1977 to 1980: From Concept to Company

The year 2020 marks the 40th anniversary of Independent Health’s existence as a health plan.  But the first steps toward the company’s conception began in 1975, not from a conference room of corporate strategists, but surprisingly through a neighborhood organization. Spurred on by a federal grant opportunity, the group is credited with planting the early seeds of what has grown into one of Western New York’s major companies.

While Independent Health has enjoyed a long history of growth and success, it almost didn’t get off the ground following the rejection of an important federal grant its planners relied on. How the company changed tack following the grant rejection in 1977 plotted a course toward the company’s birth.

The Western New York Health Planning Corporation (WNYHPC) was established in 1975 to study the feasibility of creating a new type of health plan – known as a Health Maintenance Organization, or HMO – that would serve the new Audubon community in Amherst, New York. For more on this, read Part 1: From Concept to Company.

Encouraged and energized by receiving two grants in 1975 and 1976, the WNYHPC was now focused on the development of a staff model HMO, in which doctors and other providers work for the health plan and operate out of the same buildings.

In July 1976, the WNYHPC hired Mary Lundberg as its executive director. Lundberg, who had been working for Health Care Plan, another staff model HMO in development in Western New York. In 1977, Lundberg hired two students from the University of Buffalo’s MBA program, Frank Colantuono and Bill McHugh as part-time employees, though they were still in school. Colantuono was focused on financials, McHugh on marketing.

Initial Development Grant Denied – WNYHPC Forced to Withdraw

That same year, the federal government had two operational plans to accept or reject in the same region, WNYHPC and a company named Health Care Plan, which were both being developed as staff model HMOs. The two plans were at the same point in the approval process. Because the two health plans would be competing against each other, the federal government decided to fund only one of the plans. It chose Health Care Plan, a plan that had undergone a much longer planning process.

Although WNYHPC was not selected, Lundberg was determined to overcome this setback. She went to Washington D.C. to persuade the federal government to support WNYHPC. Government officials were impressed by the quality of the management group at WNYHPC, so they told Lundberg that she and her group may develop an Independent Practice Association (IPA) model as a complement to the staff model in the WNY region. Lundberg and her group agreed to develop the IPA model, even though it meant the company would have to start the process all over. Around this time, McHugh left the company for a marketing position in Minnesota.

Second Feasibility Grant Application Submitted and Approved – IPA Model

The first step was to again obtain a $75,000 feasibility grant. This required repeating the steps from the first feasibility grant application process, but they were able to use much of the same work that had been done. The company’s application was approved, and it received the feasibility grant to research the possibility of starting an IPA model HMO.

Second Planning Grant Application Submitted and Approved

The next step was submitting a second planning grant. During this process, Lundberg was looking to hire a marketing person. Following the advice of Colantuono, she contacted McHugh in Minnesota and offered him a marketing position with the company. McHugh accepted and rejoined the company.

In January 1978, the company’s operational planning grant application for an IPA model HMO was approved. The grant money was used to expand the company, which included hiring a new medical director, Dr. Robert Kohn, and an assistant medical director.

Initial Development Grant/Name Change to Independent Health

After the feasibility and planning grants were complete, an initial development grant enabled the company to complete its initial development prior to operations. On January 1, 1979, the name of the company was changed from WNY Health Planning Corporation to Independent Health Association (IHA).

There were 11 employees when Independent Health started, including:

  • Mary Lundberg, executive director
  • Frank Colantuono, financial director
  • Bill McHugh, marketing director
  • Jean Donaldson, who had been hired during the initial planning phase, was a secretary who also performed human resources duties.
  • Fred Cohen, who was initially outside Legal counsel, eventually left private practice to later become full-time, in-house legal counsel.

Independent Health becomes fully operational

On February 9, 1980, Independent Health Association (IHA) received its Federal Qualification. Two days later, February 11, it became fully operational when the New York State Department of Health issued its Certificate of Authority.

When Independent Health became operational, Mary Lundberg was appointed president. The company was located at the corner of Main and Harlem in Amherst at 4510 Main Street, after moving from its first location in a small brown house on Millersport Highway which had been provided by the ADC.

By the end of the first year, Independent Health has 2,785 members through 55 employer groups. Among the first groups to sign on with Independent Health were:

  • American National Rubber
  • Marine Midland Bank (Now HSBC)
  • Gaymar Industries
  • Gibraltar Steel
  • Grand Island Schools
  • Lockport Memorial Hospital
  • Quebecor Printing
  • Sherwin Williams
  • Town of Tonawanda

Throughout the 1980s, Independent Health focused on building its list of clients and growing its membership. In 1984, Lundberg left her position for other opportunities. Frank Colantuono was named president and Bill McHugh became executive vice president.

Under the leadership of Colantuono and McHugh, the company expanded into the remaining six western counties of New York in 1986. Independent Health’s service area now covered all eight counties: Allegany, Cattaraugus, Chautauqua, Erie, Genesee, Niagara, Orleans, and Wyoming.

By the 1990s, Independent Health’s leaders saw greater opportunities to expand its core business offerings. Using its entrepreneurial spirit and innovative thinking, the company expanded its plan offerings and diversified into progressive affiliate companies in order to strengthen its core business and offer more value and quality to employers and members.

Today, under the leadership of president and Chief Executive Officer Michael W. Cropp, M.D. and the executive team, Independent Health continues to address the ever-changing needs of the community and its membership, while delivering the utmost in quality, care and value.