A landmark deal: Sarasota Memorial accepts a Medicare Advantage plan

David Gulliver - posted 1 a.m. Tuesday, Nov. 3; updated with industry reaction 11:30 p.m. Tuesday, Nov. 3

Sarasota Memorial Hospital, which has held out against the popular Medicare Advantage insurance plans since their inception five years ago, has signed a long-term contract to accept an Advantage plan from Aetna.

It represents a landmark change not only for the hospital and insurers, but for Medicare beneficiaries, who can enroll in plans -- including Aetna's -- starting Nov. 15.

Medicare recipients who wanted to choose the lower-cost Advantage plans but did not, for fear of losing access to Sarasota Memorial Hospital and the doctors of its First Physicians Group practice, can now do so.

And the deal has enormous potential for Aetna, which has lagged Humana and United Healthcare and others in the Medicare market. Being the sole insurer with a Medicare Advantage plan accepted at the region's leading hospital, which has about 60 percent of the Sarasota County inpatient market, could deliver thousands of new customers.

"It seems like a no-brainer that this is a great deal for Aetna," said Bob Lotane, communications and political affairs director for the National Association of Insurance and Financial Advisors - Florida.

Florida insurance regulators no longer report on the plans' enrollment, but Humana claims more than 75,000 members in the Tampa Bay region, while United claims over 500,000 from Tampa to Naples.

Medicare Advantage plans are health insurance plans offered by private companies that provide all Medicare coverage, plus additional benefits such as vision, hearing and fitness club memberships. They do so while usually costing seniors less, because they are heavily subsidized by the federal government. Studies show they cost taxpayers 12 to 18 percent more than traditional Medicare.

Advantage's popularity has caused a steady stream of complants from local Medicare beneficiaries, who say the area's public, tax-supported hospital is obliged to accept the plans.

Sarasota Memorial, unlike almost all Florida hospitals, has steadfastly declined to accept the plans. Its argument was that Medicare provides necessary care-- and in some cases, like rehabilitation or multiple hospitalizations, cheaper care-- while paying more to hospitals and doctors than the Advantage plans.

Its reversal is a sign of both the public interest in the option and the hospital's prediction about the future of the Advantage plans.

"We continue to get pressure from the community to have this kind of plan," said David Verinder, the hospital's chief financial officer.

Hospital and insurance officials said Sarasota Memorial is one of the few Florida hospitals that was not accepting the plans. "With the popularity of Medicare Advantage plans, I'm surprised they held out this long," NAIFA-Florida's Lotane said.

Sarasota Memorial officials had been debating the move for about six months, Verinder said, examining several insurers' offerings before settling on Aetna. The hospital has accepted its commercial insurance plan for many years, and Verinder said that the long relationship and Aetna's financial stability were keys.

The hospital's concern stems from getting more than half its gross income from Medicare. About 7 percent of the region's Medicare beneficiaries now use an Advantage plan, but that figure is about 22 percent nationwide and about 50 percent in the Miami market.

Because Advantage plans pay less and cost more in billing expenses, strong enrollment would be a substantial hit to the hospital's income, Verinder said.

Meanwhile, the plans' heavy federal subsidy is a target in the healthcare reform effort. That could mean even less money from the insurers in future years, Verinder said. The hospital could refuse to renew the contract -- but at the risk of losing thousand of patients.

The hospital and insurer locked in payment levels with a long-term deal. "It's a risk, but it's a mitigated risk," Verinder said. "We have terms in place that will protect us for the next several years."

With a long-term deal, the hospital may be covered until federal action restructures the plans, or insurers themselves change or drop the plans if the federal subsidy dries up, he said.