One of the Chicago area’s oldest health maintenance organizations will give up independent operation and enter into a joint venture with the local HMO network of the Prudential Insurance Co., the groups said Thursday.
The venture, set to take effect July 1, will combine the plans run by Rush-Presbyterian-St. Luke’s Medical Center with Newark, N.J.-based Prudential’s PruCare operations. The venture partners currently provide care to 200,000 members of Rush’s Anchor HMO and Access HMO and to 165,000 PruCare members.
The deal highlights the continuing consolidation of the “managed-care” market in this area. It also paves the way for head-to-head competition among a few large health-plan operators: Blue Cross and Blue Shield of Illinois, operator of HMO Illinois; publicly held Humana Inc., of Louisville, operator of the Humana-Michael Reese and Humana-Health Chicago HMOs; Chicago-based HMO America Inc., a publicly held company that operates Chicago HMO; and the Prudential-Rush joint venture.
“The market is consolidating,” said Barry Averill, vice president for Illinois of Humana Health Care plans.
“It prepares us very well for President Clinton’s approach to managed care, where the idea would be to have purchasing groups contracting with four or five major players.”
The Rush Anchor HMO operates 17 medical offices and employs a medical staff of more than 130 physicians, and its Access group contracts with 3,000 doctors. PruCare contracts with 4,700 physicians, though officials said there is overlap between the Rush and PruCare networks.
Anchor was one of the first HMOs in Chicago, beginning service in 1971. But the entire Rush Health Plans organization has struggled financially in recent years. Since 1987, it has reported total losses of $35.3 million, with a loss of $7.8 million in the year ended last June 30. One profitable year in that time included earnings of $322,015 in fiscal 1991.
Truman Esmond Jr., president of Rush Health Plans, said the Rush-Presbyterian board had consistently rejected selling the health-plans operation because of its importance in providing patients to the medical center.
The joint venture with Prudential “gives us more volume through the system and. . . allows us to cut down the administrative costs and offer a more cost-effective, first-rate plan,” said Esmond.
“Both sides are making a strong commitment to Chicago through this new venture,” said Scott Serota, vice president for Prudential’s group operations in Illinois, Detroit and Indianapolis.
The joint venture plans to launch a major marketing campaign and will expand the number of Anchor HMO offices. But the two companies decline to disclose publicly how much money either is putting into the deal.
The combination allows Rush to offer a “point-of-service” plan; that is, one that allows a consumer to decide at the point that he sees a doctor to stay within the HMO network at full insurance coverage or go outside it with some reduced insurance benefit.
Plans that allow consumers to go outside the network are generally less successful at containing costs, but they’re popular. For instance, HMO Illinois, the state’s largest HMO, has 357,000 “pure” HMO members, 300,000 “point of service” members and 1.1 million members of its “preferred provider” organization.
