In the late 70's, concerns about the rising cost of health care cause the nations doc's to offer "Voluntary Cost Containment" out of fear Congress will come up with something worse. It doesn't work. Public and congressional attention is then drawn toward prepaid health plans AKA managed care organizations such as Kaiser Permanente. Managed care is based on the old adage that there is strength in numbers; that bargaining power to control costs becomes stronger when large numbers of consumers, the "population at risk," represent the chips in play.
- One of nation's first Health Maintenance Organizations is formed shortly after the HMO Act of 1973 is passed. Dr. Jim Schubert, Sacramento Orthopedist, controversial in championing HMO's, is a founder of the Sacramento Medical Care Foundation, later forming the health plan; "Foundation Health lan." Foundation will be the first licensed health plan in California.
- 1984 - Foundation is so successful it goes public on as "Americare Health Care Corporation."
- 1986 - Merrill Lynch leads a leveraged buy out "Foundation Health Plan" reemerges.
- Early to mid 80's - Foundation, attempting to replicate Sacramento area formula for success, acquires struggling local health plans in Seattle and Portland.
- Mid 80's - Captain Bob Bunker, USAF, MSC, is helping launch the Air Force Medical Service' first Office of Innovation. He decides to approach (via cold calls) managed care organizations to gauge interest in a form of managed care to supplement direct military health care. He catches the attention of Foundation executives who he and others later brief on an upcoming Department of Defense Office of Health Affairs initiative called the CHAMPUS Reform Initiative. "CRI" when launched is to be a demonstration project that, if successful will be adopted nationally and overseas. The Title would later be changed to Tricare.
- Mid-80's - CRI pre-contract process begins. Interest of nation's HMO's declines rapidly as significant financial risk becomes apparent.
- Foundation and DOD staff begin considering "risk-sharing corridor" where both share in potential profit and losses from contract operations.
- 1987 - Foundation begins experiencing financial difficulties as their ability to manage health plans in Washington, Oregon and New Jersey fails. To raise needed cash, Foundation considers selling their large health care claims building (a former Safeway) for approximately $1 million. However doing so will drop their Tangible Net Equity below the $5 million the State requires to maintain health plan licensure.
- Late 1988: Foundation, the sole bidder, is awarded the nation's first CRI contract and begins implementation activities. At that time, it is the largest health plan ever awarded.(No other health plans would bid because of ambiguities in the associated financial risk.)
- Schubert is the champion of the initiative and is continued as Chairman and Chief Medical Officer of the company.
Subsequent Foundation hiring includes MSCs and officers from several service branches; first is recently retired AF Major Tom Campbell, an MSC who had been hired by Foundation earlier at the recommendation of Captain Bunker.
Commemorative copy -
original contract award- Campbell assumes role as COO for Northern California operations serving nearly 400,000 beneficiaries. Campbell then recruits Paul Murrell, MSC Lt. Colonel and Chuck Upton, MSC Colonel who would assume Foundation corporate roles. For Northern California operations, Campbell also hires recent MSC retirees including Navy Commander Bob Legg, Army Lt. Colonel Mike Sexton, Army Colonel Jim Schlaak and Army Colonel Ed Bland as directors. Air Force Colonel and former pilot Ernie Givani also signs on as a director.
- The health plan also begins exploring the sale of their two out-of-state HMO's.
- 1988-'89:
- CRI begins. All operations are largely successful with the exception of claims processing. Foundation had contracted with an external party for a claims system known as "Eagle." It didn't work. Schubert, in attempting to defend the system causes significant government concerns and is asked to resign.
- Foundation's CRI contract operations are favorably reviewed by external contractor, the Rand Corporation.
- The continuing influx of government contract cash saves Foundation.
- 1989: Foundation, unwilling or unable to manage its remote plans, sells Oregon and Washington HMOs to Dr. Malik Hassan, founder of a small successful Pueblo Colorado HMO; Qual-Med.
CRI /TRICARE enrollee #2
(Dr. Schubert was #1)
Yes, they were still figuring out
how to properly laminate things. - 1989-1990 - RAND Corporation evaluates CRI - operations receive excellent ratings overall with exception of struggling claims system.
- 1993: Qual-Med merges with Health Net to form Health Systems International.
- 1997: Health Systems International merges with Foundation Health to form Health Net. The 'Guppy' that Foundation sold its struggling HMOs to a few years earlier swallows the 'Whale.' Health Net CEO is Dr. Malik Hassan who originally formed the 7,000 member 'Guppy' HMO in Pueblo.
- 2016: Centene merges with Health Net.
- 2017: Centene signals intent to establish regional Headquarters in Sacramento...in full circle to where this story began.
(All during this period, from the early 70's, there is background noise about a single-payer system. Although based on general population health and economic logic, each time it rises it is defeated by insurers...and money. In the past few years though, the idea, primarily tagged as "Medicare for all" has continued to gain ground among a few politicians and the general population. More on this HERE)
