table.”

Caught in the middle of these and other disputes are United’s patients. In October 1998, the Minneapolis-based health insurer announced it was dropping its Medicare coverage in Chicago’s five collar counties because it is no longer cost effective.

Since 1995, United has lost 127,790 members, including group insurance accounts with Cook County, the Chicago Transit Authority, Motorola Inc., the city of Chicago, state of Illinois and Zenith Electronics Corp.

Health-care advocates are especially worried about United’s Medicaid membership, which has plummeted from 124,013 in December 1996 to 71,645 in October 1998, a drop of 42 percent. United’s Medicaid membership is still about triple its next largest competitor, Harmony Health Plan of Illinois, which took over the University of Chicago Health System’s 16,186 Medicaid patients in July.

Medicaid, funded by the state and federal governments, pays medical bills for low-income residents. Medicaid recipients can seek health care only where doctors or clinics accept the program.

United loses four to five times as many members per month to involuntary terminations, such as loss of eligibility, as opposed to patients who voluntarily switch to other HMOs, Safavi said. “They’re becoming part of the uninsured,” he said. “We’ve lost members because there are fewer total members, and because there are more competitors.”

But Medicaid recipients enrolled in managed care in Cook County declined by 10.8 percent from December 1996 to October 1998. The number of people eligible for Medicaid statewide declined by 7.1 percent from December 1996 to September 1998, according to records from the Illinois Department of Public Aid.

Where are United’s Medicaid members going? They are returning to traditional Medicaid, said Doug Dobmeyer, editor of the newsletter Poverty Issues–¦ Dateline Illinois and former executive director of the Public Welfare Coalition, a Chicago advocacy group. “Once they’re enrolled [in an HMO], they find out they’ve been sold a bill of goods and they disenroll,” he said.

Aggressive Marketing

Health maintenance organizations, a form of “managed care,” are organized systems that provide a defined, comprehensive set of services to a specific population for a fixed, periodic fee.

HMOs have been available to Cook County recipients of federal Aid to Families with Dependent Children since 1974 because of the high concentration of public aid clients there, said Dean Schott, bureau chief of communications, Illinois Department of Public Aid, which administers the program. In July 1997, HMOs became available to recipients of Temporary Assistance for Needy Families, which replaced AFDC under welfare reform, he said.

In 1994, Illinois asked the federal government to approve MediPlan Plus, a pilot program aimed at shifting Illinois’ Medicaid recipients into mandatory managed care. The plan was supposed to help speed up Medicaid reimbursements to health-care providers and offer patients expanded benefits and access to more doctors.

Last year, the state put MediPlan Plus on hold, and kept the program voluntary. The next governor will decide whether he wants to pursue mandatory managed care, Schott said.

United entered the Chicago market when it bought Share Health Plans in 1985. In 1993, its purchase of Chicago HMO solidified its place in the Illinois Medicaid market.

In 1996, about 68 percent of Cook County’s 181,482 Medicaid recipients in HMOs were enrolled with United, state records show. Those numbers have been dropping since. United’s share of the Medicaid market is now about 44 percent.

Does the drop in membership for Illinois’ largest Medicaid HMO concern Public Aid? “Just about each HMO has seen a drop,” Schott said. “There are fewer people on welfare” because they are working.

The state’s plan came under fire when health insurers went on a “feeding frenzy” for Medicaid recipients, said Jim Duffett, executive director of the Campaign for Better Health Care, a statewide advocacy organization. State and local officials have received widespread complaints of overly aggressive HMO marketers who made threats and false promises to sign up members, records show.

The Clinton administration approved MediPlan Plus in 1996. In 1997, the Illinois General Assembly banned door-to-door sales and marketing in public aid offices, said Gwen Smith, manager for policy and operations for Public Aid’s Bureau of Managed Care. Insurers could continue to solicit members at community health fairs and through HMO-affiliated doctors, she added.

Between July 1996 and January 1997, the Chicago Department of Public Health surveyed 277 Medicaid recipients. Half said they had never been told how to use their HMO, and 12 percent didn’t know they had been enrolled in an HMO, according to the department’s 1996-97 report, “Paying Twice: Why Medicaid Managed Care Patients Continue to Seek Services at Public Clinics.”

Thirty-eight of the 277 recipients surveyed were told they had to join an HMO or lose their benefits. Of the 129 patients who said they tried to withdraw from their HMOs, only 19 were successful.

“People may confuse managed care with private insurance,” said Susan Cahn, director of the city health department’s Office of Managed Care, which monitors and analyzes managed care’s impact in Chicago. “They think they’re getting something better than Medicaid. They didn’t understand that once you go into the HMO, it still may be the same hospital, the same clinics and doctors.”

