COVER STORY

Do doctors give HMO patients a fair shake?

Some physicians admit to treating capitated patients differently from those on fee-for-service. The big question: Is this a bad thing?

By Ken Terry
Managed Care Editor

Consumer groups and many physicians have long opposed capitation and other incentives to limit patient care. A spate of lawsuits against HMOs and proposed federal legislation promising more legal exposure for health plans have sharpened the national debate over whether physicians should take financial risk for health care services.

While HMOs have been widely vilified for withholding care, many patients suspect that physicians, too, are more concerned about the cost of care than about their patients' health. Are they right?

In conversations with dozens of doctors and industry observers, we did find some evidence of discrimination against capitated HMO patients. But it's not as widespread as the media or plaintiffs' lawyers would have us believe.

"Five to 10 percent of providers might not do as much for HMO patients as they ordinarily would for fee-for-service patients," says FP Pat Pingitore, medical director of a capitated IPA in Houston. "But those are the same guys who on the fee-for-service side do things that don't need to be done, just to generate more income."

Much more common are well-intentioned physicians who aren't trying to "game" the system, but are struggling to cope with its increasing complexity and declining reimbursement. That's why some hard-pressed physicians in California refer their capitated patients to hospitalists while following their fee-for-service patients in the hospital. And it's why doctors in highly capitated practices often turn to midlevels or telephone triage to care for patients with simple problems.

More controversially, some doctors have asked emergency departments to send nonurgent HMO patients back to their offices before the ER physician sees them. And some docors reportedly refer prepaid patients to specialists without working them up beyond the bare minimum.

Doctors who use techniques such as these deny they harm patients. But some admit they've changed their practice patterns partly in order to maintain their incomes.

"Physicians, like anyone else in business, are consciously or unconsciously influenced by how they're paid," observes FP Joseph E. Scherger, associate dean for clinical affairs at the University of California Irvine College of Medicine and chairman of the college's department of family medicine. But even in today's tightening economic vise, he adds, "you don't have to skimp on care to make a living. If everyone gets the care they need, you'll do just fine."

When physicians restrict utilization as a result of financial pressure, they don't usually confine it to their HMO patients. The clashing incentives of capitation and fee-for-service, as health economist Alan L. Hillman has noted, tend to produce a blended approach to patient care that varies from practice to practice. A physician who has mostly fee-for-service contracts will tend to treat his capitated patients like fee-for-service patients, and vice versa.

"Doctors get into a routine, and they have a style of how they deliver care," points out Scherger. "It's internally conflicting to be treating some patients one way and other patients another way."

David C. Scroggins, a practice management consultant with Clayton L. Scroggins Associates in Cincinnati, notes that most doctors have a hard time keeping the rules of the myriad health plans straight in their minds. Even if they could, he says, trying to differentiate between how they treat patients with different types of insurance would be unethical and would expose them to malpractice risks. Observes Scroggins: "What they're trying to do is practice consistently, which is the only way they can maintain their sanity and sense of responsibility."

Shorter visits don't necessarily reflect insurance status

Most physicians know the type of insurance a patient has, if only to write a prescription, order a test, or refer a patient to a specialist. Insurance information is "on the chart and it's on the encounter form," notes FP Patricia J. Roy of Muskegon, MI. And, because of plan rules, it affects her approach to treating each patient. "Whoever tells you insurance type doesn't matter is lying."

Roy and other doctors say the influence of insurance status is confined to following plan policies in areas such as referrals and prescriptions. But in a recent Medical Economics survey, 41 percent of physicians who knew their patients' insurance coverage said it affected follow-up, and 29 percent said it influenced visit length.

The median duration of office visits actually rose from 13 to 14 minutes between 1990 and 1997, according to government statistics. But the average amount of "face time" doctors spend with each patient has sunk to 7 to 8 minutes—a trend that many physicians blame on managed-care-related phone calls and paperwork.

That doesn't mean, however, that face time has decreased only for HMO patients, or that health plans dictate how much time a physician can spend with a patient. No HMO representative is standing in the exam room, timing visits with a stopwatch. The plain fact is that many physicians are seeing more patients to keep their incomes up. And this applies as much to patients in discounted fee-for-service plans as to those in capitated HMOs.

"In order to be more efficient and get to the same endpoint financially, you can't afford to spend as much time with patients," says FP Paul J. Okosky of Saratoga Springs, NY, whose practice receives two-thirds of its income from fee-for-service HMOs. "We're seeing more patients than we used to and being paid less. Eventually, we'll reach a point where we can't become more efficient, and our income is going to drop."

