Aetna cuts all-or-nothing arrangements

The insurer will get rid of the all-products clause that was anathema to many physicians. The move is part of a company restructuring strategy.

By Cheryl Jackson, amednews staff. Jan. 15, 2001.

It's no longer all-or-nothing for doctors contracting with Aetna.

The Hartford, Conn.-based company said it was dropping its all-products clause, which required physicians who wanted to contract with Aetna to participate in all of the company's plans.

One catch: Physicians must give Aetna 90 days notice before contract renewal that they no longer want to participate in all of its offerings. If physicians do not so inform Aetna, they still will be stuck with an all-products clause. But new contracts will not have an all-products clause.

Even so, just having the opportunity to opt out of an Aetna product line without totally severing a relationship with the company is a victory for many physicians. Other plans had offered up all-products clauses, but no one but Aetna made them a centerpiece of their corporate strategy.

"I give Aetna a great deal of credit for announcing they're not going to do something they never should have even thought of doing in the first place," said R. Paul Jennings, chief executive of The Physicians Inc., a 1,850-doctor independent practice association in Louisville, Ky., which in 1999 terminated a contract with Aetna over the all-products clause.

Many other physicians also terminated their Aetna contracts, mainly because they believed the all-products clause was a way to reimburse doctors under lower-paying HMO contracts rather than the PPO contracts physicians preferred.

Aetna, under former Chair, CEO and President Richard Huber, said the all-products clause guaranteed access to members and prevented physicians from, in Huber's words, treating only richer patients.

But the change of heart came a few months after John W. Rowe, MD, took over the top executive spot in September 2000. Huber, struggling under a diving stock price and a plummeting relationship with physicians, quit Feb. 25, 2000, at the request of Aetna's board.

"[Aetna's] announcement is an important victory for patients and their physicians in the continuing battle to reform managed care," D. Ted Lewers, MD, chair of the AMA Board of Trustees, said in a written statement.

Why drop all-products?

Aetna said it had dropped the all-products clause as a way to promote goodwill with its 300,000 doctors, who treat 19 million Aetna members, the largest managed-care network in the country.

"It was the one common theme in a lot of our discussions with physicians and medical providers across the country," said Aetna spokeswoman Jill Griffiths. "We believe it was a way to kick-start conversations around the country so that we could begin to talk and develop relationships."

Aetna already had dropped the requirement sporadically in markets, sometimes prompted by impending laws that would ban the practice. The clause was dropped in Texas, Connecticut, Virginia and Kentucky before the company announced the nationwide move Dec. 19, 2000.

In areas where it has lifted the requirement, more doctors have joined the network, company officials said. Aetna anticipates the same results on a national level, as doctors who had snubbed the network because of the clause will now sign on. Company officials said they did not know how many doctors had left Aetna plans because of the all-or-nothing clause. They also said they did not know how many physicians they expected to return to Aetna plans because of the change.

"We do expect that physicians who chose not to join the Aetna network may be encouraged to do so now," Griffiths said.

That may be a tough sell. Doctors in states where Aetna already has stopped the practice say the jury is still out on whether they will resume business with the insurer.

"I'm not sure I want back in," said Karen Laugel, MD, of the six-doctor Pediatric Care Associates in Stratford, Conn. But, "we have a lot of patients that may only have the choice of Aetna."

When Aetna took a take-it-or-leave-it approach to contracting, her group left it. The group has been in contract negotiations with Aetna since September 2000, after it dropped capitation and switched to fee for service.

While applauding such physician-friendly moves, including UnitedHealthcare's dropping its preapproval requirement for referrals to specialists, many doctors believe these actions are long overdue.

"This is a fine beginning. It's a vast improvement over what they had," Jennings said. "But we want to work with them as physicians and patient representatives, and we want a place at the table."

Physicians had adamantly opposed the all-product clauses from the beginning, arguing that it damaged the patient-doctor relationship and strained doctors' relationships with Aetna.

Jennings said he thought that Aetna had changed its mind not so much because of doctors, but because of Wall Street. "They did not listen until the market punished them enough."

A money issue

Technically, the market isn't punishing Aetna at the moment. Despite rising medical costs and disappointing profits, Aetna at year's end was trading for about $40 a share, reflecting a two-for-one stock split on Dec. 14, 2000. Taking that split into account, Aetna was trading as high as it had all that year.

But Wall Street had punished Aetna around the time of Huber's departure for its earnings problems, and dropping the all-products clause was only one move Dr. Rowe made to ensure profits stay up.

On Dec. 18, 2000, the day before the all-products announcement, Aetna said it would cut 5,000 jobs, or 12.5% of its work force. The company also said it would cut about 50% of its Medicare market. Aetna expects to save $200 million annually through these moves.

Meanwhile, Aetna also said its customer base would shrink. The company believes that in the next year it could lose 2 million members, 1.5 million representing Prudential HealthCare members who likely won't join Aetna. The company purchased Prudential HealthCare in 1999.

Finally, Aetna also is raising 2001 premiums by as much as 11% to 13% for commercial health plans and about 4% in its remaining Medicare HMOs.

Aetna -- which also announced agreements in business practices with medical societies in California, New Jersey and Florida -- did not say whether physicians or other providers would see any trickle-down from the premium increases. The market negotiations with physicians played no role in the rate hikes, they said.

In the week prior, Aetna had sold its international and financial businesses, leaving it solely a health care company.

Health care analysts expect even more cuts.

"I think it's a great first step, something that was definitely a necessary evil," said John Massey, senior managed care analyst at Standard & Poor's Equity Group.

"The next steps are continuous pruning," Massey said.

Analysts say Aetna already was headed in the direction of job cuts and market evaluation before Dr. Rowe came on board.

ADDITIONAL INFORMATION:

Aetna makes more promises in Calif., Fla.

In separate discussions with the California and Florida medical associations, Aetna went beyond the nationwide elimination of its all-products policy and made several further promises to doctors in those states.

In California, Aetna said it would:

Settle contract disputes with binding arbitration and cap its cost at $1,000 for small practices.
Use clinical standards from medical specialty societies. Many plans use standards compiled by private companies based on experts they chose.
Stop requiring doctors to take on money-losing pharmacy risk. Other California plans are allowing some groups to exit pharmacy risk but only with significantly reduced capitation rates.
Immediately assign new members to doctors so that capitation payments can flow to financially strapped practices. A new state law imposes a much looser requirement.
Begin dialogue with the CMA through a "liaison" panel that was scheduled to first meet Jan. 9.
Develop "actuarially sound" capitation rates with doctors.

The CMA said it had initiated talks with Aetna months ago. It called the concessions "a work in progress."

Aetna controls 8% of the California market. The CMA hopes other plans will follow Aetna and already is in talks with Blue Shield of California.

In Florida, Aetna said it would:

Eliminate the need for referrals for laboratory services.
Give patients the option of using specialists as principal physicians for "appropriate conditions," subject to medical director OK.
Pay fee for service to independently contracted primary care physician practices with 100 or fewer Aetna members.
Give 90 days' advance notice of significant payment or administrative changes to provider contracts that will have "a material adverse financial impact."

Aetna already has made separate concessions to medical societies in Connecticut, Georgia and Virginia.