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Managed care isn't spreading like kudzu through the South, but managed care plans are taking root in the region as more Southern employers embrace the concept.

In the South, health care cost pressures have not been as great as in the West or Northeast, where managed care has made significant inroads. In addition, Southern providers have fought to continue offering care in traditional ways.

At the same time, managed care plans have found less financial incentive for setting up shop in a region with vast stretches of rural communities than in more densely populated regions of the country.

Nevertheless, managed care is now making steady inroads into Dixie.

A survey by A. Foster Higgins & Co. Inc. released earlier this year indicates that managed care programs are replacing traditional indemnity plans in Southern workplaces.

It showed 31% of Southern employers offered traditional indemnity plans in 1996, down from 41% the year before.

The survey also indicates that point-of-service plans are growing faster among employers than other forms of managed care in the South.

The data showed that 15% of Southern employers were offering point-of-service plans in 1996, which was more than double the 7% that had the plans in place the year before.

Fifty-two percent had preferred provider organizations, compared with 45% in 1995. Twenty-two percent listed health maintenance organizations among their 1996 offerings, up from 18% the year before.

While encouraging, the numbers have to be taken with a grain of salt, according to Dave Hollis, a principal and health and welfare practice leader for the South unit at William M. Mercer Inc. in Atlanta.

"You could be led to believe that managed care has made as many inroads in the South as anywhere else. I would still question that a little bit."

Others agree that managed care hasn't penetrated the South as deeply as it has other parts of the country.

"It's my perception that the South has lagged behind but is doing its best to catch up," said Jane Freedman, senior consultant at Watson Wyatt Worldwide in Atlanta.

"It does lag behind for a lot of reasons," suggested Jonathan Newpol, director of The MEDSTAT Group in Atlanta.

One reason is city size, he noted. "Obviously, managed care is stronger in large metropolitan areas. The South has much more rural and small city concentrations."

Mr. Newpol pointed out that managed care is "way behind" in places with few or no major markets, such as Mississippi, Alabama and most of Louisiana. The lack of large employers with large employee populations in those states gives managed care pro-viders less incentive to operate there.

Ms. Freedman agreed that "the degree to which a marketplace

is mature in the context of managed care has more to do with size rather than the area of the country. In most of the major met-ropolitan areas, it's the businesses that are driving it."

However, plans are beginning to find ways to expand into rural areas.

Employers with operations in multiple communities are asking plans to tie together the far-flung locations in a network that will provide consistent benefits to all workers, explained Harvey Ludlam, president of Prudential Health Care Plan of Georgia Inc. in Atlanta.

Banks, for example, may have a number of employees in cities throughout a state and want to provide the same level of benefits to employees at all locations, he said. "Pressure is coming from these kinds of clients to offer statewide plans."

Plans are responding by putting together statewide networks of PPOs and POS plans, Mr. Ludlam said. "We have embarked on a statewide POS program," he said of Prudential Health Care's efforts to satisfy employers with statewide operations.

POS programs have caught on because, while they resemble HMOs, they offer patients pro-vider choice that HMOs do not.

Mr. Hollis pointed out that in many cases, a POS plan is put in place as a "second phase," when an employer thinks HMO enrollment has peaked.

But HMOs are becoming more popular, according to figures compiled by InterStudy Publications in St. Paul, Minn.

InterStudy tracks HMO enrollment in regions established by the U.S. Bureau of the Census.

HMO enrollment in the East South Central region-Alabama, Kentucky, Mississippi and Tennessee-grew almost 50% from July 1995 to July 1996, according to InterStudy. HMOs in that region covered 15.6% of the population as of July 1996.

InterStudy's figures show enrollment in the South Atlantic region-Delaware, the District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia-grew by 29% for the period. HMOs cover 19.4% of that region's population.

"In spite of the rapid growth, it is not the most highly penetrated part of the country," said Richard Hamer, director of InterStudy. The Northeast and West Coast are still "quite a bit higher in HMO penetration," he added.

According to a 1996 Foster Higgins survey of employers with at least 500 employees, 51% of eligible employees in the West were enrolled in HMOs, while among Northeast employers, 44% of eligible employees were enrolled in HMOs.

The South has lagged behind other regions in managed care partly because Southern employers have a tradition of waiting until a concept is proven before implementing it, Mr. Hollis pointed out. In many cases, he said, they have waited to watch managed care mature in the Northeast and West before joining the bandwagon.

Provider resistance has been another barrier to managed care in Southern states.

"The medical community has not been anxious to get in," Mr. Hollis said. "That has slowed the growth of managed care."

"Significant pockets" remain in the South where health care providers are "adamant against managed care," he said, explaining that many physicians worry that their incomes will drop and their livelihoods could be threatened if managed care becomes entrenched.

In some parts of the South, health care costs haven't risen enough to push employers to the concept. In fact, costs have been so low in some areas that managed care has been "a solution looking for a problem," noted David Foster, a Mercer associate and member of its managed care advisory group in Atlanta.

Florida is a managed care dichotomy.

In the southern half of the state, where the retiree population is large and health care is more costly, managed care is well-entrenched, Mr. Foster pointed out.

Not so in the northern half of the state, he said, where the population is younger and health care costs are lower.

Apart from South Florida, some hot markets for managed care can be found in North Carolina, pointed out Mr. Newpol of MEDSTAT. Population growth in Charlotte and the Research Triangle area has heated up competition among managed care marketers.

In many other areas, however, expansion likely will be slow.

"I don't foresee strong expansion," said Mr. Newpol, predicting instead "low to moderate growth" in the South.

Instead of expanding, Mr. Newpol thinks the "infrastructure," or operations, of managed care will improve among plans already in the South.