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October 26, 2007

Health Wonkery Watch

Shannon Brownlee explains the differences between managed care and (real) HMOs/group practices, and tries to rescue the shattered reputation of the latter:

The reason group practices and HMOs haven't flourished is that the market isn't set up to pay them. There isn't an insurer in this country, including Medicare, which consistently pays doctors and hospitals for the quality of care they provide. They pay for quantity. They pay for the volume of individual services provided, not for the value of those services to the patient. As Michael Hillman of the Marshfield Clinic (a group practice in Marshfield, Wisconsin) recently put it, our current payment system "is like buying a car based on how many parts it has and how long it takes to make it, without considering how well it runs.'' So even though HMOs and group practices have in effect built the equivalent of a better car, the market doesn't give a rip.

Patients don't care either, partly because they are insulated from the cost of medicine, so they have little stake in getting good value for their dollar. But they also have a bias against HMOs and group practices because the American Medical Association has spent the last century telling them that HMOs and group practices offer inferior care. The AMA's rallying cry has been the almighty "doctor-patient relationship." This might sound like a motto based on the needs of patients, but what it has meant in practice is the AMA has trumpeted the rights of individual doctors in private practice to treat patients as they see fit, without interference from the government or their peers, and more importantly, to charge whatever price the market will bear. According to the AMA anything that resembles organized medicine, including group practices and Medicare, is a Commie plot to saddle us with socialized medicine -- and constrain physician incomes.

Doesn't ring true? Think about this: HMOs came into being largely in order to better coordinate care. Much like the VA, they bring together doctors who're jointly tasked with individual patients, who share notes and generally work as a team. That's part of how they keep costs down. Now, all of you, just about, are in the Big Insurance version of the HMO: Managed care. How coordinated does your care feel?

October 26, 2007 in Health and Medicine | Permalink


I saw a documentary on kaiser permanente in its early years (I had been a member in its later incarnation) and I was stunned by what great services they provided in terms of testing, monitoring, and following up on patient care. They engaged in some very thoughtful long term care practices that they had to abandon when the industry got through with them because the cost/benefit didn't add up if patients would be forced to leave by changes in insurance coverage. I can't remember what actual example was used but it was something like massive testing and record keeping of all patients early on (costly) that produced sufficient information to track likely sufferers *later* of things like breast cancer, kideny diseases, heart attack or diabetes. The *financial payoff* came because early detection lowered the costs of later treatment a small amount. The *patient payoff* was huge because it meant that patients actually could get the care later that they were going to need. But as other insurance companies and businesses cherry picked out patients later the payoffs of early testing were lost. Kaiser ended up paying for the tests but later insurers didn't cover the problem, or cherry picked out patients who weren't likely to suffer from problem X, leaving Kaiser handling and insuring the sickest without picking up the premiums from everyone else. Meanwhile, patients who moved into these other for profit insurance scams (because the premiums were lower or their companies forced them to move) weren't tested or followed and then couldn't get treated effectively if they did come down with the diseases Kaiser was working on.

Oh well. Its the best of all possible worlds, innit?


Posted by: aimai | Oct 26, 2007 11:14:39 AM

Do they "better coordinate care," "bring together doctors who're jointly tasked with individual patients," and "share notes and generally work as a team?"

I've never had to switch doctors when switching HMOs, because nearly every reputable doctor in MA takes all the major HMOs. I've also found my doctors have not really used referrals as a way to keep tightly coordinated. My doctor says he likes to have 100% of my medical records because each piece makes up the whole. But he never said it helps that I go to his preferred referral. I found a dermatologist appt at another office a whole 4 MONTHS ahead of the one he referred me to. So I took it and my doctor thought that was great.

Posted by: Adrock | Oct 26, 2007 11:15:15 AM

The first paragraph is inaccurate. Numerous Physician groups are still reimbursed on a capitated basis. Out west I can also think of a few completly intergrated systems hospital down that are paid on capitation. If they provide good care and keep the people out of their office their profit margins are greater. If they provide poor care and thus see the patients frequently then they lose money. California is full of capitated contracts which in no way is paying for quantity.

How in the world can anyone look at Kaiser and say they pay themselves on the basis of quantity? There are numerous other integreated systems that also prove this argument false. Summa Health in Ohio off the top of my head.

Posted by: Nate O | Oct 26, 2007 11:19:36 AM

Commercial managed care has basically given up attempts to coordinate care. A lot of them have also basically stopped doing UR or denying claims. They just transfer ot down a level to physicians and correcting (or underpaying) their coding. They lost that round to the docs. In government run programs, like VA and the chronic needs population in Medicaid, the attempt to manage care exists and works- and the docs HATE it, and not just because of the rates.

Not sure what this means. Managed care can and does work, but Americans rejected that model. The only people who live with it are the people who have to live with it. I don't buy the idea that if we have single-payer that somehow people's love and trust of the government will lead them to accept the model.

