Correspondence
Corporate Managed Care
N Engl J Med 1996; 334:1060-1063April 18, 1996
- Article
To the Editor:
In response to the editorial by Drs. Woolhandler and Himmelstein (Dec. 21 issue),1 we would like to point out that financial incentives have always been a part of fee-for-service medicine — a reality that seems to have been ignored until the recent growth of managed care. Fee-for-service medicine rewards the volume as opposed to the outcome of care provided. Although more care does not necessarily lead to better outcomes, this perverse incentive is inherent in fee-for-service medicine. Unless one advocates a system in which physicians are paid a fixed compensation by the government, as proposed by the authors,2 the challenge is to minimize the impact of perverse economic incentives on the medical decision-making process.
U.S. Healthcare's Primary Care Compensation Model rewards performance by valuing the quality of care and service provided. High-quality medical care achieves the best patient outcomes and is delivered cost effectively. For example, U.S. Healthcare's model rewards physicians who have extended office hours to provide an alternative to the emergency room for nonemergency care. It also rewards physicians who develop outreach programs to encourage health maintenance within their practices. U.S. Healthcare does not decide on the appropriate level of medical services to be delivered but bases measures of cost effectiveness on the normative experience of its practicing physicians. In addition, a catastrophic-illness adjustment compensates physicians who care for the sickest patients in U.S. Healthcare's membership.
Models are developed and performance is assessed through peer committees consisting of participating physicians. Contrary to the authors' claims, descriptions of our specific model have been published, and physicians can discuss this information with their U.S. Healthcare patients.3 The pros and cons of capitated versus fee-for-service models have been vigorously debated in the mass media for years; they have not been hidden from anyone.4-7
Over the past decade, we have demonstrated that our system has the ability to improve physician performance and patient outcomes.8,9 We have invested in the information systems, additional benefits, and managed-care programs that foster preventive care and support at-risk members who require special health care resources. This investment facilitates, but does not replace, the care provided by physicians. Managed care is most successful when physicians embrace its philosophy and gain an understanding of the services and programs that could benefit their patients. Rather than shun the sick, as Drs. Woolhandler and Himmelstein charge, U.S. Healthcare provides incentives to physicians to reach out to the sick and healthy alike with quality care.
9 ReferencesArthur Leibowitz, M.D.
Nicholas A. Hanchak, M.D.
Neil Schlackman, M.D.
U.S. Healthcare, Blue Bell, PA 194221
Woolhandler S ,Himmelstein DU . Extreme risk -- the new corporate proposition for physicians. N Engl J Med 1995;333:1706-1708
Full Text | Web of Science | Medline2
Woolhandler S ,Himmelstein DU . The deteriorating administrative efficiency of the U.S. health care system. N Engl J Med 1991;324:1253-1258[Erratum, N Engl J Med 1994;331:336.]
Full Text | Web of Science | Medline3
Schlackman N . Evolution of a quality-based compensation model: the third generation. Am J Med Qual 1993;8:103-110
CrossRef | Medline4
Lazar HP. Doctor, patient, bureaucrat. New York Times. December 20, 1986:27.
5
Kramon G. Rise of preferred provider groups. New York Times. December 15, 1987:2.
6
Molotsky I. Doctor incentives on costs assailed. New York Times. December 16, 1988:29.
7
Freudenheim M. Prepaid programs for health care encounter snags. New York Times. January 31, 1988:1.
8
Morrow RW ,Gooding AD ,Clark C . Improving physicians' preventive health care behavior through peer review and financial incentives. Arch Fam Med 1995;4:165-169
CrossRef | Medline9
Solin LJ ,Schultz DJ ,Legorreta AP ,Goodman RL . Downstaging of breast carcinomas associated with mammographic screening. Breast Dis 1995;8:45-56
To the Editor:
U.S. Healthcare's termination of Dr. David Himmelstein “without cause” [see the addendum to the editorial] is quite apparently an exhibition of a business's antisedition rule in action and, in our opinion, an abomination. Note that the early American colonists felt that England's antisedition laws were a cause for revolution.