Salaried physicians aren't immune to these economic forces. Physicians employed by hospitals and management services organizations, for instance, are often required to see a minimum number of patients each day, says FP Rosanne J. Hooks, an independent practitioner in Nichols, SC. Because these employed doctors are under so much pressure, she adds, they often don't advocate for patients with insurance companies the way they should.

Hooks and a few other doctors we interviewed have responded to the downward pressure on their incomes by putting in longer hours. But they seem to be the exception, since the median number of hours physicians (other than surgeons) work each week has dipped in recent years. According to the Medical Economics Continuing Survey, the amount of managed care in a practice has little effect on working hours. (See "How does your productivity measure up?" Nov. 22, 1999.)

Paris E. Phillips, a family physician in Jericho, NY, has taken an unusual approach: Instead of trimming her relatively long visits, which average 20 minutes, or laboring longer each day, she has accepted a 50 percent cut in income over the past few years.

"In family practice, you need to be there for your patients," she explains. "I can't just cram them in and run them out. I'm not going to like it, and the money isn't going to be worth it to me."

At the other end of the spectrum, Joe Scherger tells of a general internist who works for a large group in southern California. She used to spend a lot of time with patients and was very popular. "Then managed care came in," Scherger says, "and she was capitated, and she was insulted by the reimbursement she got. So she made a rule that, at 10 minutes, the visit was over. She'd literally stop a visit in mid-sentence and say, 'I'm sorry, you're an HMO patient, and I can only see you for 10 minutes. You'll have to make another appointment.' "

Phone triage and midlevels help hold down demand

Despite low copayments, capitated patients visit doctors no more often than other patients do. (See "Capitation on the rise," Dec. 6, 1999.) This doesn't mean they don't want to visit more. But practices with a lot of prepaid business tend to do more telephone work with patients. They employ triage nurses who decide which callers should come in and dispense self-treatment advice to the rest. Doctors in those practices also spend plenty of time on the phone with patients.

Physicians who are dependent on fee-for-service eschew these demand management techniques. "In the fee-for-service world, telephone work is costly, because you need to have a good nurse doing it, but you get paid nothing," notes consultant David Scroggins.

From the viewpoint of fee-for-service physicians, telephone care also equals lower-quality care that carries a substantial malpractice risk. Internist Jeffrey M. Kagan of Newington, CT, tells about a practice (not his) where the receptionist marks the type of insurance on telephone messages as part of a "conspiracy" to keep capitated patients out. "They try not to see these patients except when absolutely necessary," he states.

"Let's say Mr. Jones calls; he's coughing up yellow stuff and he's got a fever. If he's got fee-for-service insurance, they say, 'Come on down.' But if Mrs. Smith calls up with the same symptoms, and she's capitated, they call in an antibiotic, and say, 'Get back with us if it doesn't work.' So I know some offices do have a double standard."

FP David E. Bright of Stuart, FL, has very little prepaid business, but he knows physicians who do a lot of phone work with capitated patients. He sees nothing wrong with that—or with e-mail communication—in cases where the patient doesn't really need to be seen. But many capitated physicians, he believes, emphasize phone triage for economic reasons—which, to him, is a dangerous style of practice.

FP Frederic F. Porcase of Jacksonville, FL, leads a medium-sized primary care group that used phone triage extensively when it had risk contracts a few years ago. At that time, he regarded phone nurses as necessary to discourage visits for minor complaints, especially by HMO patients with low or no copayments. The group has since dropped this approach, because local HMO officials felt it limited patient access too much. But elsewhere, phone triage is alive and well.

The rise in telephone treatment of capitated patients coincides with an adjustment in many doctors' approach to follow-ups. Joe Scherger notes that before the HMO tidal wave hit southern California, many physicians made comfortable livings doing rechecks of marginal value. Then, after they were capitated, they began to think it wasn't necessary to bring patients back after every ear infection. "You began to use visits more selectively, more judiciously," he recalls.

Many primary care offices also use nurse practitioners and physician assistants to meet patient demand. FP Patricia Roy thinks some practices have gone too far in this respect. "New patients frequently come to our practice because they were always treated over the phone or because they always saw a midlevel practitioner," she points out.

Capitated practices make the greatest use of midlevels, says David Scroggins. "The game in capitation is figuring out how to see 15 or 20 percent more patients by using the midlevel provider or nurse triage function," he says, adding that he's often seen this done in big clinics.

Internist Brent A. Bauer says he's lucky to be working for the well-endowed Mayo Clinic, where the physicians can still take as much time with patients as they want. In most other groups, he says, capitated patients tend to see NPs or PAs preferentially for routine care. "Most places are getting midlevel practitioners, and that doesn't just apply to the doc down the street or a 10-doctor practice, but to major groups like the Ochsner Clinic and the Cleveland Clinic."