That's part of the reason this admin has pushed for Medicare managed care so hard. Easy to say it's a sop to the insurance industry, but I think it's more of an upfront bribe because long term they need to shift that growing population to some type of capitated system because the guess is if they don't do it now they'll be faced with a huge constituency that is not inclined to accept such changes.

Posted by: Alex | Oct 26, 2007 11:23:09 AM

I saw a documentary on kaiser permanente in its early years (I had been a member in its later incarnation) and I was stunned by what great services they provided in terms of testing, monitoring, and following up on patient care. - aimai

The change in Kaiser, in my experience, is relatively recent. I must confess that I have somewhat of a bias and an inside view of things, as my father is a (quasi) medical professional employed by Kaiser.

But even when I was growing up, Kaiser still very much worked on the philosophy that an ounce of prevention is worth a pound of cure, so in the long run, it'd be cheaper for them to give you oodles of preventive medicine (of course, we had the most comprehensive insurance Kaiser provided). Also, from a professional stand-point, as a medical professional, working at a Kaiser practice you were completely insulated from the business aspects so you could concentrate 100% on patients (and had plenty of time to do so).

At some point, however, the "cost-cutting" mania of for-profit medical practices hit Kaiser, and they began to force their health providers to see more patients and take up some of the business aspects of medical practice (as they didn't hire new support staff to replace old staff lost to attrition). And, pace Nate O., just because payment occurs via capitation doesn't mean payment isn't based on quantity rather than quality: indeed, what happens is that there is simply an incentive to schedule as many patients as possible (remember the medical providers themselves are salaried: they are paid by the hour while the organization gets paid by the patient count -- so the incentive is not to provide quality medical care, but simply to turn over patients as quickly as possible!) and screw whether or not the health care provider actually has enough time to fully figure out what care the patient needs!

Nu? The real problem in health care (and in much of the corporate world) is one of how accounting is handled at the highest levels, isn't it? The idea of investing money now to save or profit later is lost: it's all about cutting your nose to cut costs in spite of your face.

Posted by: DAS | Oct 26, 2007 11:31:01 AM

“The AMA fought the fraternal orders over their practice of hiring doctors for individual lodges, which helped them to control medical costs. Big insurance companies, some of which started out as mutual aid societies, fought them over every type of insurance they tried to extend to their members. Yet in most cases, dues-paying lodge members received comparable or better benefits at a lower cost than other workers.”

Posted by: Floccina | Oct 26, 2007 11:43:32 AM

X-posting this from my comment at tapped:

I'd like a bit more evidence that Kaiser and Group Health (of Washington) really are among the top providers.

U.S. News and world report did a rating of top health plans in colloberation with the NCQA. While I would not exactly consider this a the be-all and end-all, is seems at least indicative: No Kaiser plan is on either of the top lists, and the only group health cooperative on it is Group Health of Wisconsin.

Top Commercial Plans

Top Plans

At any rate, given how bad our health system has gotten I won't rule out the possibility that Kaiser and Group Health are the best of a bad lot. I would like some sort of evidence before accepting it though

Posted by: Gar Lipow | Oct 26, 2007 1:27:48 PM

Atul Gawande wrote an interesting New Yorker article about how doctors are paid, and included the story of what was essentially a tiny HMO that started in 1971 -- a small group of New Hampshire docs who offered healthcare to patients for a fixed fee and paid themselves fixed salaries. They paid specialists a flat fee each month in exchange for not having to deal with paperwork, and that gave the specialists incentives to educate the HMO docs about when they really needed to send patients to specialists.

This evidently worked beautifully with 5,000 patients, but not so well with 60,000. I suspect it's not the only healthcare idea that doesn't scale well.


Posted by: Liz | Oct 26, 2007 1:35:53 PM

"...who share notes and generally work as a team. That's part of how they keep costs down."

Also mandated in-house referral ...keep the patient in shop,
so to speak....
the ethical conflict of referring to a group Doc whose abilities or creds aren't optimal.
While someone's -not in the plan- ...are.

Posted by: has_te | Oct 26, 2007 1:45:26 PM

Mason's still provide a level of care for retired members. There are a few other such organizations that try to accomplish such goals but are stymied by state insurance law. There has been numerous efforts to allow association health plans that would be a vehicle of such orders to deliver care but it has been blocked by unions and democrats. They where/are extremly successful at offering great servcie nd care at afforable cost. Personally I think our relying on federal governemnt for all these programs is what dooms them to failure. If we would localise these decisions and resources they would be far more efficient.

