by John M. Curtis
(310) 204-8700

Copyright September 5, 1999
All Rights Reserved.

eteriorating faster than anyone expected, California’s once monolithic health care experiment — better known as managed care — is one step closer to Forest Lawn. With more than 115 medical groups — including California’s largest, MedPartners/Mullikin — going broke since 1996, the wheels have come off the managed care freight train. Touted to save the health care industry from spiraling costs, the HMO industry is now sacrificing the health of California’s 20 million managed care subscribers. Failing to streamline the practice of medicine, HMOs have turned back the clock on quality care. "We face an epidemic of physician organization bankruptcies unless we fix a very broken system," said California Medical Association executive vice president, Jack Lewin. Guess what? It’s no accident that many of California’s largest medical groups are in failing health.

       Blaming HMOs for delivering inferior medical care tells only half the story. Contrary to popular belief, HMOs sell health plans on glossy paper to employers — they don’t directly provide any medical services. HMOs don’t own medical groups, clinics, pharmacies, laboratories or hospitals. No, HMOs only contract with these organizations and pay them fixed payments to manage large blocks of health plan enrollees. So when subscribers are denied the use of medical benefits, it’s medical groups — not the HMOs — who deny the care. "When a medical group is not doing well financially, there is additional pressure on the doctors to look at cost instead of quality," said Peter Lee, executive director of the Center for Healthcare Rights. When medical groups become insolvent and close their doors, HMOs find other medical groups to take over. Sounds responsible, doesn’t it? But, it’s the HMO’s monopoly over patients and their untenable payment system known as capitation, that is responsible for medical groups’ financial woes.

       Feigning interest in quality care, HMOs claim that they carefully monitor the fiscal solvency of medical groups with whom they contract. Once HMOs usurp medical groups, they replace them with financially stable groups. How ironic. Only now is Sacramento looking into ways to regulate medical groups who service HMO subscribers. But more regulation won’t fix the basic problem of how HMOs bankrupt medical groups. While HMOs like to blame medical groups for fiscal mismanagement, it’s actually HMO’s failed system of reimbursement that’s responsible for the current rash of bankruptcies.

       Thanks to the HMO industry, solo medical practice — except for the most coveted specialties, like cosmetic surgery or laser vision correction — is all but extinct. Since HMOs control access to patients, they typically contract with large multispecialty medical groups known as IPAs — bypassing solo practitioners, forcing them to either join group practices or face commercial liquidation. Now comes the real dilemma. HMOs contract-out all medical, hospital and tertiary services by paying physician groups fixed dollar amounts per month. With fierce competition for patients, HMOs have hammered down these payments so low that medical groups are either forced to ration care or hemorrhage into insolvency. With Titanic-sized groups like MedPartners/Mullikin and FPA Medical Management representing 1.5 million lives going under, Sacramento is finally taking notice. Or are they?

       Swamped with managed care reform, the California legislature appears lost in the Redwoods, not dealing with the fundamental flaw creating intolerable mediocrity in today’s managed care system: How HMOs pay for services. Placing medical groups — not HMO — at financial risk by fixing their monthly income, HMOs have decimated the ethical practice of medicine. Installing gatekeepers to ration benefits turns quality medicine on its head by placing finances over sound medical decisions. Demonstrating these cost savings, prompted the Clinton administration to use the HMO model as the cornerstone for health care reform. Using Medicare HMOs as a prototype for national health care, the White House was dangerously led down the garden path. Fortunately, congress rained on their parade.

       Herding seniors into HMO plans — touting lower costs and lavish benefits — doesn’t answer the basic question of how services are paid for. When the government pays fixed amounts to medical groups, the groups find themselves quickly running in the red. Unlike younger subscribers, seniors heavily utilize medical benefits. Choosing between providing seniors costly tests and procedures or paying their monthly overhead, guess who prevails? What’s wrong with shortening seniors’ lifespans? They’re going to eventually expire. Right? Surely most people would find this cavalier approach totally unacceptable. But with the current system, what options are left?

       Acquiescing to the current system won’t fix the problem. It’s time deal with the fatal flaw of today’s HMOs — physician groups can’t be placed at financial risk for delivering medical care. Like other types of insurance, health plans — not doctors — must reclaim responsibility of paying for subscribers’ care. Can you imagine contractors sharing the risk with homeowners for their fire insurance? Or body shops accepting financial responsibility for insureds’ auto accidents? I don’t think so. Surely physicians have to be held accountable for practicing responsible medicine. They need to accept and implement the principle of delivering only medically necessary care. But physicians can’t be financially penalized for doing what’s right for their patients. The present system does exactly that! Medical groups must be reimbursed for delivering appropriate medical care. Placing physicians at financial risk for practicing medicine must be stopped.

About the Author

John M. Curtis is director of a West Los Angeles think tank specializing in human behavior, health care and political research and media consultation. He’s a seminar trainer, columnist and author of Dodging The Bullet and Operation Charisma.

©1999-2000 Discobolos Consulting Services, Inc.
(310) 204-8300
All Rights Reserved.