'Oh, oh, oh . . . Chicago HMO!'
So go the TV jingles plugging Chicago HMO group health care.Dancers skitter across the screen, upbeat young professionals strollthe lakeshore. Chicago HMO markets its product as slickly as anyother business does.
The bottom line is an overriding factor in Illinois' MedicaidHMO program. More than $57 million in state spending flowed lastyear to Chicago HMO and to Med Care HMO, its major rival for Medicaidbusiness.
It's a business, beyond doubt. Medicaid HMOs are 'amoney-making proposition once you get a substantial enrollment,'according to James Trainor, an HMO consultant and former Illinoispublic aid director.
Nearly 100,000 of the two HMOs' 170,000 members are welfareclients - Chicago's poorest mothers and children. But while thestate underwrites the two prepaid health plans, many of theirMedicaid patients protest that they are not getting a fair shake.
A four-month investigation by the Chicago Sun-Times of welfareHMOs has unearthed shady huckstering by salesmen, doctors withhistories of multiple malpractice suits or Medicaid abuses, a medicalwar over the treatment of high-risk babies, and slapdash monitoringby the state. Tens of thousands have quit the two plans.
Chicago HMO and Med Care HMO contract for services in themedical market, using their economic power to control costs ofdoctors, clinics and hospitals.
But the Sun-Times found that Illinois' Medicaid HMO program isriddled with questions about financing, policy and influentialconnections - as well as health care.
'Medicaid HMOs can be excellent, complete failures or evendisasters,' said Dr. Sidney Wolfe, director of Public Citizens HealthResearch in Washington, D.C. 'It depends on how strong the state'ssafeguards are.'
Illinois' Public Aid Department contracts with eight MedicaidHMOs in Cook County but admits it ignored them until this year. Thestate Public Health Department says it is understaffed and cannotcheck on HMOs' quality of care.
The Registration and Education Department is charged withlicensing and disciplining physicians, but says it is not responsiblefor policing HMOs. Seventy of the 160 most-sued doctors in Illinoisare listed as having practiced within the Medicaid HMO system, theSun-Times found.
Said Dr. Quentin Young, president of the Chicago-based Healthand Medicine Policy Research Group: 'The state seems interested onlyin cost control, but chronic underfunding ends up in Medicaid mills.There must be serious state review and frequent and unannouncedvisits (to clinics), with stiff penalties for misfeasance. The statecan't just say, `Here is the money and a list of services you mustprovide.'
'Political leaders have procrastinated to the point of puttingthe entire system in jeopardy. They have not combined the financialand political resources of the state, city and county.' Programs in 30 states
Thirty states have Medicaid HMOs, but a number of them havesuffered from abuses similar to those unearthed here. California washit by scandals in the 1970s but now has inspectors to monitorclinics, said Alan Stolmack, chief of policy development for theCalifornia department of health services.
'The HMOs got rid of the Medicaid mill syndrome, the seeing of60 patients per hour, the fee-for-service situation,' said Phillip H.Snelling, staff attorney for the Legal Assistance Foundation ofChicago. 'But there's another abuse possible: underprovision ofservice. You get the money every month whether you give adequatecare or not.'
Chicago HMO, Cook County's major Medicaid HMO, earns only $1 amonth per Medicaid patient, according to Dr. Robert J. Weinstein, itschief executive. But it is fiscally sound, he said. State documentsshow Chicago HMO grossed $72.7 million in 1986, making it themainstay of its $76 million-a-year parent firm, HMO America.
The HMO's profits were $688,827 in 1985 and $207,994 last year,according to the state Insurance Department.
HMO America listed an after-tax profit of $1,012,586 for thefirst six months of 1987 - a reversal of a $2.3 million loss lastyear. Weinstein attributed the 1986 dropoff to a change in theIllinois public-aid payment schedule and to losses in Florida andMichigan, where the company was trying to expand. In 1985 HMOAmerica reported a profit of $2.8 million. Linked to Roosevelt
Weinstein is president of HMO America, and has a contract for$150,000 a year plus cost-of-living raises, the firm's annual reportsays. He and several colleagues at Chicago HMO formerly wereassociated with Roosevelt Memorial Hospital, which folded in 1980after a Medicaid-Medicare fraud scandal.