Posted by: Nate O | Oct 26, 2007 2:04:21 PM

I was previously insured by a large corp. that was 'self-insured', meaning that they paid the health insurance providers essentially to provide administration rather than accept risk - although I have no idea the terms that were negotiated. This self-insurance is very common among large companies, but little remarked upon - almost invisible. My guess is that the contracts between health insurers and company provide some form of capitated payment, but with the employer accepting financial responsibility for costs above some negotiated limit. I doubt that the company's cost is just a pass-through for all costs (which the term self-insured implies). Some reporting on this self-insurance is surely needed. Is this why corporations are largely opposed to major reform? My understanding is that all of the costs of health care for employees is tax deductible for the companies involved - so it is possible that although they complain, they like the financial aspects of the current 'system'.

Anyway, the corp. that insurered me. offered a menu of plans, at various rates, to the employees with the company and the employee each paying part of the cost. Among the employees there was little discussion of any difference between those plans that were essentially fee-for-service and those who called themselves HMOs. And, nearly everything was 'covered'.

So, I wonder if the distinction between so-called 'network' plans (fee-for-service) and HMOs really is a distinction anymore - it certainly wasn't a visible issue in choosing a network plan versus a HMO. Yes, there were (minor) differences in coverage, but the biggest issue was cost and preference for choosing the MDs and specialists - by the patient, or by the HMO.

The original 'promise' of the HMOs was coordinated care for a fixed price. That seems to have degraded into 'all the care the HMO wants to provide' for the fee charged.

But, like parents love of 'their kids teacher' or 'their local school' at the same time they denounce the school system or public education itself, people like what they have. This also includes their Congressperson, it seems. It surely seems to apply to their health plan - which is why wholesale, root and branch proposals for a single payer universal health plan will fall on deaf ears from the existing insurered. They like just what they have in all too many cases.

They don't like being 'locked in' however to that insurer, and if the insurers were smart, they'd accept patients that transfer from any other comparable plan from another company, or keep insuring those who leave the sponsoring employers. But they aren't smart in that way.

New Dem. plans (Clinton, Edwards, Obama) that offer a public-insurance choice while retaining the choice of staying with the existing insurer are the only way we will get to evolve toward a single-payer future - when the patients/insured get to choose.

Posted by: JimPortlandOR | Oct 26, 2007 2:06:09 PM

Doesn't ring true? Think about this: HMOs came into being largely in order to better coordinate care. Much like the VA, they bring together doctors who're jointly tasked with individual patients, who share notes and generally work as a team. That's part of how they keep costs down

The confusion here is between an HMO as a physician practice model and an HMO as an insurance payment model. HMOs were designed, back in the seventies, to integrate medical practice along the continuum of care as a means to provide both better and cheaper healthcare.
HMOs as an insurance model were bastardized to create barriers to care ("managed care")that keep insurance company medical loss ratios down.

But Nate O is right. A true "HMO", insurance version, is a risk sharing mechanism that pays physicans, and sometimes hospitals, on a capitated basis thus incentivizing less care, preventive or otherwise.

At some point, however, the "cost-cutting" mania of for-profit medical practices hit Kaiser, and they began to force their health providers to see more patients and take up some of the business aspects of medical practice (as they didn't hire new support staff to replace old staff lost to attrition).

That point was the mid nineties when Kaiser was losing close to a billion dollars a year. It had nothing to do with "for-profit medical practice" and everything to do with surviving as a system. Along with getting beyond some serious management errors, like trying to take the organization national.

Posted by: flory | Oct 26, 2007 2:13:33 PM

JimPortlandOR - Everyone should be forced to read the history of self funding before they comment on or propose any changes to our Healthcare system. It would take a novel to cover it all but some facts

Late 70s, the 80's and real early 90s most large employers where self funded, satisfaction with insurance was at it highest at this time.

Some large employers are bigger then the insurance companies that would insure them so the rish was not an issue, imaging cutting out 90% of carrier profits and what that could do.

If you have a problem with a claim under a self funded plan you complain to your employer who when dealing face to face and with an employee is more likly to be compassionate.

Self funding was almost killed off by the federal government mandating employers offer HMOs. HMOs picked off the young healthy workers driving up the cost of the self-funded plan forcing most employers to drop them after they where left with nothing but the old sick ones.

States constantly try to outlaw self funding because it is exempt from most state law and regulation, including premium taxes.

Look what our governemnt has done to a system people where happy with, why would we trust them to fix what they broke?

Posted by: Nate O | Oct 26, 2007 2:55:59 PM

HMO as a way of controlling access to health care -- with "primary" acting as gatekeeper, and all specialists unaffiliated and needing "referrals" -- is a whole different model from the Kaiser or group practice HMO model.

I have less coordinated care, have had to change primary docs (and practices) when my employer changed insurers, and find that getting specialty care is harder and more onerous. Meanwhile the primary doc gets peanuts and resents the parsimoniousness of the plan.

The whole debate in Congress about "choice" and "own doctor" and stuff reflects much more the health care scene in the 1970s and 1980s (and in the gold-plate Congressional plans) than anything anyone I know actually has.

Posted by: jmm | Oct 26, 2007 4:46:24 PM

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