FP Fred Porcase insists that his group doesn't discriminate in its use of midlevels. But in the wake of a disastrous sale and buyback of the group, it's still in weak financial health. So he's told his staff that he'd prefer to see fee-for-service patients on Monday evenings, leaving midlevels to handle routine HMO cases. The group has also discontinued Saturday hours, because most of the patients who came in then were capitated, and the practice was losing money on those hours.

A fee-for-service patient is as likely as an HMO member to see the NP who works for FP Kenneth J. Gjeltema of Albany, CA. But Gjeltema, who has a highly capitated practice, admits he hired the NP for financial reasons. "I'm going to get the same amount of capitation payments regardless of who sees the patient, and that affected my decision to hire a midlevel instead of a physician."

Tests are ordered without regard to insurance

Regardless of how physicians deal with patient visits, phone triage, and midlevels, their test-ordering patterns seem to be largely the same for fee-for-service and HMO patients, say insurance industry sources.

According to radiologist Neil A. Grossman, medical director of NorthEast Imaging, a Boston radiology utilization management firm, just as many inappropriate tests are ordered for HMO patients as for fee-for-service patients. "It's rare for physicians to practice differently depending upon the insurer," he says.

Small physician groups taking risk for Medicare patients, however, tend to be conservative in their ordering patterns, he notes: "If they lose money, it comes out of their wallets."

In contrast, says Grossman, physicians who belong to large groups don't pay much attention to the impact their test ordering has on the group's bottom line. FP Gil L. Solomon of Malibu, CA, who belongs to a 35-doctor primary care group, agrees. "Even where physicians are at financial risk for tests, the amount of risk is so diluted that it doesn't make a difference," he says.

In Pat Pingitore's Houston IPA, up to 6 percent of physicians' capitation income is based on their overall utilization of services. He views this as an incentive to do more, rather than fewer, tests. "Not doing something could result in increased costs if the patient has an adverse event later on," he points out. "And any costs that are out of network or are created by complications will be applied directly to a doctor's own financial results."

Dumping patients is more common than not referring them

Horror stories have been told about managed care patients who had adverse outcomes because they weren't referred to specialists as soon as they should have been, or at all. Yet doctors interviewed for this article cited their peers' eagerness to refer capitated patients as a form of discrimination.

A southeastern hematologist/oncologist, who prefers to remain anonymous, notes that it's common for primary care physicians to "dump" cancer patients on specialists without working them up properly. Once they've been referred to an oncologist, he says, the primaries don't want to have any more to do with them, even if they develop a medical problem unrelated to cancer. Often, the doctors won't even prescribe pain medications for these patients.

"It's more likely to happen with an HMO patient, because the doctor's already getting a capitated fee," says the oncologist. "So there's no financial incentive for him to spend a lot of time evaluating something he's already getting paid for."

Many primary care physicians have a different attitude, however. FP Jeffrey S. Gorodetsky of Stuart, FL, for instance, says he's always done as much as he could for patients before referring them. While he hasn't changed his practice style as a result of participating in a capitated HMO, he notes, "We probably see more people because they have to come to us before they see a specialist." Although some patients resent that, he says, he can handle a sprain just as well as an orthopedist can.

Capitation provides only 15 to 20 percent of Gorodetsky's revenues. In contrast, capitated HMOs supply 75 percent of the volume of Santa Monica Bay Physicians, Gil Solomon's group in southern California. Yet these primary care doctors don't refer patients out quickly, either, says FP Bernard J. Katz, CEO of SMBP Health Services, which manages the group and an affiliated IPA.

"There are docs in the community who don't want to spend the time to work up a patient if all they're going to get is the capitation money for the month," he says. "But the doctors in our group don't just want to be a gatekeeper and fill out referral forms."

Both Katz and Solomon feel that the group culture and the managed care experience of its physicians are the main determinants of their referral patterns. On the other hand, a major component of their compensation is productivity, which means they have a financial incentive to hold on to patients. Primary care physicians in the IPA have a wider spectrum of referral patterns, says Katz, but he doesn't attribute that to the fact that they're capitated. "It depends on the doctor's training," he says. Physicians who are less acclimatized to managed care, he adds, are more likely to dump HMO patients on specialists.

Solomon notes that many physicians came to managed care late, because they had no other choice. "These people resent having to see HMO patients, because they remember what it was like to just bill insurance, and not have to get approvals for referrals. So they take it out on the patient.

