The rise & fall of HMOs

MANILA, Philippines - Health maintenance organizations (HMOs) would appear like hit songs going up and down the music chart in the race to the top, but none ever staying long in that slot.

This phenomenon has been going on for decades in the HMO industry, with the leader remaining on top only until another player comes along.

For the first time, however, current industry leader IntelliCare appears poised to keep the top slot for long, confident that its formula for success will keep it above the competition for as long as the company itself can handle and manage its own surging operations.

IntelliCare’s formula, according to chairman and president Mario Angelo M. Silos, was practically the solution to the many problems that beset the HMO industry when the company was created in November 1995.

“The concept of why we went into forming this new company and putting it into fruition was really because of our own experiences with our healthcare coverages. Over the five prior years of getting healthcare coverages of all the HMOs existing at that time before 1995, we always had encountered, as a matter of norm, problems that were both irritating and significant. We kept moving from one HMO to another. And so we thought that if this was the kind of competition we would be facing, we would excel,” Silos recalled.

“So, we felt that if we set up an HMO, with even just the modicum of standards of performance – and these didn’t have to be excellent… you simply had to meet your word — then we could make a big difference in the industry. At that time, you didn’t even have to delight the customers or give them some surprises. It was simply delivering what you committed, or doing what you said” Silos added.

“And if we were to deliver in this manner alone and were able to do this, we would be able to top this industry. So we formed the company (Asalus Corp. with IntelliCare as brandname) in November 1995 and started operations in January (1996). But there were five common problems then in the HMO industry that we had to surmount.

“First, the lack of servicing (the clients’ needs), which was mostly done by agents who sold the product. So basically you had a push and pull as to which the agents should prioritize – the new accounts or servicing the old accounts that they already closed. And naturally, the lure and attraction of additional commissions would force them to the other side,” Silos pointed out.

Second, if these agents were not available, the servicing of their accounts would be passed on to some people in the office. Again, there was really no system by which who would answer it, who would actually make the decisions on it, and more often than not, it was to be expected that the answer would normally be a “No”. 

“Third was the lack of reportorial requirements in terms of what was a client’s HMO utilization, why is the HMO increasing the client’s fees for the following year, what was the basis for the increase? So people were really left in the dark with simply perceptions of why rates would be increased. At the end of the day, there was really no concept as to how to record these (increases) on time for the next year’s renewal,” Silos said.

“Fourth, there seemed to be at that time a very high level of marketing expenses related to sales. Maybe it was because the HMO industry was not that fully understood and they needed people to shout it out on the streets. Now that it’s known and its purpose already achieved, marketing expenses have to be driven down to refocus savings to cost efficiency.”

“Fifth, if you go to the organizational structure of many of the HMOs then, there was a demand for a higher level of professionalism and expertise in running the business. Not unlike any other businesses, the industry demanded from its players a background in marketing, finance, account management, billing, collection, etc. This, however, was apparently not evident. They thought it was just going to be easy, that they would just grow with the job. But it wasn’t and they didn’t. And you would find out that over the history of the HMO industry, there were collapses along the way because of mismanagement of many of these types of small companies.

“To address those problems, we had to look at the industry practices and market needs from a totally new paradigm and thereupon create our company’s own niche. We said, at the end of the day, the demand for the HMO product would be simply based on cost savings and cost efficiencies. In other words, the only way that we could sell HMO benefits to corporations, which were already providing internally-managed health benefits to their own personnel, would be if we could do it for them - both in cost and servicing - than they were already doing.

IntelliCare does it by providing healthcare providers like hospitals and doctors with a big number of regular patients. The steady stream of high-volume business makes way for big discounts that enable IntelliCare to enhance its clients’ value for money.

The company has over 1,000 corporate accounts composed of leading companies in every industry sector, total membership of almost 600,000 and a network of more than 12,000 of the country’s well-known physicians and medical specialists, and almost 800 reputable hospitals, clinics, diagnostic centers and other first-class medical institutions.

IntelliCare’s uninterrupted delivery of top-grade service is assured by a 24/7 call center and on-site patient relations officers in each affiliated tertiary hospital.

Thus, the company boasts a 90 percent client retention rate and a compounded annual growth of roughly 25 to 30 percent in the past ten years, which sums up to over 100 percent membership expansion every year.

Nonetheless, the company has a vast asset base expanding to over P1 billion worth, a dynamic workforce of nearly 800, and a growing financial muscle of over P200 million in stockholders’ equity from only P1.9 million in 1995.