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New For-Profit HMO Moving into Detroit

Crain's Detroit Business (August 11, 1997) reports that the new for-profit HMO, CareAmerica Michigan, Inc., will spend about $1 million this year in a saturation advertising and marketing campaign through metro Detroit. CareAmerica Michigan Inc. in Southfield recieved its license in July from the Michigan Insurance Bureau. President and CEO of CareAmerica Michigan, Mark Zickel, said, "We're very excited about our entry into Michigan. We see tremendous opportunities among small and midsize employers for an organization committed to high-quality service for customers."

The Crain's article refers repeatedly to the huge "untapped market" and "investment potential" for managed-care companies in the Detroit area, with only 20% penetration by HMOs and even less when it comes to Medicare (only 2-3% of eligible Medicare recipients). "Detroit is one of the top five untapped markets for a Medicare risk program," Zickel said.

The new HMO is a partnership between Woodland Hills, California-based CareAmerica Health Plans Inc. and Michigan Provider Network, a Troy-based consortium of more than 2500 physicians and nine locally based independent physician organizations. While 15% of the HMO is owned by the local physician network, the other 85% is controlled by CareAmerica Health Plans Inc. For-profit CareAmerica has about 265,000 members in southern California and reported 1996 net revenue of about $628 million.

Michigan Provider leader Gerald Sherman, MD, of Sterling Heights, said CareAmerica Michigan would be unique locally because of its significant ownership and operating interest by physicians. Subscribers are expected to chose from among 500 local physicians and several medical centers, including Beaumont Hospital and St. John Hospital and Medical Center.

CareAmerica Michigan is beginning its local marketing immediately, Zickel said. Plans call for it to spend $10 to $20 million over the next four years to enter the Detroit area, according to a Crain's interview with CareAmerica executives last year. At the time, Sherman said it might take three years or more for the local plan to break even. By 1988, CareAmerica Michigan also plans to roll out othe managed-care options, including point-of-service and a Medicare HMO (emphasis added).

According to James Kenney, president of the Greater Detroit Area Health Council, CareAmerica is just one of many national HMOs expected to enter Michigan. Aetna U.S. Healthcatre already has a Michigan HMO license pending with Michigan insurance regulators.

(This report combines elements of the Crain's Detroit Business article cited in the text and one published, July 21, 1997.)

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This page was updated March 1, 1998.