"Physicians who have only a few HMO patients are more likely to treat them differently," he concludes. "Once you get up to 50 percent HMO business, it doesn't make that much difference."

Two practices react differently to managed care pressures

The distinction between those two kinds of practices is exemplified by a pair of physicians who practice in the San Francisco Bay area. One of them is FP Ken Gjeltema, who practices with one partner. About 55 percent of Gjeltema's patients are HMO members. A third of those are Medicare HMO patients who come to him through a small IPA that takes full professional risk.

That IPA, Gjeltema's best payer, has given him bonuses every quarter for seven years. Yet he doesn't feel pressured to withhold necessary care. In some cases, he's actually able to do more for seniors in HMOs. "Our IPA has a program where an NP can go to the home of a person who we think might be crashing to prevent him from being admitted," he says. "That's something we can do through the HMO that we can't do through regular Medicare."

Gjeltema has had to make the usual compromises to cope with HMO restrictions. But that doesn't mean he treats HMO patients differently from those with fee-for-service insurance, beyond sending them to certain specialists and labs. In fact, he says, aspects of his HMO practice—such as increased telephone work, careful hospital utilization, and more appropriate intervals between rechecks—have carried over to his fee-for-service patients.

"Over the past five years, managed care has changed the way I do business," he says. "Nearly all of the changes I've been asked to make are ethical, even if I've delivered what some people would perceive as less service. At the same time, I haven't reaped any financial benefit from it. In fact, the major beneficiary has been the employers, who haven't had their premiums go up."

Despite having a much smaller percentage of prepaid business than Gjeltema, Burlingame internist Philip R. Alper also feels that it has affected his entire practice—mainly in terms of "the exasperation factor, the waste of time, the eligibility problems." But some of the compromises he's made seem to affect his HMO patients a little differently than his fee-for-service patients.

For instance, while he's found there's a benefit in doing Pap smears annually rather than once every three years, he follows the three-year guideline for HMO patients unless they want the test done more frequently.

Alper wouldn't bring in a chronic-disease patient any more often if he had fee-for-service insurance than if he were an HMO member. "But I'd be more sensitive to certain individual factors, maybe of a personal nature, that might make me think it would make sense to see him a little sooner," he says. "I wouldn't suffer, and he might gain. But if he belonged to an HMO and I brought him in more often than the protocol specifies, I would suffer financially, and it's not essential that he come in.

"My normal mode of practice, before managed care, was to leave no stone unturned. Now that's financially impossible." Like many physicians in the Bay area, Alper has seen his practice income erode significantly over the past few years. "My costs are soaring," he says. "I took a part-time job with a health care information company to support my office."

His decision not to go beyond the essentials for every patient, he says, is based on a harsh economic reality: "HMO patients are 20 percent of my practice and 10 percent of my income. So the plans have succeeded in lowering the cost of care, at least as far as my slice of it is concerned. Whether they've lowered the cost in exchange for diminished quality or for higher costs elsewhere, nobody really knows."

A managed care mentality blurs differences in care

As physicians' reimbursement shrinks, as paperwork eats up more clinical time, and as the line between HMOs and PPOs blurs, patients with various kinds of insurance are all being affected. Consultant David Scroggins has seen this happen in the Midwest, where most of the population is in some form of managed care but most doctors are still paid discounted fee- for-service.

When noncapitated health plans arrived in his area, he recalls, physicians practiced the same as they had in the pure fee-for-service environment. "But that has changed," he says. "Consciously or unconsciously, the doctor is now practicing under the gatekeeper/preauthorization type of mentality."

Other observers agree that physicians in a variety of settings have begun to internalize cost-consciousness. "I think doctors have changed how they make decisions, based partly on years of interaction with the plans," says internist Allan J. Chernov, a Dallas-based regional medical director for Aetna US Healthcare.

When physicians strive to be cost-efficient, they have less incentive to treat capitated and fee-for-service patients differently. On the other hand, they also provide less time and fewer services to all of their patients. The only parties that benefit, say doctors, are insurance companies, employers, and the government. "HMOs have sold employers a cheap product and passed the cheapness on to us, and we've had to figure out how to make it work," says Ken Gjeltema. "We've tried our best to do it in an ethical fashion, but it hasn't always been easy."

It's even harder when patients don't believe doctors are on their side. "Because of what they've read or heard, HMO patients often feel they're not going to be treated fairly, and we sometimes find that they demand more of our office staff than before," says Wellman Tsang, a San Francisco internist. This climate of suspicion, he feels, "has really hurt the quality of the relationship that people have with physicians."

