Micro-managed Health

COVER UPDATE

Micro-managed Health

Avalon Healthcare faces giant competition, but it

is gaining contracts in the Florida health care market.

Avalon Healthcare, a Tampa health insurance company taking on industry giants such as United and Blue Cross, finished 2008 with more capital and more hospital contracts and it is looking forward to a better 2009.

It secured $3.2 million in funding in debt and convertible debt, bringing its fundraising total to more than $14 million.

It is starting to make inroads in small group business. It also recently signed up Naples Community Hospital, the first hospital in Collier County accepting Avalon insurance, and with Lee Memorial, which owns five hospitals in Lee County.

It is in negotiations with Sarasota Memorial, and expects to finalize that contract in the first quarter, which would give it coverage on the entire Gulf Coast, one of its goals. In total, Avalon ended 2008 with more than 70 hospitals signed up in Florida.

"We are pushing into 2009 feeling pretty good," says Chuck O'Neill, chief executive officer of Avalon. "We're concerned like everyone is about the economy. We don't have the membership of the larger companies. We're not worried about retention, but about growth."

New contracts and growth is very important for Avalon. That's because the more patients it gets, the better it can negotiate with hospitals and clinics for contracts and the more latitude it will have in setting rates.

Hospitals, in turn, want health insurers with lots of patients. So it is a circular argument. "We say, if you don't bring me discounts, we can't give you discounts," O'Neill says. "We promise them volume."

In a continuing quest to offer something different, Avalon has launched hybrid, or what it calls "micro plans" with special rates for certain geographic areas.

For example, it launched the Sawgrass Plan in North Broward County, which covers four hospitals the county owns in the North Broward Health System. The price is 25% to 30% cheaper than some of Avalon's other offerings.

The micro plans are for select markets, where hospitals are looking for alternatives, O'Neill says. Avalon is looking to add similar micro plans in Miami and Pennsylvania in 2009. Pennsylvania has insurance industry regulations similar to Florida.

Avalon knows that the only way to be successful in the long run is to have its own provider network. That means signing contracts with hospitals, doctors, laboratories and chiropractors. It will take years, O'Neill says.

Avalon also begins 2009 with a new board member, Kevin Hill, ex-CEO of Oxford Health Plans. Hill is also former CEO of United Healthcare Northeast, a division of United. He is now a partner in Roundstone Healthcare Partners, a health care investment firm in Rumson, N.J.

- Dave Szymanski