Debbie Van Winkle, who was 28 years old and in excellent health, was driving to work one day in February 1991 when something went drastically wrong inside her brain–some kind of seizure, a terrifying neurological event. She passed out at the wheel and was taken to a hospital in Torrance, Calif. Over the next two weeks, and through months of follow-up care, specialists used state-of-the-art technology to test her for every conceivable type of illness stroke, multiple sclerosis, even rare infectious diseases. All this has cost her HMO, FHP Inc. of Fountain Valley, Calif., more than $45,000. Debbie’s feeling fine, though the cause of her seizure is still unknown, and she paid only about $300 for all the care she got. “FHP is wonderful, considering that I basically didn’t pay a cent,” she says. “But they get kind of nervous when I call them up.”
Andrew and Susan Tostison, who are members of the same HMO, have a very different story to tell. On Christmas Day, 1992, their 7-year-old daughter, Jennifer, came down with a fever and a severe headache. The cold, or whatever it was, didn’t go away. On Jan. 4 Susan took her daughter to the Hauch Medical Group in Pomona, Calif., which provides medical care for HMO patients under contract with FHP. By the end of January, Susan says, Jennifer had been examined four times by three different doctors who prescribed three different antibiotics. A chest X-ray finally confirmed pneumonia, and a Hauch doctor ordered a neurological exam to find the cause of Jennifer’s headaches. As Susan tells it, a nurse then said Hauch couldn’t schedule the neurological exam until early March.
Susan hit the roof. Her child had missed nearly a month of school and Hauch, as she saw it, was offering only more delay. On the advice of two doctors they knew, the Tostisons got an appointment with a neurologist at Loma Linda Hospital in Loma Linda, Calif. They also called FHP to demand action. It took two separate appeals, but FHP transferred their records to Loma Linda Hospital and Jennifer was examined the next day. The neurologist tentatively concluded her pneumonia had led to a “mild” viral meningitis. Jennifer is back in school, but the Tostisons are still angry. FHP, which paid for the neurological exam, says it did everything possible to help. The Hauch group’s medical director, Dr. Steven Reiner, refused to comment, citing medical ethics and state law on doctor-patient confidentiality. “What if it had been a brain tumor?” Andrew Tostison says. “We wanted to know, not wait another five weeks.”
Health-maintenance organizations are nothing new in American medicine, but they are shaking it up today. Nationwide, 61 percent of all employers now offer HMO membership to their employees, and 40 million Americans get their medical care from about 600 HMOs operating in more than 45 states. The reason is simple. As the cost of health care explodes-by most estimates, it jumped nearly 10 percent last year-HMOs offer employers a significant price advantage in providing health insurance for their workers. Frank Robinson, who owns the company where Andrew Tostison and Debbie Van Winkle both work, is no exception. “The problem as I saw it was that there was no way to put a lid on it-a doctor could charge any goddam thing he wanted, and the same thing for the hospital,” Robinson says. “Medicine as it has been practiced in the past just doesn’t work.” Robinson Helicopter Co. of Torrance now has a contract with FHP to provide HMO care for most Of its 439 workers-and since the experts who are advising Bill and Hillary Rodham Clinton seem to agree with Robinson, HMOs are likely to be a major element in the administration’s health-reform plan.
It is time, in short, for all Americans to know more about HMOs and how they are changing the practice of medicine. Most of the stereotypes are wrong. HMOs like FHP can and do offer excellent medical care –care that is provided without regard to any preset or arbitrary cost limitation, and without the frustrating, time-consuming bureaucracy for which many HMOs are notorious. While some HMOs still operate their own clinics and hospitals staffed by salaried doctors, most HMOs function as specialized health-insurance companies that contract with doctors to provide the actual patient care. FHP Inc., the focus of this story, is a mixed-model HMO: it has its own chain of clinics and hospitals, and it employs about 2,850 staff physicians, dentists and nurses. But it also contracts with about 8,000 independent doctors, many of whom simultaneously work for other HMOs and offer traditional “fee for service” care. FHP is a for-profit, publicly owned corporation with 805,000 members in five states, and it is a big player in the intensely competitive health-care market in southern California. “A major portion of what they’re talking about in Washington exists right here,” says CEO Westcott (Bill) Price Ill. “We’re doing it.”
HMOs are designed and built for “managed care,” which means that all their doctors-the independent contractors as well as the staff physicians-practice cost-conscious medicine. “Managed care” is a sloppy term: it can even refer to the attempt by health-insurance companies to question doctors about the costs and medical necessity of treatments they have given to their patients. But the type of managed care that HMOs provide is different in one vital respect: it occurs before treatment, not afterward. It also occurs during treatment and after treatment-in fact, all the time. In practice, this means a company like FHP has hundreds of people reviewing every aspect of the medical care it delivers-its cost, its quality and its impact on patient satisfaction. Critically, since managed care is hotly controversial among doctors, much of this oversight is conducted by physicians on other physicians. It is peer review.
For the patient, HMO-style managed care unquestionably means limitations on the right-if it is a right-to request specific kinds of treatment. This is one of the oldest tensions, and biggest problems, in American medicine. An FHP physician–take Dr. Jim Connor, for example–will not necessarily agree if you walk in and demand a CT scan. Connor is a 39-year-old primary-care physician at an FHP clinic in Laguna Hills, Calif. He is a “gatekeeper” in the managed-care system: his job is to know his patients’ medical histories and to provide the first assessment of whatever ails them. If the patient needs to get a test or see a specialist, Connor makes the call-and barring a medical emergency, he will do so only after considering the most cost-effective approach. In essence, says Dr. William Bracciodieta, the administrator of one of FHP’s California hospitals, this means “giving patients what they need, rather than what they want.”
