Health Net 1998 Annual Report Download - page 9

F O U N DAT IO N H EALTH SYSTEM S, I N C. 7
when Health Net received three year, Full Accreditation from the National Committee for Quality
Assurance (NCQA).
We’ve also focused on customer service and providing our members and our employer groups
with the best and most responsive service possible. In 1998, we exceeded nearly every Health Net
performance standard that we set for our customers and our providers. In fact, one of the state’s
largest purchasers of health care services rated Health Net the best health plan in California in
areas such as service to medical groups, quality and consumer education.
We continue to face great challenges,however. One of Health Net’s largest medical groups
declared bankruptcy in 1998,while others are experiencing similar difficulties.Medical costs,par-
ticularly in the area of pharmacy, continue to rise.And, we continue to increase health care premi-
ums to cover the rising costs of care.
Medical groups seem to be experiencing financial difficulties. How does this change the way Health Net
does business?
It certainly changes the landscape of our industry and makes us more diligent about our re l a t i o n s h i p s
with medical gro u p s .We will continue to work with medical groups that can effectively manage care
and ri s k , and many do this we l l .With those that can’t , we’ll try to help and as a last measure, e s t a bl i s h
direct contracts with physicians to ensure our members are not affected by a medical group’s finan-
cial performance.There were several times in 1998 when we had to establish direct contracts with
p hy s i c i a n s .I ’ve got to hand it to our associates who did a re m a r k a ble job during these instances by
helping most Health Net members keep their relationships with their physicians intact.
I expect that in 1999 we will face similar circumstances with some of our medical gro u p s .While these
situations are never pleasant, we have the processes and contingency plans in place which we
believe will be sufficient to keep as many physicians as we can in our network and ensure our
members have access to health care services.
How did rising medical costs impact Health Net in 1998?
Health Net continues to share financial risk for hospital and other institution costs with medical
groups.In 1998, the levels of utilization and the total costs of care were higher than we had
expected.We will continue to have input in the management of care during hospital stays,simply
because past experience has taught us that we have the infrastructure to manage these costs better
than some of our medical groups.
How is Health Net managing other medical costs such as pharmacy?
Two key factors that drove premium increases in 1998 were rising drug costs and higher drug
utilization trends.That is why we are so committed to working hard to keep the pharmacy benefit
affordable and comprehensive for our members.To be successful in this endeavor, however, we
must have access to important cost management tools,such as formularies.Without these tools, we
cannot be successful in our goal of protecting this important benefit for our members and keeping
health care premiums affordable.
W hy did you join Health Net?
How could I say no? Health Net is an outstanding company with unlimited opportunities and a
stellar reputation. I also knew I could bring valuable industry perspective to the table, based on my
more than 20 years of industry experience with some of the nation’s largest health care companies.
I truly feel as though I’ve been preparing for this opportunity all of my life. I’m excited about
being here and leading a group of outstanding individuals to success in 1999.