Health Care and Insurance

Gateway shuts the door on benefits enhancement: Indianapolis company will cease operations Aug. 30; CEO hopes to reopen

August 7, 2006

Gateway Medical Resource Alliance, a niche health care benefits company, will shut down Aug. 30, more than a month after losing the lone Indianapolis hospital in its network.

The company, which has shrunk to six workers, provides employers discounts for certain cardiology, orthopedics and oncology care. In return for fees from the employers, Gateway offers flat, all-inclusive prices for procedures. It also offers prescription and wellness services.

CEO Terry Kopp said he still hopes to find another hospital to resuscitate Gateway, and he wants to continue developing a new comprehensive care product that emphasizes preventive measures and encourages employees to seek treatment from doctors with high quality ratings.

Gateway has been working on that product, the Quality Driven Health Care Partnership, with the Indiana Employers Quality Health Alliance, a group trying to improve care and control health care costs.

"A number of people have asked me to try to keep it open, and I'm having discussions with people about that possibility," he said. "If it stays open, it will be under a different set of circumstances."

The Heart Center of Indiana ended its contract with Gateway on July 17. Cardiology services represent a "sizeable portion" of Gateway's business, and the company had no other Indiana hospitals to fall back on, Kopp said.

"The hospital has been good to work with, and I'm not sure what the basis of the decision was," Kopp said. "I tried to talk to them about it, and they said they didn't want to reverse their decision, and that was it."

Heart Center CEO John Stewart declined to discuss the reasons for ending Gateway's contract, but said the hospital went through "a long thought process" before doing it.

"We feel it unfortunate for Gateway that our decision has had that impact," he said.

The largest cardiology group in Indiana, The Care Group LLC, holds ownership stakes in both the Heart Center and Gateway.

Other owners of Gateway are Chicagobased Midwest Heart Specialists and Evansville-based Ohio Valley HeartCare Inc. Care Group Chief Financial Officer Brian Morris said Gateway "had not been meeting financial expectations over the last several years" but the physician group stayed out of the final decision to end the contract.

He said the Care Group "was obviously conflicted in this situation, but we allowed the Heart Center of Indiana's management to follow their business protocol in dealing with Gateway."

Founded in 1995, Gateway sold its products either directly to employers or through benefits consultants, brokers or insurance companies. Employers used Gateway's network for certain kinds of care rather than the networks for their conventional HMOs or PPOs.

The company recorded about $6 million in revenue last year, which was more than $1 million below its top annual performance, Kopp said. Gateway once employed about 20 people, but was down to six employees when it started notifying customers last month of the closing.

Some insurance insiders say Gateway's discounts were a good-but-flawed idea.

For instance, employers with self-funded insurance plans might have little incentive to purchase one of Gateway's products, said Greg Wright, an Indianapolis insurance broker.

Those employers also carry stop-loss coverage to shield them from big medical bills. This coverage generally handles cancer care and heart problems. That makes the stop-loss insurer the ultimate beneficiary of discounts Gateway provided in those arenas, Wright said.

If an insurer did not pass a discount back to the employer for using Gateway, then the employer had little incentive to buy a Gateway product, he noted.

"That's the reason why I didn't work with Gateway," he said. "That's the only reason. If I had found that they were economically justifiable, I would have used them."

Gateway did offer significant discounts, said Curtis Donley, president of Donley & Co. Inc., an Indianapolis thirdparty benefits administrator. It also gave employers a better sense of what costs to expect because of its flat pricing.

But Donley said bigger insurers have the clout to get discounts on their own, and he also saw stop-loss carriers as unwilling to pass discounts from Gateway to the employer.

Donley only used Gateway for less than 10 percent of his clients.

"They just didn't have a big hook there to really get the employer fired up about it," he said.
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