Beware of Healthways Inc (HWAY)



You may be left in the lurch

14 November 2015

By David Arthur Walters

Seniors, beware during this Medicare Advantage enrollment period if you believe your Healthways Silver Sneakers benefit will continue to include your favorite gym. It may no longer be on the list, and it may be too late for you to do anything about it, because the emphasis of financially strapped Healthways is return to stockholders and not benefits to its customers.

For example, Crunch Fitness South Beach, the only full service gym in South Beach besides upscale Equinox, which cannot afford to serve the entire community, was dropped by Healthways. The luxury real estate boom in South Beach has driven rents so high that GOLDS and David Barton’s were forced to close. Crunch Fitness reorganized nationwide, and its two South Beach locations are now its top producers.

I visit the Crunch gym everyday to keep myself fit and out of the hands of doctors. The reason I switched my Advantage plan from Preferred Care Partners to Care Plus last year was because Care Plus provided my gym, Crunch Fitness South Beach, as a benefit. It was not actually listed in Healthways’ Silver Sneakers directory, but I was assured by my local Crunch of its participation.

This year, I happened to check the list again because I was dissatisfied with Care Plus, which enjoys the highest Medicare rating, I believe, not because its plan is superior, but because of its bedside manner; it is good at holding the hands of disappointed seniors.

This year, Preferred Care Partners does provide the Silver Sneakers network. I resolved to dump Care Plus and return to Preferred, which is backed by United Healthcare. I discovered during my conversation with the Preferred Care Partners’ representative that my gym was not on the Silver Sneakers list.

I contacted Silver Sneakers via email, and received a response by someone who would not put his name on the communication. Crunch Fitness in area 33139 was no longer on the list:

“We anticipate being successful in our efforts and feel confident we will have alternative locations for you in the near future to continue to enjoy the Fitness, Fun and Friends you have come to expect with Silver Sneakers offered by your health plan at no additional cost.”

The fact of the matter is that there is no viable alternative location within zip code 33139 i.e. South Beach. It so happens that my primary care physician, whom I have never met and whose Care Plus optical program I found pathetic because it took his eyeglass monopoly upstairs in his clinic 7 months to get my glasses, is on the Silver Sneakers list, that being an exercise room he set up for his captive customers, the frail elderly.

Otherwise, carless seniors with the Silver Sneakers benefit can board the horrendous Miami-Dade County bus system for up to two hours a day at $5 roundtrip to go to an economy gym.

I called Michelle at Silver Sneakers to point out that there are no alternatives nor will there a viable option given local market conditions. That is, Crunch Fitness South Beach is the only option.

That was no concern of hers although she appreciated how deprived members might feel. She said a notification would be sent out, but she did not know when. She said that it is the responsibility, however, of insurance company customers to find out if they are covered. We are a nearly month into the enrollment period now, which will close on 7 December, yet Healthways has not yet provided notification to Crunch Fitness South Beach members.

I still hoped that Healthways Silver Sneakers would renegotiate the contract with Crunch, which recently raised its membership fee by about $5. I emailed Jill Myers, Healthways Press Relations Director. My plea for a response to the particular concerns was forwarded to Virginia Anderson at Allison + Partners, a strategic market public relations firm. She pasted a hackneyed PR response into her email to me:

“We are in the process of contacting Silver Sneakers members in the area to notify them of this change and encourage them to seek one of our neighboring locations, among more than 13,000 locations nationwide. We are committed to providing our members with many class and location options to suit their needs and will explore new alternatives to serve our Miami members who previously participated at the Crunch location. I understand this meets your deadline tomorrow. Thanks so much!”

When I asked what the problem with the contract was, she refused to say anything except that the information was proprietary. Neither would Crunch Fitness Corporate comment on the issue.

One can only infer from the information available that Healthways is concerned with its bottom line and not the consumers whom they would leave to suffer the conditions of a particular highly priced market.

I was obviously speaking to a machine with a broken record. A little research of Healthways financials revealed that it is a badly managed health care management company. The Nashville firm, founded in 1981, and, with $742 million in revenue in fiscal 2014, laid out $4.4 million dollars in the third quarter this year to get rid of its former president and CEO, and then laid 68,531 shares, today valued at $872,000, of restricted stock (HWAY) on its new president and CEO as a supposed incentive. Hedrick Smith’s national bestseller (Who Stole the American Dream?) contradicts the notion that stock incentives actually produce stellar results except to executives.

The company lost $15 million before taxes in the third quarter including a $10 million settlement of a contract dispute. The third quarter loss does not include a $20 million investment loss in a joint venture with Gallup.

Healthways and Gallup have partnered for 25 years in an endeavor to track and manipulate human behavior. They created the so-called Well-Being Index in 2012. The public is randomly polled with 10 questions appertaining to 5 elements, physical health being the last element.

Healthways expects to lose another $25 million in the fourth quarter for restructuring charges intended to align the interests of management with the shareholders’ interests in profits. Operations will be “decentralized” despite its current blindness to local consumer needs. Costs will be “rationalized” in order to “lower health related costs,” which probably explains why so-called Silver Sneaker members with Crunch Fitness are getting the shaft on South Beach.

Healthways will also take a hit to revenue because it is amending its contract with the Hawaii Blue, Hawaii Medical Service Association, transferring 220 of its staff to HMSA, most likely because HMSA is better managed. Hawaii pioneered prepaid health care, mandating that all employers over a small size provide coverage for each employee at its cost. I had a difference of opinion with HMSA over its marketing, and the secrecy of its formula for determining its level of benefits several years ago, but that was resolved with the assistance of the state ombudsman and two U.S. Senators.

Healthways losses will exceed its $29 million in retained earnings, and leave it with less than one dollar in current assets to satisfy each dollar in current liabilities.

Healthways rhetoric states that it is “The largest independent global provider of well-being improvement solutions. Dedicated to creating a healthier world one person at a time, the Company uses the science of behavior change to produce and measure positive change in well-being for our customers, which include employers, integrated health systems, hospitals, physicians, health plans, communities and government entities.”

Tellingly, the ultimate consumer on which capital depends is not included in the customer list, although Healthways also says it provides “highly specific and personalized support for each individual,” which it obviously does not now do in the South Beach market.

We also read that “68 million covered lives (are) actively managed” by Healthways, meaning that individuals are deprived of choices to manage their own lives, as my example demonstrates. This is top-down, paternalistic, managed health care by a demonstrably badly managed company.

We do not need this incompetent “middle man” to manage our lives. Health club benefits should be tailored to local market conditions; some clubs cost less, some cost more; on the average the cost is reasonable. Or the insurance companies can simply pay the average cost to the clubs, and the members could pick up the difference if any.

Part of staying healthy is making individual decisions as to what health club we want to belong to. Healthways markets its Silver Sneakers on the basis that the clubs intervene in disease and promote health. We know that. And when great health clubs like Crunch Fitness are excluded from participation, we know that is unhealthy. We want our gym benefit, not public relations bullshit.

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