Bull’s Eye Publishing 1999 North Carolina Health Care Buyer Articles

Feature Article

Changing Relationships in the Region

Southeastern and Sandhills Regions

With most managed care companies focusing their initial marketing efforts on North Carolina’s three major metropolitan areas, health systems in the Southeastern and Sandhills Regions are forging new relationships and renewing old ones as they prepare to become the next target markets.

“Up until a few years ago, the large hospitals’ game plan was to put small hospitals out of business,” observes Leo Petit, CEO of Bladen County Hospital in Elizabethtown. “Since then, the big hospitals have realized it’s much easier to let small hospitals get strong and work together to make our communities healthier.”

Managed care in this region has grown fairly steadily. Total HMO penetration is 20 percent, and commercial market penetration is 30 percent, according to National Research Corporation’s Healthcare Market Guide Study 1998. PPOs have 30 percent of the total market and 46 percent of the commercial market.

Three Insurers Dominate

“Managed care in the Sandhills/Southeastern Region is dominated by Blue Cross and Blue Shield of North Carolina, United HealthCare of North Carolina and Cigna/Healthsource North Carolina. Based upon figures from the N.C. Department of Insurance, United HealthCare has the majority of the market in the Southeastern Region, while Cigna/Healthsource leads in the Sandhills Region.

Greensboro-based United HealthCare has marketed its products in the region for about 10 of the organization’s 13 years in business. “We moved relatively early in the history of this company down to Fayetteville and Wilmington,” says Roger Rollman, director of corporate communications. “We were invited down there by physicians in that area.”

Rollman says the region offers much opportunity for the HMO, particularly due to the rapid growth in Wilmington and the surrounding counties. “United HealthCare has had great success in New Hanover County,” he says. “And we expect in 1999 to be expanding our presence in Southeastern North Carolina. We look upon the lower Cape Fear and the upper Cape Fear to represent a tremendous amount of promise for us.”

Insurers are finding that PPOs are a popular option in this area made up of smaller towns and rural counties. “Our PPO Select co-pay plan accounts for 95 percent of new sales,” says Jo Ann Wetzel, Blue Cross regional director for southeastern North Carolina.

Alliance Looks for New Options

To prepare for what most regard as the inevitable growth of managed care throughout the Southeastern and Sandhills Regions, health care providers have been aligning themselves into local and regional systems designed to offer the full continuum of care.

Affiliation is nothing new. For the past six years, nine area hospitals have worked together as members of the Coastal Carolinas Health Alliance. “Our goals are to work together to improve health care services in Southeastern North Carolina, avoid duplication and save money [through] economies of scale,” says Bill Clark, CEO of Columbus County Hospital in Whiteville and president of the alliance.

The alliance’s PPO, the Coastal Carolinas Health Plan, currently holds seven contracts covering 4,700 lives. Physicians make up the majority of the alliance board and the plan’s medical management committee.

Initially, alliance members saw the plan as a way to keep community health care under the control of local physicians while keeping premium dollars in the community as well, where they could be used to help enhance the local health care system. These days, however, Clark says, “The health plan is kind of at a standstill, and we are actively looking for a partner.”

While emphasizing that the group has not lost sight of its original community-oriented vision, Clark says, “When you’re building a network and you’re trying to put together a health plan, as it evolves, you have needs and you have to figure out how to satisfy those needs. So we’re looking at different options.”

Southeastern Hospitals Joining Forces

The New Hanover Health Care network is emerging as a major force in the Southeastern Region as it increases its presence in surrounding counties and becomes the only hospital network in the city of Wilmington. Late in 1998, New Hanover closed on its $98 million purchase of Columbia Cape Fear Memorial Hospital from Columbia/HCA Healthcare Corporation. Cape Fear was one of seven North Carolina hospitals Columbia offered for sale in May 1998.

“With the two organizations working together, we believe we can provide more cost-effective care, not only to the insured population, but to the entire population we serve,” says Dick Jones, New Hanover’s vice president for strategic services. “Consequently, we will be looking at services and the location of services, so the community may see some shifting in the future—not immediately, but over the next several years as we work with physicians to see what makes the most sense in terms of delivery of services.”

