Managed Care
Financial Incentives:
The Hard Facts for Patients
Many patients don't know about the financial incentives that various managed care insurance companies pay their doctors to limit ("manage" in the vocabulary of the insurance industry) the healthcare they provide to their patients. You need to know this: information is power. This is a very touchy subject, and most doctors don't want to discuss it with their patients. It is important that you learn if your plan does pay such incentives, and if it does, what financial incentives are being paid to your doctor. Then you need to decide whether or not you want to be in such a plan. If you already have a hand problem, it is too late to change healthplans. You may decide that your hand problem is serious enough you would like to obtain care outside of the plan, even if it costs you some out-of-pocket expenses. (Note: one way to get an idea if financial incentives are being paid to your doctor is to look at your insurance card. If it says "HMO" or "IPA" on it, or if you need permission from your primary care provider to see a specialist, your insurance plan probably pays incentives to "manage" your healthcare. Call your insurance broker or the health representative at your work for further information.)
Financial Incentive Mechanisms
Shared Risk Pool. "Shared risk pools" are one of the financial incentive mechanisms that health insurance companies use. In this arrangement, the health insurance executives decide on how much they want to spend on taking care of you for the year, and then penalize doctors if they spend more than that on your healthcare that year, or reward them with a bonus if they limit healthcare even lower than the target that the executives set. The Healthcare Financial Management Association describes it this way: "...the health plan deducts amounts paid for covered services from the pool. At the end of a specified period (generally, a year), the health plan allocates the deficit or surplus in the pool between the health plan and the provider according to an agreed-upon formula. For instance, a typical contract might provide that the health plan shares in 40 percent of the surplus or satisfies 40 percent of the deficit while the provider shares in 60 percent of the surplus or satisfies 60 percent of the deficit. " (From The Healthcare Financial Management Association's article Risk Pools: Payers and Providers Take the Plunge.)
There is nothing illegal about these payments to doctors, as decided by the Supreme Court in Pegram vs. Herdrich, of June 13, 2000. "The court reasoned that the very purpose of an HMO is to hold down costs by 'rationing' medical care" (San Francisco Chronicle, June 13, 2000).
Capitation. Another type of arrangement that health plans use to "manage" your healthcare (that is, limit or ration care) is called "capitation." Capitation is a system in which the doctor is paid so much per person (per "head"; "capita" is Latin for "head"; I don't think patients should be measured by heads, like cattle), whether or not they see the patient. This means that they'll earn the same amount whether you get seen or not.
For-Profit Insurance Companies. Although "HMO" stands for "health maintenance organization", as a matter of fact, the for-profit HMO's just stand for profit. They are owned by investors and they have a legal responsibility to their investors to maximize profit. I have no objection to that. I do have an objection to having that kind of company as my personal insurance company. Personally, I have a not-for-profit insurance company for my family's health insurance.
Weiss Ratings, a Florida-based financial rating service, reports that health maintenance organizations (HMOs) had net profits of $10.2 billion in 2003, nearly double their 2002 net profits of $5.5 billion. Regulatory changes that required California HMO Kaiser Permanente to consolidate year-end financial statements for all its businesses, including hospitals and provider groups, resulted in a year-over-year earning increase of $1.1 billion, or 20 percent of the industry's profit gains. The nation's Blue Cross and Blue Shield plans saw an increase in profits of 63 percent, from $3.3 billion in 2002 to $5.4 billion in 2003. "The industry's soaring profits continue to irk both consumers and businesses who are shouldering skyrocketing healthcare costs without any perceived improvement in benefits," said Melissa Gannon, vice president of Weiss, in a press release. There is no legal requirement that your doctor tell you that they accept financial incentives from your insurance company to deny you care. This issue has come up many times. One example is a case before the Illinois Supreme Court. Here is an article describing this case and its ramifications.
There is no legal requirement that your doctor tell you that they accept financial incentives from your insurance company to deny you care.
This issue has come up many times. One example is a case before the Illinois Supreme Court. Here is an article (dead link) describing this case and its ramifications.
The insurance companies want to both deny you care and then hide from the responsibility of doing so.
Insurance companies have long tried to hide from the responsibility of denying patients care. The most common tact that they try is claiming immunity under the ERISA Act. "An unintended quirk in federal ERISA law denies employees receiving health insurance through their employers essential state protections." It is almost always a successful defense for the insurance company if your case goes to court.