In July 1997, the Chicago City Council passed the Managed Care Consumer Protection Ordinance, which established the managed care office.

Monique Rose, a 21-year-old Medicaid recipient, was switched to Harmony Health Plan when it bought Family First, which she joined in 1997. The single mother of two, who lives at 64th and King Drive, said she now wants to return to traditional Medicaid.

Rose said a Harmony marketer “signed [her] up inside the public aid office” at 915 E. 63rd St. in Woodlawn. “They have all types of HMOs in the public aid office. They harass me,” she said.

The reason she is dropping Harmony? “They lied.” The agent’s false promises included cab rides to doctor’s visits and a free monthly package of aspirin, bandages and other items for her two children. She said she finally received her August package in October, after she told the HMO she wanted to disenroll. Officials at Harmony could not be reached for comment about Rose’s case.

Paying Claims

Doctors like Hickombottom also have grown unhappy with HMOs. United, he said, has made it difficult for him to pay his bills.

Each month, HMOs pay their doctors a fee, called “capitation,” for all patients, whether they treat them or not. Some doctors get higher capitation fees to act as brokers for services they don’t provide, such as visits to specialists or lab services. The doctors use the higher fees to pay these claims.

For example, a doctor might earn $20 per patient per month for a Medicaid patient. Depending on the contract, the doctor could collect that fee from the HMO, then pay any claims for additional services the patient required.

But when those other providers don’t get paid, they start billing either the patient or United, Safavi said. Because United is ultimately responsible for those bills, he said, the company imposed a financial accounting system in May 1997 called the Site Turn Around Report.

STAR cut the turnaround time for a physician to respond to a claim from 30 days to five. If a doctor does not either honor or deny the claim within the five days, United pays the bill and deducts it from the doctor’s next capitation check.

The Michael Reese Physician’s Group, an independent physicians association, terminated its capitated contracts with United on June 15, 1998, because of problems with STAR.

United paid the Reese group a capitation fee of about $200,000 per month for 3,208 members, about 21 percent of Reese’s total clientele, said William Patten, executive vice president for SNI Management, which provides financial management services for physician groups, including Reese. United’s Medicaid members comprised about 6 percent of Reese’s patient load.

The group, in turn, paid its specialists and other medical vendors at a discount because of the volume of business Reese brought them, said Dr. David Wechter, president of the Reese group.

United switched to the STAR system in May 1997. Not long after that, Patten said the Reese group noticed changes in the billing system. Some months, United deducted between 50 percent and 70 percent of the group’s capitation checks. By June, United had cut the group’s capitation fees by about 85 percent, to about $30,000 per month, leaving the group with little money to run its practice or pay physicians, Wechter said.

Amy Sheyer, director of communications for United, said Reese was not singled out. “We have a large number of physician organizations that are succeeding with this model,” she said.

William DeMarco, president of DeMarco & Associates Inc., a Rockford-based health-care consulting firm, said programs like STAR affect a physician’s ability to deliver health care of all types, including Medicaid. Doctors can’t afford to put aside funds to pay for improvements like computer systems, which could help them turn claims around more quickly, he added.

But physicians also must share some of the blame, DeMarco said. Too many in the Chicago market have been “pretty loose” in keeping up with their paperwork, forcing United to institute tighter controls, he said.

Risky Business

Hickombottom said he hasn’t paid himself in a year. And when his wife asks him why he doesn’t move his practice to a more lucrative area, he tells her, “I want to serve in an area where my people are. I want to help those who are less fortunate.”

The Mississippi native said he had to take out a second mortgage on his Downers Grove home to keep his office open.

Safavi said United is rethinking its strategy on HMOs by trying to position itself with new products in the next few years, and by expanding the number of available doctors and continuing to enhance claims processing. But while United’s non-HMO business is growing, Safavi said that “HMOs have never really caught fire in Chicago or been fashionable in Illinois.”

Most people in Illinois get their health insurance from other means, he said. As of December 1997, about 13 percent of Medicaid recipients were in managed care, public aid records show. For this group, the state must ensure that people know what they’re getting when they join an HMO, said Dobmeyer of Poverty Issues.

“It’s fine for people who are up to speed, but it’s a problem for people who don’t have inside knowledge” of how managed care works, he said. Public aid recipients are under pressure to choose an insurer, and some make poor choices. “It raises a very strong possibility that you have more confusion than competition.”

Contributing: Heather Kuipers and Natalie Pardo.

Michael Rohner, Karen Shields and Terris R. Tiller helped research this article.