Jones says he expects Cape Fear to be part of all New Hanover’s managed care contracts, giving covered employees access to both hospitals. “We are moving toward the development of a network—one that is fully integrated,” explains Jones. “By that I mean, the patient has access to a primary and secondary care hospital in Cape Fear and a tertiary, becoming quaternary, level hospital in New Hanover. We have a long-term care facility, we have a home care agency, we have a hospice organization and we have a rehab hospital.”

New Hanover had also offered $36 million to buy Columbia’s $1-a-year operating lease for Brunswick Community Hospital in Supply, but the Brunswick County Hospital Authority, which owns the facility, objected, raising a number of questions about the benefits of the deal to Brunswick County. They also questioned Columbia’s authority to sell the lease and the exclusion of the facility owners from negotiations with New Hanover. Unable to resolve the issues, the sale fell through. Then, in November, Columbia announced an agreement with NetCare Health System to sell NetCare the Brunswick lease. Nashville-based NetCare had also purchased Davis Medical Center in Statesville from Columbia and owns 13 hospitals and four nursing homes in several states.

“Certain parties have agreed to the sale to NetCare,” says Jeff Prescott, spokesperson for Columbia. “We’re hopeful we can work something out.” Prescott says the sale is expected to be completed during the first quarter of 1999.

Even without purchasing Brunswick Community Hospital, New Hanover has a strong presence in the county. “It is still very important for us to be a part of the Brunswick County community,” Jones says, commenting that New Hanover has a strong working relationship with J. Arthur Dosher Memorial Hospital in Southport.

New Hanover’s commitment to the Brunswick County health care market is part of the system’s larger commitment to serve Columbus, Bladen, Pender, Duplin and Onslow counties as well. “Over 50 percent of the care we deliver at this medical center is to people who live outside New Hanover County,” says Jones. “So we see ourselves, and the community sees us, as a regional provider of care.”

Late in 1998, the Bladen County Hospital board asked New Hanover Regional’s trustees to formalize the affiliation between the two hospitals, and New Hanover Regional agreed. “We’ve had an ongoing relationship, but we wanted to put some definition to it,” Petit says. “The new agreement more clearly defines the kind of relationship we have and says it more publicly.”

In the immediate future, Petit wants to enhance the working relationship with New Hanover’s Emergency Department. “We don’t have a deep well of specialists,” he explains, “so we do a lot of stabilization and transfer. The agreement should help lock in the kind of relationship we have and make the transfer process easier.”

Looking to enhance services, make capital improvements and get help with managed care contracting, Pender Memorial Hospital in Burgaw is negotiating details of a proposed affiliation with New Hanover Regional. “We were looking to affiliate with another hospital in our region, and we asked both New Hanover and Onslow Memorial Hospital to submit proposals to us for our consideration,” says Larry Bishop, CEO of Pender Memorial. “The committee’s decision—after reviewing the proposals from both hospitals—was that New Hanover Regional could probably provide a broader array of services.”

Reaching Out to Employers

To the west in the Sandhills Region, FirstHealth of the Carolinas is also building a regional system to provide a comprehensive range of health care services. Created in 1995 when Moore Regional Hospital in Pinehurst merged with Montgomery Memorial Hospital in Troy, FirstHealth also operates 15 family care clinics, three emergency medical systems, three fitness centers and a home health agency.

In an effort to integrate another of the region’s community hospitals into its system, FirstHealth announced plans to pay $44 million for Richmond Memorial Hospital in Rockingham and its affiliates, with closing expected by early October. However, Health Management Associates, Inc., of Naples, Fla., which owns and operates nearby Hamlet Hospital, made an unsolicited offer of $55 million for Richmond Memorial, and filed a lawsuit against the county and the hospital after hospital trustees refused to consider the HMA offer. The FirstHealth/Richmond Memorial deal is now on hold, pending the outcome of the litigation.