Even if you do not have a plan that has financial incentives to deny you care, if you go to a medical group that accepts the low-paying healthplans, there may be negative consequences for you: Financial incentives based on patient insurance may have unintended consequences. This is because the low-paying contracts require the doctors not to discriminate against the low-paying healthplans. Therefore, even if you have a high-paying healthplan, the doctors in that group are legally required to treat you in a similar fashion to the low-paying healthplan patients. Even if they wanted to treat you better, they may be so used to treating patients of the low-paying plans that you will be treated the same way.
What does "denied care" mean to me in terms of my hand?
It can take many forms: decreased authorization of hand therapy, decreased referrals to hand specialists, decreased use of xrays or other specialized tests. These less obvious forms of "managed care" occur not only in HMO's and IPA's, but also in most other types of healthcare coverage today. What does this mean in practical terms? One example might be that your doctor thinks that 12 sessions of hand therapy are necessary for best results, but your health plan thinks that only 6 are necessary. Who do you think has the medical background to make the decision? Who do you think actually makes the decision? You are right if you said that it is the healthplan, not the doctor, who decides. You don't think that this happens? A study by the Kaiser Family Foundation (not related to the Kaiser Healthplan) and the Harvard School of Public Health in 1999 found that 87% of doctors said their patient have experienced some type of denial of coverage by a health plan over the previous two years." (reported in the Wall Street Journal, July 7, 2000; be careful of the hyperlinked reference, since it is put out by the Health Insurance Association of America, a trade group of insurance companies). How many times do you think the patients had their care "managed" without even knowing it? I have had the insurance companies play doctor in the past in my practice. There are many other, more subtle ways that it can effect your healthcare, and you may never even know it: decreased time the doctor spends with patients, increased time it takes for you to get an appointment (see below). Your healthplan may not even offer you the option of seeing a hand specialist, since some managed care plans do not have a full-time board-certified hand surgeon on their list of providers. They would prefer that you see a general orthopedist (with no special training in hand, or any interest in it, for that matter) who has agreed to accept a deeply discounted fee in exchange for the referral.
There are other, lesser side effects of "managed" healthcare.
One side effect is the length of time physicians spend with their patients. An interesting and insightful question when you are selecting a doctor is to ask the receptionist how much time they allot for a new patient visit or for a routine followup visit. A national survey of physicians documented that the average time spent with a patient in the office is 7 minutes. In our office, the standard appointment for a new patient is 30 minutes; if they have been referred by another doctor or have seen another doctor, the standard appointment is 45 minutes; if they have had surgery or have been seen by more than one doctor, the standard appointment is 60 minutes. We do not have any return appointments for less than 15 minutes. We could not afford to spend this much time with our patients if we were participating in managed care plans for a deeply discounted fee. In medicine as in the rest of life, you get what you pay for.
Another effect of managed care is the length of time you wait in the doctor's office. An interesting and insightful question when you are selecting a doctor is to ask the receptionist what the average wait is for the doctor. If they don't know, it means that they haven't studied this part of their practice and you might wonder if they consider your time important. If they say the average wait is an hour or more, you know that they don't respect their patients or consider their time important. We have kept track of the time patients wait in our office for several years, and the average time is less than 15 minutes. We could not offer this service if we were participating in managed care plans for a deeply discounted fee. Again, you get what you pay for.
Another effect of managed care is the length of time it takes to get an appointment with the doctor. Many patients are finding that they cannot get a timely appointment, even for an urgent matter such as a fracture. Our office policy is that any patient with a fracture will be seen in the office the next day we are in, whether or not there is an appointment opening. Rather than overbook the schedule, Dr. Nelson will either come in early, skip lunch, or stay late. Obviously, emergencies cannot be scheduled or put off until it conveniently fits into the doctor's schedule. We could not offer this service if we were participating in managed care plans for a deeply discounted fee. Again, you get what you pay for.
One final thought. It is a little uncomfortable, but you can see that it is true: all doctors are not equal. Just think of your own line of work: are all of the people in your line of work equal, or are some better than others? And some a lot better? The executives of the healthplans that consider all doctors equal must not have ever been a patient. It is very difficult to measure quality, but possibly one way is to evaluate a doctor's academic credentials. You will find Dr. Nelson's here. Other aspects of quality relate to the time the doctor spends with you, how easy it is to get an appointment, how you are treated in the office, can you understand what the doctor said, did you have enough time to ask questions. A critical question to ask is: Does the doctor's office have a program in place to ask your opinion on how they treat you? (This type of program is called a "Continuous Quality Assessment" program, or CQA. Our office's CQA program consists of a form we give patients at every follow-up visit.) If they don't ask, then they will never know how they are doing in treating you; if they don't ask, they must not be interested in the answer.