Roosevelt Health Plan, which was connected with the hospital,had a $1.3 million contract with the public aid department to cover2,200 welfare clients. The agreement was signed when Trainor headedthe department. He left in 1977 and afterward became executivedirector of Roosevelt Health Plan.
In the aftermath, Roosevelt Health Plan was renamed Chicago HMO,was converted to a for-profit enterprise and was built up fast with abase of Medicaid patients. In turn, Chicago HMO was acquired in 1984by HMO America for about $7.65 million, according to documents filedwith the Securities and Exchange Commission.
HMO America's board chairman is Theodore Tannebaum, alawyer-friend of Charles R. Swibel, ex-chairman of the ChicagoHousing Authority. Swibel is a stockholder, according to Weinstein.This year a Chicago hospital network tried to buy HMO America for $65million, but the deal collapsed.
Chicago HMO claims 60,000 private members in addition to morethan 70,000 Medicaid clients. The largest private subscriber isLocal 707 of the National Production Workers, SEC records state. Theunion is headed by Joseph Senese and was linked to organized crime intestimony before a U.S. Senate committee in 1983. Chicago HMO'soffice employees are represented by the union.
A reporter asked Weinstein about the accusations against Local707. 'We have seen the (newspaper) clippings,' he said. 'But nothingin our dealings with them would suggest that.'
Med Care HMO is not-for-profit and was founded by six inner-cityhospitals in 1985. 'The state saves dollars and the hospitals areprepaid rather than waiting three or four months,' said SondraRafferty, its president.
She said Med Care HMO broke even in 1986, its first year ofoperation, and is fiscally sound. The state Insurance Departmentsays Med Care HMO reported revenues of $9,021,276 and a loss of$3,259,973 in 1986.
Patrick A. DeMoon and Patrick S. DeMoon, father-and-son hospitaladministrators, are listed as two of Med Care HMO's founding boardmembers. In 1963, Patrick A. DeMoon helped to reorganize BruniMemorial Hospital as Northlake Community Hospital. Bruni Hospitalhad been founded by Dr. Giulio Bruni, who was convicted in a $3million counterfeiting plot.
Lawsuits against Med Care HMO, alleging nonpayment, total morethan $700,000. Michael Reese Hospital is suing Chicago HMO for $1.2million, charging unpaid emergency room bills.
The state Insurance Department is closely monitoring thefinances of several HMOs, according to deputy director ArmandDutcher. He did not identify them.
But Illinois appears to be squeezing Medicaid HMO dollarsdangerously despite the millions going into the program, theSun-Times found. Illinois' average payment of $58 a month per personcovered is the lowest of six large states dealing with dependentmothers and children.
'I find it hard to believe that health care can be given to thatpopulation for that amount,' said Catherine McLaughlin, a publichealth economist at the University of Michigan.
Wisconsin pays an average of $64, Minnesota $70, Michigan $72,and Ohio and California $85.
'You get what you pay for,' said Dr. Nicole Lurie, a professorat the University of Minnesota Medical School. 'With HMOs, if therate is too low, the care either suffers or the HMO goes broke.'
The only way Medicaid HMOs 'can hope to profit is to cutservices to the bone and see a lot of clients,' according to Dr. FredZ. White, chairman of the council on economics of the Illinois StateMedical Society.
Poor people tend to be sicker than middle-class people, someofficials note, and can strain the resources of HMOs trying to holddown costs. A 12-year study by the Rand Corp. found that the poorappear to be worse off in HMOs than in fee-for-service care.
'It's not good for an HMO to have a large Medicaid population,'said Dr. Bernard J. Turnock, Illinois public health director. 'Thekey to a successful HMO program is to pay an adequate rate and have agood mix of patients.'
