Aurora Health Care uses sharp elbows to change market
G. Edwin Howe decided his Aurora Health Care had to stand up to Wisconsin's largest insurer.
So the 12-hospital system, a key part of PrimeCare Health Plan's Milwaukee-area provider network, cut its ties to the company last October.
Howe, Aurora's president, attributes the failure to reach a new contract agreement to PrimeCare's tightening grip on medical utilization. Larry Rambo, PrimeCare's president, says the breakup was mostly about money.
Either way, many hospital executives wouldn't dare make such a move. But Aurora makes a habit of audacity. Recently:
* Its flagship hospital lashed out at a competitor--and reportedly irked state officials--by releasing preliminary state data on mortality rates for heart surgery. In a letter to physicians, executives of Aurora's 368-bed St. Luke's Medical Center announced that the facility's performance in coronary bypass operations was 2.5 times better than that of 279-bed St. Francis Hospital, a member of rival Covenant Healthcare System. St. Francis later responded that it actually beat expected results, given the especially high-risk status of its cases.
* Aurora financed a lawsuit against All Saints Healthcare System in Racine, Wis., last year by physicians who were denied privileges at All Saints' two hospitals. All Saints' action threatened the success of a new Aurora clinic in Racine, which was affiliated with the physicians (Jan. 15, 1996, p. 8). The parties later settled out of court for undisclosed terms.
* Aurora completed a formidable expansion. Its deals include strategic alliances with Advocate Health Care, an eight-hospital Chicago-area system, and Bellin Health System, a Green Bay, Wis., clinic and hospital. Since 1995, Aurora has added four hospitals and nearly doubled its number of employed physicians to 450.
'A few years ago, the standing joke was if there was a doctor's office on the comer, Aurora would buy it,' says Brian Jensen, a consultant in the Milwaukee office of Coopers & Lybrand.
Systems, rather than employers or health plans, are driving change in the Milwaukee area. Aurora is the largest system, holding about 28% of the area market. Since 1991, it has expanded its domain considerably to include 12 hospitals and 75 clinics running most of the Lake Michigan shoreline. Its goal, largely met, was to locate a facility within 15 minutes of every eastern Wisconsin resident (See graphic, this page).
Aurora's chief rivals are the Covenant system and Horizon Health Care, which also have grown. Unlike the others, Covenant has partnered with an HMO, Family Health Plan, to develop its own insurance product. Horizon is the most decentralized of the systems, marketing its hospitals under their own names.
Jensen says Aurora shows more street smarts than its competitors. It knows mass marketing and networking with both business and political communities. 'But from my viewpoint, they aren't as publicly and strategically focused,' he says. 'You don't hear a lot of talk about Aurora's strategy.'
In a comment that's a little ironic, Howe says: 'We try to be kind of quiet and out of the way.'
Aurora's current plan, like those of many systems, is to become capable of preventing illness when possible and of comprehensively managing care when necessary. An outreach project of eight Aurora clinics last year upped the rate of flu vaccinations for high-risk people to 80% from 20% in the previous flu season, averting $1 million in healthcare costs, Howe believes. The program paid for itself.
In a January restructuring, Howe divided Aurora's operations into four regions. The move should simplify the development of other community health initiatives and care management programs, he says. That's because it will eliminate some of the organizational lines that divide hospitals and other parts of the delivery system (See graphic, p. 138).
Physicians head all but one region. The system's Metro Region, which covers Milwaukee, will be led by St. Luke's president, Mark Ambrosius, along with a group of six to 10 physicians.
Howe says the October 1996 breakup with PrimeCare stemmed from Aurora's vision. 'The economics weren't the driving force. It was some of the carve-outs in radiology that we thought would prevent us from doing managed-care things,' he says. 'We figured every part of our vision was to make sure practicing physicians controlled how medicine was practiced. If we weren't willing to take a stand on this, when would we ever?'
Both organizations are suffering because of the split, although the ultimate effect is unclear. The Milwaukee-area contracts between Aurora and PrimeCare expired last Oct. 31, but other contracts will run through this year. Additionally, the majority of PrimeCare enrollees belong to its point-of-service plan, which allows them to use out-of-network doctors or hospitals for higher copayments.
When the companies ended talks, about 25% of PrimeCare's 290,000 enrollees used Aurora facilities. PrimeCare represented about 5% of Aurora's 1995 patient-care revenues of $810 million, according to Aurora's figures.
The split cost Wauwatosa-based primeCare about 15% of its business, or roughly 40,000 enrollees, as employers switched to plans that contracted with Aurora. PrimeCare's Rambo says he hopes to many customers back with the lower prices afforded by PrimeCare's smaller delivery network.
Aurora's response was typically brazen. With an Appleton, Wis.-based insurer, it announced a new insurance product to supplement point-of-service plans. For a low annual fee, Aurora Access would cover copayments, deductibles and other costs associated with out-of-network use of Aurora facilities. The plan was proposed by United Health of Wisconsin Insurance Co., of which Aurora owns a 25% stake.
The Wisconsin Office of the Commissioner of Insurance rejected the initial proposal in February. It's now reviewing a modified proposal and is expected to rule on it shortly, says Guenther Ruch, administrator of the office's regulation and enforcement division.
Employers probably would bite on the offer, if it's approved, because many workers are upset about having to pay more for care at Aurora, says Jim McCormack, president of Diversified Insurance Services, a Milwaukee-based insurance broker. 'But it poses problems. What happens to PrimeCare if you take away the incentive to use its preferred network? It will increase PrimeCare's costs and increase employers' costs,' McCormack says.
Rambo says he believes the plan is illegal under a Wisconsin law that requires the collection of deductibles. 'It's clearly a proposal not designed to be self-sufficient,' he says.
Howe disagrees. According to the Milwaukee Business Journal, documents filed with the state insurance office put the annual fee for an individual at $20. Howe says fees aren't set yet, and he would hope not to lose money on the product.
Aurora clearly came out ahead of PrimeCare in the public perception of their split, McCormack says. He rated Aurora's public-relations effort a 10 on a scale of 1 to 10. PrimeCare, in comparison, scored a 2, he says.
'Within 24 hours, every one of our clients had two or three pieces of paper from Aurora explaining its action,' McCormack says. 'Aurora released the news to the media, very proactively. It was on the evening news the day they ended talks and on the front of the Milwaukee Journal the next day. When you read the papers, it really appeared as if PrimeCare was the bad guy, trying to gouge providers. PrimeCare responded slowly and defensively.'
Similar feuds between health plans and provider systems are taking place in other markets. That's partly because of cost pressures, but it's also due to the growing size and clout of consolidating companies.
In the Twin Cities, two healthcare giants, Allina Health System and Blue Cross and Blue Shield of Minnesota, recently clashed. They finally negotiated a contract after taking the unusual step of using an outside mediator (Feb. 17, p. 30).
Observers wonder if Aurora is positioning itself to contract directly with self-insured employers or to develop its own health plan.
Says Howe: 'We don't want to become an insurance company, but we want to do that part of care management that is, in some cases, an insurance function ....In the next step of our journey, we want to manage how care is delivered, not just be the people who deliver it.'
