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March 16, 1999


Trashing PrimeHealth or As Me Old Irish Grandmither Used To Say, Laddie Ye Be Cuttin' Off Your Nose To Spite Your Face!

In its March-5 headline story, "Trustees question Bailout, HMO Gets $21 Million from USA Foundation," the Mobile Register has fashioned a new and improved crooked yardstick, surpassing all its previous measures for reckless journalism.

Now that frontal assaults on the USA Foundation by some members of the USA Board of Trustees have been repulsed with little detriment done, the Mob.Reg. has sicked its lead attack dog, Ronni Clark, on the USA Foundation's ward, PrimeHealth. But, judging from Ronni Clark's reporting of remarks made by Jack Brunson, the chair pro tempore of the USA Board, it appears that Brunson, in objecting to the Foundation's right to disburse funds to PrimeHealth, doesn't really understand the guardian-ward relationship between the USA Foundation and PrimeHealth. At the March-4 meeting of the USA Board of Trustees, Brunson said, according to Clark, that "the $21 million bailout for PrimeHealth of Alabama Inc. late last years shows that USA's private foundation made a bad investment that's draining dollars better spent in classrooms." (Mob.Reg.,3/5/99) Brunson, who prides himself on his business acumen gained while managing his family's small insurance business, told his fellow trustees that "based on his analysis of PrimeHealth's Sept.30 report to state insurance regulators that HMO is 'bankrupt, broke'" (Ibid.), implying that the $21 million disbursed almost six months ago to PrimeHealth was money poured down a rathole.

Such statements are, we believe, not only totally outrageous but totally irresponsible and especially so since they come from the chair pro tem of the USA Board of Trustees. He ought to know that such statements undercut the confidence of thousands of people in southern Alabama who depend on PrimeHealth as their affordable health-care provider. To support his claim that PrimeHealth is bankrupt, Brunson offered nothing more than the "analysis" he made to the September-30 report to state insurance regulators. That PrimeHealth has experienced some serious financial difficulties due to an unfortunate alliance with Columbia/HCA is no secret, but that is no reason to throw the baby out with the bathwater, as apparently Brunson would do when he characterizes PrimeHealth as "bankrupt, broke." (Mob.Reg.,3/5/99) Perhaps it is Brunson's hope that in sowing fear in the mind of the public and the university community, he will generate enough erosion of confidence in PrimeHealth to make his "analysis" a self-fulfilling prophecy and bring down not only PrimeHealth but the USA Foundation too.

Becky Tate, the Executive Director of PrimeHealth Alabama, misquoted in the Mob.Reg., said there was a need for an infusion of capital from the parent organization, the USA Foundation, but that that need has been addressed thanks to the $21 million sent to PrimeHealth in December 1998 by the USA Foundation. In a recent letter to PrimeHealth clients and friends, Ms. Tate said that PrimeHealth is working very hard to address every issue that contributed to its recent losses and promises that the cause of these losses will be eliminated in the very near future.

Clark, taking her cues from Brunson, presents PrimeHealth as a bad investment opportunity on the verge of collapse if not bailed out by the USA Foundation. Not only does this portrayal entirely misrepresent the viability of PrimeHealth but also misrepresents the relationship of the USA Foundation to PrimeHealth. For the USA Foundation, investing in the PrimeHealth companies is not an act of softhearted and unwise charity extended to a basket-case organization picked, as it were, out of the blue for rescue. Nor is investing in PrimeHealth, for the USA Foundation, like investing in Coca Cola or any other Fortune 500 corporation. Either Brunson doesn't want to understand the relationship between these two organizations or he is intentionally misrepresenting their relationship to trash not only PrimeHealth but the USA Foundation as well. The USA Foundation is the superordinate guarantor organization, under whose wings are sheltered: PrimeHealth, Inc., which is non-profit and two other entities which are for profit: PrimeHealth Administrative Services, Inc., and PrimeHealth of Alabama, Inc.

This complex structure has evolved from a suggestion coming originally from the Mobile Chamber of Commerce to Dr. Fred Whiddon to the effect that the southern part of Alabama was in desperate need of a health-care provider that could handle a wide spectrum of medical needs for the people of Mobile and surrounding counties. Dr Whiddon, then President of USA, seeing an opportunity to provide both affordable health-care and an economic engine to support the USA Medical complex, with the assistance of Wayne Davis and Steve Simmons, came up with a plan, modest in its original conception, that eventually evolved into a successful statewide organization.