The New York Times has decried gag rules imposed by health maintenance organizations (HMOs)1 but has indicated that relief lies not in legislation but in a “well-informed public” (note that U.S. Healthcare's action is considered a private business action). We, the public, through our legislation have created fertile ground for these businesses, exempting them from various taxes and antitrust legislation. An enlightened public should seek relief through legislation that opens the books and eliminates the self-serving gag rules of businesses on both the federal and state levels.
The Massachusetts Medical Society has championed such a law (Chapter 8 of the Acts of 1996), which prohibits health insurers from including gag rules in their contracts. This was signed into law by Governor William Weld on January 19, 1996. We believe that Massachusetts is the first state with such a law. We encourage other states and the federal government to pass similar legislation.
Physicians must have the ability to discuss candidly health plans that may be detrimental to their patients' health.
1 ReferencesRobert Lebow, M.D.
American College of Physicians, Southbridge, MA 01550Guenter L. Spanknebel, M.D.
Massachusetts Medical Society, Waltham, MA 02154To the Editor:
One might ask Woolhandler and Himmelstein why they agreed to participate in a plan that seemed not to meet their superior moral standards. Could it be the potential of a $150,000 bonus for things done right? Or could it be that they did not read the contract before they agreed to its terms?
The American public has decided that we spend too much in this country for inappropriate or unnecessary care. Should primary physicians and patients not share some financial responsibility for using unnecessary emergency care? Otherwise, what incentives do Woolhandler and Himmelstein suggest to alter this inefficient, clinically fragmented, costly behavior? . . .
Charles Peck, M.D.
Michael Eleff, M.D.
Aetna Health Plans of Ohio, Inc., Cleveland, OH 44122To the Editor:
U.S. Healthcare's termination of Dr. Himmelstein without cause should really be a call to arms for physicians. There is no greater challenge to the academic and intellectual freedom of physicians than the fact that a company can now essentially fire a physician for the expression of ideas.
This type of behavior by for-profit companies should not go unchallenged. American physicians have lost a substantial amount of power in recent years, but I hope that we have not yet become sheep.
Michael W. Devereaux, M.D.
Mt. Sinai Medical Center, Cleveland, OH 44106-4198To the Editor:
. . . Perhaps it is too easy for physicians to see the HMOs and their predatory chief executive officers (CEOs) as the enemy. But we forfeited the moral high ground long ago when we let our own desire for private enrichment displace our commitment to service through the alleviation of suffering, especially care of the poor. We sold out. Instead of choosing patient care as our preeminent concern, we cultivated a cottage industry of money-making that sooner or later would be ripe for a takeover. That time has now come, and we have no right to criticize the HMOs on ethical grounds for their brutal disregard of appropriate and humane patient care — we have already done the same thing ourselves.1 Under the old system we overused resources because it was to our financial advantage to do so. We will underuse them now because it is the turn of the CEOs to call the shots and their turn to make a killing.
1 ReferencesMark Alan Thompson, M.D.
Lancaster General Hospital, Lancaster, PA 176041
Kerr EA ,Mittman BS ,Hays RD ,Siu AL ,Leake B ,Brook RH . Managed care and capitation in California: how do physicians at financial risk control their own utilization? Ann Intern Med 1995;123:500-504
Web of Science | Medline
To the Editor:
Woolhandler and Himmelstein are correct in their contention that risk sharing pressures doctors to encourage only well elderly patients to enroll in capitated-care plans. But there is even more. U.S. Healthcare gives an additional 2.5 percent capitation bounty to physicians for enrolling fee-for-service patients already in their practices.1 Thus, there is a double incentive for skimming the healthy elderly into HMOs and leaving the costly remaining patients in fee-for-service Medicare.
1 ReferencesPaul C. Royce, M.D., Ph.D.
9 Prospect Rd., Atlantic Highlands, NJ 07716To the Editor:
. . . Woolhandler and Himmelstein fail to understand that capitation penalizes physicians when they delay or withhold indicated care. Capitation ties income to health, not sickness. Physician groups paid by capitation are rewarded financially when they decrease the need for care, not when they withhold necessary care. Just as most fee-for-service physicians are honest and decent practitioners, so are most clinicians in capitated plans (most of them former fee-for-service doctors). These doctors paid on a capitation basis are rewarded for appropriate referrals and penalized for inappropriate failures to refer.
