East Bay Business Times (California)

Hospitals and clinics serving the uninsured say they’re worried about being left out of grants earmarked for under-served communities as part of the $9 billion takeover of PacifiCare by UnitedHealth Group Inc.

The insurer is starting to accept applications for some $25 million in charitable contributions it is making as part of a state-required program to distribute a total $50 million in contributions and make some $200 million in investments over five years to benefit California health care.

“I am very concerned because a representative from the Department of Managed Health Care did tell us that the eligibility for these dollars… is general,” said Carmela Castellano-Garcia, president and CEO of the California Primary Care Association, which represents more than 600 community health-care centers across
the state and is advocating for funds to build more clinics and develop information technology systems.

She worried the Department of Managed Health Care did not limit applicants for the grant to “safety net providers” and so the clinics she represents may not get the grant funding that they need.

UnitedHealth Group agreed to the payments as part of a deal negotiated by former insurance Commissioner John Garamendi to protect California consumers and to ensure that they wouldn’t be saddled with costs of the combination and increased executive compensation packages.

The community health care clinics, who hoped to use the money to fund expensive IT projects that are fast becoming the norm in today’s health-care environment, were were disappointed to find in late 2005 that the written merger agreement provided a broader scope of uses for the money.

Distribution of the first half of the $50 million in charitable dollars started last summer with a $10 million contribution to UC campuses at Riverside and Merced, among other things, with no money going directly to clinics and hospitals. Regulators and insurers are still putting together a committee to direct investments, something that both health care advocates and consumer groups say was to happen long ago.

“It hasn’t make sense that this is taking so long,” said Jerry Flanagan, a health-care advocate with The Foundation for Taxpayer & Consumer Rights. “This is a classic case of insurers saying they’ll do what it takes to get a merger approved then dragging things out.”

Cheryl Randolph, a spokeswoman for UnitedHealth/PacifiCare says the insurers have been working with the Department of Managed Health Care and the California Department of Insurance to follow the agreement and that working with so many players takes time. “We want to make sure the process is fair and people have the opportunity to apply for funds,” she said.

State regulators point out that merger documents don’t limit the category of recipients for the charitable dollars, which according to the papers “may be used” to fund subsidies and outreach to low-income populations, technology improvements for safety-net providers and medical education programs in under-served areas.

“There is a general feeling that the intent of the charitable money is to improve health-care delivery in California and look at under-served communities,” added Ellen Badley, assistant deputy director of health technology for the Department of Managed Health Care.

Also watching closely is the California Association of Public Hospitals and Health Systems, which represents 6 percent of the hospitals in California and estimates it provides health care to more than half the state’s uninsured population.

“We would be concerned if public hospitals were not included in efforts to improve care for patients of those populations,” said Erica Murray, policy director for the program.

In separate allocations of the charitable dollars, UnitedHealthcare donated:

– $10 million in July 2006 to UC-Riverside and Merced for medical education programs.

– Another $5 million is going to support grants to rural clinics and hospitals participating in the Federal Communications Commission’s pilot program creating a national broadband network to connect public and private not-profit health-care providers. If California’s application for this program isn’t granted, the funds would be redistributed.

– $1.5 million is funding research and education projects related to primary care, with at least some of that money already granted to put on a symposium last December in Long Beach on health care products and access issues.

– $350,000 went to pay consulting fees to “develop a road map” for health care IT in California and expenses for Gov. Arnold Schwarzennger’s health care IT summit last year.

– Another $8.15 million plus interests payments accrued on the charitable dollars is being set aside in a “reserve fund” to “support” activities related to the $200 million investment program.

The Foundation for Taxpayer & Consumer Rights’ Flanagan says his biggest concern is that money be used to increase health-care access, not insurer profits. “The insurers in the past have demanded return on their investment and this limits that areas where the money can be contributed,” he said. “There are probably lot of needs-assessed health-care access issues that may not be an investment to the company.”

The California Primary Care Association is suggesting loans for funding information technology in its clinics that could be forgiven as certain benchmarks are met.

The clinic association previously expanded health care access to the indigent and uninsured a part of a $35 million grant after the merger of Anthem Inc. and WellPoint Health Networks Inc.

“We aren’t the only provider,” said Castellano-Garcia. “But we are so well positioned for so many different reasons, including our track record with servicing these people in the communities they reside in.”