This notion-Doctor Knows Best-clearly presages the new era of limits in U.S. health care, and it is likely to be jarring to many patients. Despite their well-documented reverence for the medical profession in general, Americans are quick to question their doctors; they are also quick to demand top-of-the-line care. Americans want “instant gratification” even when their complaints are “trivial,” one managed-care physician says. “They want something done now.” Time and again, in millions of small and large decisions, doctors give in. “When I was in private practice in Florida, we had all these affluent geriatric patients who’d come in and say they wanted an MRI because their friend had one,” says Dr. Terry Napal of the Greater Valley Medical Group in Los Angeles. “A lot of times, we gave it to them, even though it was breaking the system.”
HMOs don’t –or at least shouldn’t-let that happen. The system of managed care heavily depends on a gatekeeper, usually an internist or a family-care physician like Napal, who can look the patient in the eye and credibly say, “You don’t need that.” This takes close familiarity with the patient’s medical history and, above all, trust. This knowledge and trust, in turn, can come only when the doctor has a solid relationship with the patient. That is one reason why FHP has recently changed its internal procedures to eliminate the revolving-door syndrome: despite the Tostisons’ experience at the Hauch Medical Group, FHP says its members usually see the same primary-care doctor every time they come in. But FHP’s internal reforms went further than that. Concerned about high turnover among its salaried medical staff, the company decentralized medical decision making to the clinic level. That built morale by empowering doctors to make medical decisions based on medical facts. Connor says his group recently approved a bone-marrow transplant for a 3-year-old boy with cancer-and only later found out that it would cost FHP $180,000. “If you need an MRI, you’ll get an MRI,” Connor says. “Trust me to tell you when you need one.”
At bottom, this means consumers are being asked to entrust their health, and perhaps their lives, to a big, profit-oriented corporation. FHP officials insist the firm has many safeguards against bad medicine. FHP has a hot line for patient complaints, including an 800 number direct to its president. It screens the credentials and on-job performance of both staff and contracting doctors, and it bounces those who err. It monitors lawsuits against affiliated physicians, and its general counsel, Michael Weinstock, says FHP’s " litigation experience" compares favorably with fee-for-service medicine. Its managers, like executive vice president Jack Massimino, insist that good medical practice is simply a matter of business survival. And its doctors, like chief of cardiology Joe Ruggio, say they will not tolerate cost-driven compromises in the quality of care. “The minute I feel there’s even the remotest chance that someone’s going to force compromise on my department, I’m outta here,” Ruggio says. “It’s not going to happen.”
Still, business is business. FHP is a growth company in a competitive market, and it has recently gotten into trouble with the Feds. This happened over a three-year period from 1988 to 1991, and the problems were on the marketing side of the operation. Unlike many HMOs, FHP eagerly recruits Medicare patients, and it now has 280,000 senior-citizen members. Medicare pays about $385 a month for each of them, which is three to four times more than the average monthly premium ($137 in southern California) that FHP collects for working-age members. In essence, the regulators found that some FHP salespeople used high-pressure tactics and didn’t always tell seniors that their choice of doctors was restricted to FHP-approved physicians. Massimino concedes that FHP had problems. He says the offending salespeople were fired and that the company changed its salary and bonus system to minimize pressure tactics. Critics say FHP took too long to eliminate the problems and that federal regulators were slow to move, too.
The overriding issue about HMOs, from the standpoint of national health reform, is their effectiveness in controlling costs. FHP’s experience presents grounds for optimism, and a close look at the way the company operates suggests that managed care could be a major plus in health reform. FHP has turned physicians into frontline warriors in the battle against runaway costs. Its staff doctors, obviously, are more easily motivated to hold down costs than its contracting hospitals and medical groups. But even the independents are subject to the relentless emphasis on “utilization reviews.” And like other HMOs, FHP provides an “incentive pool” that is shared by doctors and hospitals when its cost-control goals are met. The size of these payments is secret, but they are substantial.
The primary goal for everyone is to reduce the cost of hospitalization. FHP uses every trick in the book, and Massimino says it has cut hospital costs to about $800 per day, which is $300 less than the national average for fee-for-service patients. He also says FHP has reduced the number of hospital days for a geriatric patient to about 1.2 per year-less than half the national average. Those are big numbers, and FHP intends to do even better.
But the jury is still out on HMOs as costmanagement tools. True, their per-patient costs are significantly lower than those of other health-insurance companies-but they are not immune to the feverish rise in U.S. health-care pricing. On average, according to one recent study, HMO costs jumped 8.8 percent in 1992. That’s lower than the 14.2 percent increase for fee-for-service care, but it’s well above the rate of inflation. This means a nationwide shift to HMOs would help slow the upward spiral in health-care costs. But it wouldn’t stop the spiral, which is why reformers will almost certainly be forced to look elsewhere for the ultimate answer to America’s medical-cost explosion. HMO doctors like Terry Napal confront this question every day. “When a patient comes in-when you see someone in front of you who’s really sick-how can you think of the cost?” she says. And that, in a nutshell, is the dilemma.
What Americans spend on surgical procedures can vary widely from region to region. Determining factors include overhead, competition and equipment used.
PROCEDURE N.Y.C. LA. DALLAS DENVER Triple coronary bypass $8,312 $7,006 $5,802 $4,792 Hysterectomy $5,123 $2,830 $1 996 $1,746 Caesarean section $4,984 $2,521 $1,973 $2,102 Appendectomy $1,377 $1,009 $909 Vasectomy $717 $502 $375 $356
SOURCE: HEALTH INSURANCE ASSOCIATION OF AMERICA
