Published in Health Care

Grand Valley Health closes down HMO business

BY Sunday, September 18, 2016 04:26pm

GRAND RAPIDS — Grand Valley Health Corp.’s decision to get out of the HMO business follows continued losses and years of dwindling membership, combined with pressures brought on by the federal Affordable Care Act.

The Grand Rapids-based Grand Valley Health will now focus on offering primary care to patients with health coverage with other insurers at its five family health centers and an outpatient surgical center in greater Grand Rapids.

“This will allow us to increase the number of patients we provide care to in West Michigan while aligning with the overall purpose of providing high-quality, service-focused care,” said President and CEO Pam Silva. “This is what Grand Valley does best.”

Grand Valley Health operates Grand Valley Family Health Center locations in Grand Rapids, Walker, Wyoming, Rockford and Hudsonville. The Grand Rapids campus on Leonard Street also houses an urgent care center and the outpatient Grand Valley Surgical Center.

In announcing the change in the business and the end of its award-winning Grand Valley Health Plan HMO, the corporation cited “rapidly changing as well as increased health care regulations” that “ultimately became a barrier to providing high quality, high touch health care to the community GVHP serves.”

“The decision was not made lightly and certainly was a difficult decision to make,” Silva said.

Formed more than 30 years ago, Grand Valley Health Plan was a classic staff model HMO that employed its own doctors and operated its own health centers. The HMO was recognized repeatedly for high quality and was named frequently as a top 50 health plan in the U.S. by the National Committee for Quality Assurance.

At one point, Grand Valley Health Plan had more than 30,000 members in the Grand Rapids area. As the HMO industry shifted to more of a network-based model where health plans contract with independent or group physician practices, and as consumers and employers opted for HMOs and other insurers that had flexible care networks, Grand Valley Health Plan’s membership steadily declined.

For years, Grand Valley Health Plan has operated as the last staff model HMO in Michigan.

“It’s the end of an era for that type of model,” said Rick Murdock, executive director for the Michigan Association of Health Plans. “They were one of the best plans by any measure in the country, historically.”

As of midyear, Grand Valley Health Plan had just 3,275 members, according to a quarterly financial report filed with the Michigan Department of Insurance and Financial Services. That was down from 5,076 members at the end of 2015.

The HMO lost $80,592 in the first six months of 2016 on revenues of $9.7 million. The results came on top of losses of $767,208 in 2015, $255,963 in 2014, and $356,617 in 2013, according to state financial reports.

Along with the shifts in the HMO market and in consumers’ preferences came pressure from the Affordable Care Act that mandated the benefits health plans must offer. According to Murdock, the Affordable Care Act has a lot of health insurance carriers “trying to go forward with their hands tied behind their back.”

“This was a long-standing highly effective plan that just couldn’t afford to stay in business given the current climate,” he said. “There were additional costs to continue in the program, and if you’re losing membership at the same time your costs are increasing, you have to make a business decision.” 

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