Meanwhile, FirstHealth is moving forward with FirstCarolinaCare, a managed care point of service plan now available only to 2,600 FirstHealth employees. “A number of companies are pulling out of the small business market, so we’re trying to develop our product to offer the smaller employers,” says T. Robert Ward, Jr., FirstHealth’s vice president for managed care.

To the north of Pinehurst in Lee County, Central Carolina Physicians Hospital Organization (CCPHO) offers self-insured employers a regional health care option through its Direct Employer Contracting Initiative. Formed in 1994, CCPHO’s 50 physicians and Central Carolina Hospital are committed to being a leader in service excellence in health care. In addition, strategic partnerships with Duke University Health System and UNC Health Care System enable CCPHO to offer the regional tertiary care arrangements employers seek.

CCPHO sees its comprehensive provider network, competitive fees, commitment to service excellence and ability to manage care as a way to assist employers in recognizing an achievable balance of choice, cost containment and quality. “We believe that health care should be a local choice for our employers and their employees,” says Todd Holder, director of CCPHO. “Our providers are committed to an integrated delivery system, which offers high-quality, cost-effective health care services to our community.”

Scotland Health Care System in Laurinburg serves Scotland County and the surrounding area with its hospital, nursing home, hospice, home health and five family practice centers. The system’s PHO, Scotland Regional Comprehensive Care, is a non-profit joint venture with local physicians that has tertiary care arrangements with Duke University Health System and UNC Health Care System. The PHO contracts directly with self-insured employers.

“We are also beginning to look at affiliating with another IPA or hospital network to be able to offer more managed care services to our community,” says Greg Wood, Scotland’s president and CEO. “We are early in the discussion stage both with the PrimaHealth IPA affiliate at Duke, as well as the MidCarolinas PO and FirstHealth out of Pinehurst.”

Fayetteville-based Cape Fear Valley Health System has been growing and streamlining for more efficient care. The health system opened a chest pain center, which is a seven-bed dedicated unit within the emergency department where patients experiencing symptoms of a heart attack can receive prompt diagnosis and treatment. Cape Fear Valley also opened an expanded Cancer Center that provides additional treatment space for radiation oncology and medical oncology patients.

To provide more services to its younger population, Cape Fear Valley finished a $412,000 renovation to create an eight-bed pediatric special care unit. The center also has a 44-bed neonatal intensive care unit and opened a nine-bed pediatric emergency department. “Our population has a very young average age,” explains Cape Fear Valley spokesman Clinton Weaver. “Previously, people had to go to a hospital several hours away for the level of pediatric care we now offer, so it’s a real convenience.”

Cape Fear Valley also recently introduced “Well On Your Way,” a preventive medicine program for area employers. “We provide health screening at the work site, followed by appropriate education,” explains Cape Fear Valley’s associate administrator of business development Bill Belanger. “For employers, the program helps keep employees well and at work.”

Other recent initiatives at Cape Fear Valley include MedReach, a mobile unit that the medical center’s occupational health department uses to bring services to area employers’ locations. “The equipment on board varies, depending on the employer’s needs,” Belanger says.

In Robeson County, Lumberton’s Southeastern Regional Medical Center has joined forces with approximately 100 area physicians to create Southeastern Health Network, a for-profit PHO. “What we are attempting to do is integrate services and programs in a seamless fashion in order to positively impact both the quality and the economics of health care,” says Lou Orban, the network’s executive director and director of managed care for Southeastern Regional. “It no longer is appropriate for the hospital and physicians to contract separately rather than work together to build efficiencies through an integrated network of care, which can be offered to managed care plans and other payers.”

Orban says one of the network’s major goals is to select at least one health plan to partner with to assist with greater geographic coverage and help build the necessary structure of the PHO.

The medical center has also developed a wellness program, which is designed to take preventive medicine and health education to the community. The program’s staff conduct education and health screening programs in conjunction with community and employer groups.

In a related project, Orban says Southeastern is developing an occupational health program, which is directed toward helping employers deal with workers’ health and injury problems by emphasizing case management and improved access to appropriate levels of care.