It is 1996. Someone must make decisions about utilization. Will it be remote decision makers reached through 1-800 numbers, or will it be clinicians and their practicing colleagues? If it is to be clinicians and their colleagues, there is absolutely nothing wrong with creating a financial incentive to provide the right care, at the right time, and in the right way. That is called capitation. Moreover, that same incentive encourages physician groups paid by capitation to create proactive, population-based strategies for health care, with creative diagnostic, therapeutic, and preventive solutions to America's crisis in medical costs.
The authors' argument against compensation on the basis of capitation rests on the unspoken assumption that physicians merely respond to “seekers” of care, that the rate of “seeking” is fixed, and that doctors simply react when disease strikes. Some of us are more optimistic. We believe that doctors can do much more than react to illness by providing health care “widgets.” We look forward to the time when health care moves from a focus on care to a focus on health.
Physicians have the power to decrease the need for medical care, as well as to develop innovative and cost-effective diagnostic and care-related solutions, and creating a financial incentive to do so is the only solution. “Salaried practice in nonprofit, community-controlled regional plans” will never achieve this.
Alan R. Zwerner, M.D., J.D.
Unified Medical Group Association, Seal Beach, CA 90740-2750To the Editor:
The editorial by Woolhandler and Himmelstein and the Occasional Notes article by Weston and Lauria1 prompt me to write about a child for whom I cared. The child had cryptogenic cirrhosis, and her liver was failing. A pediatric liver-transplantation center at one of the premier pediatric hospitals in the United States was located within 50 miles of the family's home. Her HMO refused to use that center. They contracted with a center 1500 miles from the child's home. Their reason: it was cheaper.
A donor was found. The child flew the 1500 miles to receive her new liver. But her postoperative course was difficult and required a three-month hospitalization. Her mother stayed with her and her father visited often. Eventually the child came home, but she continued to have to make visits to the transplantation center.
The father had an understanding supervisor, but after a year of traveling to obtain health care for his daughter, his absenteeism was too high to tolerate. He lost his job and his HMO membership. The family went on welfare, and the child went on Medicaid. The father finally found another job, but because the child had a preexisting condition, she could not be covered by health insurance. Our bottom line: We, the citizens, pay for the child's care and will continue to pay. I don't know how much the HMO saved on that liver transplant, but I do know it was expensive for us. If the child had received her transplant 50 miles from home, her family would have been together and her father would have kept his job and his HMO membership.
As the health insurance industry cuts costs to itself, we, as citizens, must be cognizant of what that cost cutting means. Lower health care costs for an HMO do not mean lower costs for society. In this case, the HMO may have saved some money, but we will now pay for the child's care, and we paid for the welfare her family received. These costs are unnecessary.
The case described by Weston and Lauria was hardly unique.
1 ReferencesSusan S. Baker, M.D., Ph.D.
University Medical Associates, Charleston, SC 294031
Weston B ,Lauria M . Patient advocacy in the 1990s. N Engl J Med 1996;334:543-544
Full Text | Web of Science | Medline
To the Editor:
The Palo Alto Medical Foundation (which is an affiliate of the not-for-profit Sutter Health system; it was not “purchased by Sutter,” as stated in the article by Robinson and Casalino1) believes that capitated managed care represents the best approach to providing high-quality, affordable health care in this country. The fee-for-service system is simply too expensive. The system of government-controlled medicine is broken — witness Medicare, Medicaid, and the Department of Veterans Affairs. Prepaid capitated medicine is the only approach that emphasizes prevention and education — truly the next frontier in reducing costs and improving outcomes.
Woolhandler and Himmelstein imply that there is a perverse incentive: that capitation will inevitably lead to health care plans' limiting care and cherry-picking healthy patients. They cite the low utilization rates in California as examples. We assert that capitation results in higher-quality medicine with better outcomes. Who really believes that high hospital use results in superior care?
