Correspondence
Physician-Operated Networks and Antitrust Regulations
N Engl J Med 1997; 337:55-56July 3, 1997
- Article
To the Editor:
Robert Kuttner, in his Heath Policy Report on physician-operated networks and antitrust guidelines (Jan. 30 issue),1 fails to distinguish between physician-owned health maintenance organizations (HMOs) and risk-sharing organizations of physicians (physician-operated networks or independent practice associations). Physician-owned HMOs are not, and have never been, the target of antitrust scrutiny, whereas physician-operated networks have been subjected to a frequently changing level of scrutiny. Thus, physician-operated networks, not HMOs, benefit from the changes in guidelines discussed by the author. By providing effective resource management and rewards for high-quality health care and by sharing risk among physicians, physician-operated networks can now include a large percentage of physicians in the relevant geographic market without concern about antitrust violation. These organizations allow physicians to provide health care as part of a comprehensive medical network rather than as piecemeal services in a given community.
The author's discussion of the financial barriers to forming physician-operated networks is also confusing and unnecessarily discouraging. Although a physician-owned HMO may cost $5,000 in start-up expenses per physician, the typical physician-operated network can be formed at a much lower cost per physician. As a subsidiary of the Pennsylvania Medical Society, during the past two years we were successful in bringing more than 6000 physicians together in 40 physician-operated networks in Pennsylvania and neighboring states. To date, it has not cost more than $1,500 per physician for any network to become operational.
As for an additional $10,000 to $25,000 per physician to cover unanticipated losses, the author overlooks the benefits of stop-loss insurance, a type of catastrophic coverage that minimizes the risk incurred by a network and is required by the Health Care Financing Administration on Medicare and Medicaid risk-sharing agreements.2 He also fails to point out that the network will be able to negotiate with the payer for a cap on liability, as well as for a provision to carry losses forward from one fiscal year to the next, payable from future surpluses. Since we have been successful in assisting our networks to obtain each of these protections, no bankrolling has been necessary. It has been our experience that, in general, a risk-sharing physician-operated network can become fully operational for less than $1,000 per physician. Of course, operating as part of the Pennsylvania Medical Society, we were not driven by the profit motives of many consultants in the marketplace.
Risk-sharing physician-operated networks are an inexpensive way to return the control of health care to physicians at the community level. We hope that the relaxed antitrust guidelines reduce physicians' anxiety, and we encourage physicians to work through their state societies to help bring about the type of change that has been introduced in Pennsylvania.
2 ReferencesMichael P. Lance
Managed Healthcare Solutions, Harrisburg, PA 17112Victor R. Cotton, M.D., J.D.
PennMed Member Services, Harrisburg, PA 17105-88201
Kuttner R . Physician-operated networks and the new antitrust guidelines. N Engl J Med 1997;336:386-391
Full Text | Web of Science | Medline2
Medicare and Medicaid Programs; Requirements for Physician Incentive Plans in Prepaid Health Care Organizations, 42 C.F.R. 417.479(g)(2).
To the Editor:
According to Kuttner, Health Systems International (now Foundation Health Systems) bought MD Health Plan, a Connecticut HMO, and was later acquired by Wellpoint Health Network, which is now in control of MD Health Plan. Wellpoint, which is Blue Cross of California's HMO, and Health Systems International, one of the nation's larger HMOs, discussed a merger of equals but because of unresolvable disagreements decided to call it off in 1996. Wellpoint has never had anything to do with MD Health Plan.
As for the relation between Health Systems International and MD Health Plan, the physician owners of MD Health Plan voted to join Health Systems International because they believed our information-driven medical management system would improve the quality of care they could provide at costs consumers could afford to pay.
Malik M. Hasan, M.D.
Foundation Health Systems, Pueblo, CO 81003Author/Editor Response
Mr. Kuttner replies:
To the Editor: Contrary to the criticism by Mr. Lance and Dr. Cotton that I lumped together HMOs and physician-operated networks, I explicitly pointed out (on page 387) that staff-model, or risk-sharing, HMOs had never been targets of antitrust scrutiny. If other types of physician-controlled plans share substantial risk, according to antitrust policy, they are no longer considered cases of price fixing by potential competitors, but are instead viewed as legitimate joint ventures. The point made by Mr. Lance and Dr. Cotton on that issue is precisely the point I made in my article.
With respect to cost, I take them at their word that it is possible for a state medical society to organize a physician-operated network at minimal out-of-pocket cost. Ironically, the figures I cited as typical costs for physician ventures came from the American Medical Association and its consultants. However, it is far from clear how extensive reserves will ultimately need to be, since state regulators have not yet decided whether physician-controlled networks are to be regulated as insurance companies.
Dr. Hasan is correct that Wellpoint never acquired Health Systems International. At the time I was researching the article, I was told that the merger had been consummated, but that information was obviously incorrect. I regret the error.
Robert Kuttner
, Cambridge, MA 02138