Critics have repeatedly objected that going statewide was a bad idea, so why did PrimeHealth leave the safe confines of Southwest Alabama and venture out into the entire State where many assumed it had "no business"? Contrary to the Mob.Reg.'s portrayal of PrimeHealth's alliance with Columbia/HCA and as a "unwise partnership," at the time it made excellent sense because PrimeHealth faced an increasingly competitive market, one in which employers demanded that their employees have access to a statewide HMO network. K-Mart's employees, for example, would have access to health-care providers not only in Mobile but in Birmingham or in Montgomery and Huntsville. Without a statewide network, PrimeHealth found itself unable to secure as clients the employees of "big business," and thus unable to capture a larger share of the health-care market for USA's hospitals, and without these additional clients, PrimeHealth's ability to serve as "an economic engine" for the university's medical complex would have been drastically impaired. That "economic engine" created by PrimeHealth Inc.'s joint venture with PrimeHealth Alabama produced a statewide network with 40,000 additional members; bringing membership to over 90,000 lives. And it has increased its market value substantially over the ten million spent on statewide expansion.

What Brunson and others fail to mention is that before PrimeHealth's existence, USA hospitals were in danger of being swamped by indigent patients. Those who could afford it took their business to the upscale hospitals in Mobile, leaving USA hospitals to absorb huge losses. With the inception of PrimeHealth, ensuring a steady stream of patients with health insurance and thus able to pay for their medical care, the fiscal health of USA's hospital improved radically, making health care affordable for a wide range of patients in all income brackets. Moreover, contrary to Brunson's claim that PrimeHealth money is not being spent in the classroom, PrimeHealth pays the USA Health Systems, including USA Physicians and the USA Hospitals, more than $50 million annually and a total of more than $250 million since inception. This money helps assure that the USA Medical School will have viable hospitals as an integral part of their teaching mission -- sites where teaching doctors and medical interns can practice their profession. Without the steady stream of income assured by the alliance with the PrimeHealth group, USA hospitals would indeed be in real financial trouble and the teaching resources and training opportunities would not be as fully available as they currently are.

Jack Brunson, who prides himself on being "a bottom line kinda fella," has his eye fixed shortsightedly on the $21 million the USA Foundation has provide PrimeHealth Alabama to remedy the losses incurred when Columbia/HCA withdrew, selling the majority of its hospitals in the state. If Brunson and other trustees with tunnel vision take the blinkers off, they might see, as Becky Tate, the Director of PrimeHealth Alabama, put it, "the quarter of a billion dollars the HMOs have paid to the university's hospitals and physicians over the years and . . . the $50 million they are paying to the university's hospitals and doctors this year." But apparently Brunson is not the only one bent on trashing PrimeHealth. According to Clark's story, USA President Gordon Moulton and Hospital Administrator Steve Simmons said the "hospitals did not profit from the payments." Simmons added, "What they pay us just barely covers our cost." "They pay us $800 a day for in-patient care while Blue Cross pays us over $1200 a day for the same care of their patients." Well, then the logic of this, aside from the fact that the University does have Blue Cross/Blue Shield as a provider, appears to be to change horses completely. But is that feasible? How many $1200-a-day patients can Blue Cross provide? Will such a switch make a profit for the hospitals? If switching to Blue Cross means switching to an upscale horse with only a few polo-players for riders, then where's the advantage, where are the big profits to come from?

Now, I can really sympathize with dear old folksy Jack Brunson's need to see things in the simplistic light of the bottom line. I too wish things weren't so darn complex, but unfortunately they are and the way things are headed, it doesn't look like we'll ever get back to the horse-and- buggy simplicity of the good old days when doing biz was cozy and a fella didn't need to have at least an M.S. degree in business management. But since we live in parlous complex times, it's essential that those who administer universities and sit on boards of trustees, have all the education they can get so they can do their best to cope creatively with the complexity of our parlous times and not do painful things like cutting off their noses to spite their faces.

-- Tom Brennan

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