I am deeply concerned about the profit motive in medicine. Medicine never has been and should not be a profit-making enterprise. Certainly there are excesses in the for-profit HMOs; excessive HMO profits and unconscionable executive salaries cannot long be tolerated. Whenever market excesses occur, the pendulum will swing.
1 ReferencesDavid Druker, M.D.
Palo Alto Medical Association, Palo Alto, CA 943011
Robinson JC ,Casalino LP . The growth of medical groups paid through capitation in California. N Engl J Med 1995;333:1684-1687
Full Text | Web of Science | Medline
Author/Editor Response
The authors reply:
To the Editor: Once in the spotlight, U.S. Healthcare withdrew Dr. Himmelstein's termination and removed the gag clauses from its physician contracts. (For the record, we had both crossed out these clauses before signing.) The firm's concessions are reminders of our profession's power as a civic advocate. But U.S. Healthcare still forbids the disclosure of payment rates and retains the right to terminate physicians without cause.
The firm's executives note, as did we, that their bonus system rewards some good deeds. But it also rewards doctors who selectively recruit healthy patients and skimp on appropriate care — incentives minimally attenuated by their catastrophic-illness adjustments.
Dr. Zwerner offers rosy theories of HMO incentives and disturbing views of what stimulates good medical work. Preventive care extends life but usually raises costs,1 especially in the short run (and when targeted to HMOs' favored, low-risk populations2). Since patients frequently switch plans, future savings mostly accrue to future insurers. Financially savvy HMOs know that prevention's main financial benefit is its marketing value; it attracts the healthy. Few HMO public-relations campaigns aim to recruit more patients with the human immunodeficiency virus or chronic mental illness.
Most medical innovations, and clinicians' best work, arise from physicians' calling, not cupidity. Both fee-for-service and capitation give doctors incentives for good things and bad. Kickbacks, whether for prescribing more care or less, amplify the bad and fray the altruism that sustains caregivers as we “handle blood, vomit, feces, despair and death.”3
In cutting costs, would Aetna's executives also trim their overhead and profits from the current 22.6 percent of revenues4 to Medicare's 2.1 percent or Canada's 0.9 percent? National health programs in Canada and elsewhere cover everyone and constrain costs through global budgets, avoiding perverse incentives for physicians and useless nonclinical expenditures. Relative to our market-driven system, they have lower costs, more doctor visits, longer hospital stays, a greater choice of physicians, and better outcomes.5
Dr. Druker asserts without evidence that capitated managed care is superior to this and all other approaches and that the market will correct abuses. He also omits mention that the amount of outpatient care received has fallen along with rates of hospitalization.
For-profit medicine predictably begets profit-driven transgressions — intimidation of physicians, cream skimming, denials of care, and executive incomes that would make the Dallas Cowboys' Deion Sanders blush. The Massachusetts law banning gag clauses is a symbolically important, though narrow, redress. The California Nurses Association and consumer groups plan to introduce a ballot initiative outlawing both gag clauses and utilization incentives for clinicians (e.g., Kaiser's plan to offer nurses bonuses for faster discharges6). An even better approach, favored by the 7000 members of Physicians for a National Health Program, would proscribe for-profit care and prescribe universal coverage.
6 ReferencesSteffie Woolhandler, M.D., M.P.H.
David U. Himmelstein, M.D.
Cambridge Hospital, Cambridge, MA 021391
Russell LB. Is prevention better than cure? Washington, D.C.: Brookings Institution, 1986.
2
Woolhandler S ,Himmelstein DU . Reverse targeting of preventive care due to lack of health insurance. JAMA 1988;259:2872-2874
CrossRef | Web of Science | Medline3
In England nowLancet 1986;2:802-802
4
Knox-Keene health plan expenditures summary: FY 1994-95. Sacramento: California Medical Association, February 1996.
5
OECD computer database of health statistics. Paris: Organization for Economic Cooperation and Development, 1993.
6
Moore JD Jr. Kaiser nurse pay may be tied to early patient discharges. Modern Healthcare. January 1, 1996:4.