The doctors' dilemma, says Brent Bauer of the Mayo Clinic, speaking from his personal perspective, is that payers have made them responsible for rationing without explaining it to the public. "It's all at a hidden level," he says. "Patients remember that 10 years ago, when Grandma went into the hospital, she was in there for a week, and when she left she looked like a rose. Now we're throwing Grandma out after a couple of days and she looks like death warmed over, and they don't understand. I don't blame them. They've not been told that Medicare said, 'Okay, pneumonia is worth two days in the hospital, and we're going to pay $800. And it doesn't matter how many X-rays you took.'

"Everybody's tried to make the rationing happen in a way that the patient doesn't see it or feel it. Then the media and the politicians say, 'It was the bad HMOs, the bad managed care group, the greedy physician, the greedy hospital.' They always point their fingers away from the hard truth, which is you can't promise people everything and then not pay for it."

Two standards of care for hospitalized patients?

In many parts of the country, primary care doctors hand over all of their hospitalized patients to hospitalists. In California, however, a different kind of community standard has developed. Many physicians submit only their capitated HMO patients to hospitalists, and follow fee-for-service inpatients themselves.

The primary care physicians who belong to the big Northridge IPA in the Los Angeles suburbs are required to give their IPA inpatients, who are all capitated, to a hospitalist service. But they don't have to hand over their fee-for-service patients, and most of them don't, says pulmonologist Gordon Downs, chief of the hospitalist service. Nor did they earlier, when the service was voluntary. But they did refer HMO patients to the hospitalists back then.

One reason they follow fee-for-service patients themselves, he says, is that they need to do a certain amount of hospital work to retain their staff privileges. Another reason is that they get paid extra for rounding on those patients.

The story is similar in San Francisco. The Brown & Toland IPA has never required its doctors to surrender patients to the hospitalist service at the city's California Pacific Medical Center. Yet 85 percent of the physicians give their HMO patients to the service; only 35 percent submit their non-HMO patients, too.

Internist Paul B. Aronowitz, who leads the hospitalist service, agrees that many primary care physicians, especially internists, want to maintain their inpatient skills. But he thinks the main reason they follow their fee-for-service patients in the hospital is to make extra money at a time when physician incomes are declining. While they could see more patients in the office if they did no rounding, he argues that they're better compensated in the hospital.

San Francisco internist Wellman Tsang and the other three doctors in his practice send the hospitalist service all their HMO patients, but no others. While Tsang admits that money enters the equation, he says that he and his colleagues would probably follow all of their patients if not for two factors: the annoyance of receiving calls from utilization coordinators when they admit HMO patients, and the knowledge that their hospital needs help in containing costs under its capitation contracts.

Although patients followed by private doctors stay in the hospital longer, on average, than those managed by the hospitalists, Tsang denies that his HMO patients receive inferior care. He and his colleagues remain in close contact with the hospitalists, consulting with them on such matters as the choice of subspecialists. Also, like about a third of the physicians who refer to the service, they visit their HMO inpatients regularly.

"The only way we're treating the HMO and fee-for-service patients differently is that we're more directly involved in decision-making when the hospitalist is not involved," says Tsang.

Cutting patients off at the ER pass

One of the prime tenets of managed care is to keep nonemergent patients out of the emergency room. While this approach produces better care for some patients, physicians who are at financial risk sometimes bend the rules regarding proper workup in the ER.

Thomas E. Benzoni, an emergency department physician in Sioux City, IA, says it's not uncommon for outpatient physicians to call his ER and ask to be notified first when one of their patients presents there. Sometimes these are "wealthy fee-for-service doctors" who want to provide extra service. In other cases, the calls come from physicians with heavily capitated practices.

"A capitated doctor might tell the hospital clerk to ask the patient whether he belongs to a particular HMO," says Benzoni. "If he doesn't, the doctor will want him to see the ER doc. If he is an HMO member, the doctor will ask to have the patient sent to his office or wait there until he arrives. Because if the doctor is at risk for whatever I do to the patient in the ER, the incentive is for him to come in and avoid my fee."

The physicians who make these requests don't expect patients to be turned away from the ER before they're triaged. But Benzoni notes that 7 to 15 percent of patients initially classified as "non-urgent" are admitted. So even if a physician wants only nonemergent patients sent to his office, he could be endangering their health.

The emergency department declines all such requests, says Benzoni, because it's illegal to discharge patients from the ER before they've been screened by an ER physician. "But the fact that the request is made is a sign of an effort to game the system," he says. "Unfortunately, it's a source of great friction with the medical staff. I wish it would go away."

Ken Terry. Do doctors give HMO patients a fair shake?.

Medical Economics

2000;4:160.