A Difficult Mission Mission:Health's Demise Reflects Trend of Provider-Based Managed Care Industry

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A month ago, a Jacksonville-based managed care group formed as an attempt to provide better-managed, low-cost health care filed for Chapter 11 bankruptcy.

Officials from the group, Mission:Health, cited rising prescription costs and contracts with HMOs that left little room for error as reasons for its financial failure.

Mission:Health's problems are part of a larger trend.

Nationwide, many hospitals and doctors that own managed care plans are facing tight margins brought on by high costs and the lack of size, expertise and capital needed to compete with large insurance companies.

And because of this, many are being forced to close their doors and others are finding themselves with no alternative but to file for bankruptcy.

"The belief by providers is that insurance companies are making enormous amounts of money," said Mike W. Smith, president of Axis Manage-ment Group, a New York-based consulting firm. "Therefore, if they get into the business, some of the profits the insurance companies are making could get distributed back to the health system." Mission:Health was formed by Baptist/St. Vincent's Health System and the North Florida Physician's Association because the health system and the doctors thought they could manage medical costs better than their HMO counterparts. They also saw insurance as a way to make a profit. But without the financial reserves and time to track what services patients were using, they failed, forcing the seven insurance companies Mission:Health contracted with to take back policyholders. In the early 1990s, when HMOs had higher profit margins than they do today, hospitals and doctors entered the managed care industry en masse. According to U.S. News & World Report, by the mid-'90s, more than 40 percent of all new HMOs were being …