Reuteman: Health care squabble like UAW vs. GM of old

Saturday, September 2, 2006

It's tough to root for either side in the ongoing standoff between United Healthcare and HCA's HealthOne.

HCA is the country's largest for-profit hospital company. As of last December, it operated 182 U.S. hospitals. Through its HealthOne subsidiary, the company runs seven hospitals and 10 surgery centers in the metro area, giving it a 34 percent market share.

United Healthcare is the second-largest health insurer in the United States and covers more than 800,000 Coloradans. They face paying additional "out-of-network" costs for HealthOne hospital care since the two behemoths let their contract run out Thursday in a squabble over reimbursement rates.

United's CEO, William McGuire, was in the news a lot as this year's poster boy for excessive pay. Last year he earned about $124 million, but more importantly, holds $1.6 billion in exercisable options of United Healthcare. True, the company's stock has risen seventyfold since he became CEO in 1991, but even at that, United has been hard-pressed to justify that rate of compensation. (For the record, McGuire was a practicing physician who ran an HMO in Colorado Springs that was acquired by United, and he began the climb up the ladder.)

HCA has also been in the news several times in the past year. The company, formerly known as Hospital Corporation of America, was founded by Thomas Frist Sr. and Thomas Frist Jr., the father and brother of Senate Majority Leader and presidential hopeful Bill Frist. Sen. Frist came under insider-trading scrutiny from the Securities and Exchange Commission last fall after he ordered his trust to sell his remaining HCA shares a month before the stock plunged following a poor earnings report. He said he sold the shares to prevent any appearance of conflict of interest with health care legislation. A little more than a month ago, Thomas Frist and an investor group that includes Merrill Lynch and Kohlberg Kravis Roberts & Co. took HCA private in a $21.3 billion leveraged buyout.

Two health care experts I spoke with late this week, independently of each other, likened today's HCA-UHC showdown to the old days when the United Auto Workers union would pick a highly successful General Motors plant and call a strike until their demands were met. HCA-HealthOne is secretive about its rate of profit, more so since it went private, but most observers agree that Denver's a cash cow for the company. Jim Hertel, publisher of the Colorado Managed Care Newsletter, likened the current situation to "the old UAW stare-downs with GM." Ralph Pollock, chairman of the health council for the Colorado Association of Commerce and Industry for the past seven years, said, "It reminds me of GM and the UAW - two Goliaths going after each other."

United Healthcare says HealthOne hospitals ask for higher reimbursement rates than the other hospitals it works with. And it's drawing the line. Health- One says United Healthcare wants to pay less than any other insurers it deals with, and it's drawing the line.

Asked to defend the hospital company's position, Pollock said, "They have a huge customer demand for the best technology, the best hours for access to it. Customers want facilities near where they live. So the company has built new hospitals and ambulatory surgery centers - all to meet this growing demand. And it comes at a cost."

Asked then to take the side of the insurer, Pollock offered, "Employers have asked me to be the middle man and do the best job I can to contain costs for high-quality care in a broader network, and we're trying to do that. We're negotiating hard with the hospitals."

So we have two relatively defensible positions, a standoff. In fact, the public must share responsibility, Pollock said.

"The public is so far removed from this process," he said. "Even in the past few years, as the cost burden has begun to shift from employer to employee, they've seen very little pain, nothing like they'll see in the next few years as more of the burden is shifted onto their shoulders."

"Obviously this can't continue," Pollock said. "As Dick Lamm has been saying for years, there are tough choices to make and we haven't yet been forced to make them. At some point we are going to have to sit down and decide that we as a society have finite resources.

"We are the only industrial country in the world with this burden. Other countries tax their citizens directly for health care. But we don't have a health care budget here. It's an open checkbook."

And after all, we can sympathize with the 800,000 Coloradans who find themselves pawns in this chess match - and we do. But don't lose sight of the fact that, by the current best estimates, more than 715,000 Coloradans can't afford any health insurance at all.

Business editor Rob Reuteman can be reached at 303-954-5177 or reutemanr@RockyMountainNews.com.