Health Net 1998 Annual Report Download - page 10

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8F O U N DAT IO N HEALTH SYSTEM S, I N C.
How do you view the Northeast market?
The Northeast market is an area of tremendous growth opportunity for FHS – in particular, the
NewYork City metropolitan area.Managed care is still fairly new to this area, yet the demand for
sensibly priced health care products is very strong.
Physicians Health Services (PHS) offers a wide spectrum of products,including both open access
and gatekeeper products.These products meet employer needs by providing choice, while offering
the opportunity to effectively manage health care costs.
Our growth strategy in the Northeast focuses on bolstering our provider network by establishing
relationships with the area’s leading physician-hospital organizations.During the latter part of
1998, we signed long-term contracts with NewYork University and Montefiore medical centers
and plan on aligning with more hospital-based organizations of this caliber in 1999.
The Northeast’s Medicare product lost a considerable amount of money in 1998.W hy?
We lost more than $40 million on Medicare in 1998 for several reasons.Utilization in certain ser-
vice areas was much higher than we anticipated,leading to a Medical Care Ratio (MCR) that was
more than 100%.We also offered Medicare in areas where federal government reimbursement rates
did not cover dramatic increases in the costs of providing quality health care services to seniors.
A considerable amount of work was accomplished in 1998 that will drastically help to contain
future Medicare losses.We left counties where reimbursement rates did not cover quality health
care services.We redesigned the benefit packages.And, we increased premiums.
K a ren Coughlin
P resident and Chief Executive Off i c e r
N o rtheast Division
Karen Coughlin joined the company’s Northeast Division in October of 1998. Her immediate charge when she
accepted the job: turn around FHS’ Northeast operations and successfully bring together three health plans
under one banner.
Prior to joining FHS, Karen served with Humana, Inc. for more than 18 years in several executive management
positions, and most recently led one of Humana’s operating divisions.