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Just say no to HMOs: When doctors reject bad contracts

Dropping HMO contracts may seem like a risky move, but more and more doctors are deciding it's a move worth making.

By Cheryl Jackson, amednews staff. Oct. 15, 2001. - Clarification

Managed Care: What's Next?"
With the managed care system drawing complaints from all quarters, doctors, patients, payers and even insurers themselves found themselves looking for alternatives to a concept that hadn't met its promise of improving care while reducing costs. This 2000-02 occasional series highlighted what physicians and others were doing to come up with a way to improve the system -- or replace it with something else.

Mountain View, Calif., neurologist Ron Hess, MD, was 53 in 1999. He was spending a limited amount of time with patients, and his workload was grueling, he said. So he planned to retire as soon as his youngest child -- then a sixth-grader -- was out of high school.

Then he got word that his local medical association was calling for doctors to get out of bad HMO contracts.

Cutting ties to HMOs

"I decided that was really worth trying. It didn't seem like things could get much worse," Dr. Hess said.

He looked through all of his insurance contracts and identified the worst plan to do business with.

"I said, 'Who's giving us the most trouble? Who's not paying? Who's paying at the lowest rates?' "

He gave that plan an option of renegotiating. The plan wasn't interested. He sent notification he was dropping the contract.

In 1998, 94% of physicians held managed care contracts.

The office didn't suffer, so he moved on to the second worst contract. And that's when he and his staff noticed a difference.

"The staff wasn't working as hard. It was a little quieter. But there was no decrease in the number of patients," Dr. Hess admits.

They waited another few months and pared more HMO plans, even the more favorable ones, from their practice.

"We realized that the patients who could afford least to buy good health insurance were paying cash and coming out of plan. When we realized that was occurring, it became clear there was no point in taking any of the good insurance."

And with that, Dr. Hess turned a corner in his practice, finding himself on a street with fellow physicians who were happier going about their jobs after kicking HMOs to the curb.

When presented with all-or-nothing contracts, they opt for nothing.

And they say they get more as a result. More job satisfaction and less aggravation. More time to spend with patients, because the patient loads are smaller. More money and less red tape.

Dr. Hess, whose last HMO contract expires this year, gets paid about 25% more for seeing fewer patients.

"If I hadn't had somebody tell me to do this, I would still be doing the same thing I was," he said. "I feel like I can do this until I'm 65 or 70 without any problem."

Although, according to the American Medical Association, the percentage of physicians with managed care contracts rose to 94% in 1998, the last year for which figures are available, physician leaders across the country are reporting pockets of doctors who have successfully shunned HMOs.

"Some of the doctors are deciding to go bare and not sign contracts," said cardiologist Stuart Seides, MD, president of the Medical Society of the District of Columbia.

"While the patients may grouse a bit, they realize that the kind of care they want and the kind of physician with the kind of time to spend with them cannot be bought at HMO rates, and I agree," Dr. Seides said.

"It's getting tougher and tougher for an employee to find a quality primary care doctor in this town who will accept HMO rates," he said. "The doctors aren't contracting with them."

Going it alone

While some doctors are encouraging about dumping HMO contracts, others warn that a physician attempting to go without them must have an established practice, preferably in a more affluent community.

And in those areas with a dominant employer who contracts with an HMO, physicians pretty much have to give in and sign on, they say. Also, there are physicians in the position of Dr. Seides, who said that he feels he needs to contract with HMOs because many of the patients referred to him are members.

"This is not an option for doctors who take care of people at medium- or lower-income levels," said John C. Lewin, MD, executive vice president and chief executive of the California Medical Assn. "I have some concerns that this is taking us toward a tiered health care system. But it's happening because physicians are so fed up with the contracting hassles of the HMOs and their related underpayments."

Besides, physicians say, they should be paid an amount commensurate with the care they render. They're finding many of their patients, from varying income levels, would rather pay cash than to switch doctors.

But many don't.

"It's not an easy decision to make. But I felt like if more doctors did it maybe we could do more," said Donald Counts, MD, a family physician in Austin, Texas.

It took him three years to make the decision.

He initially got rid of contracts with all the HMOs that required referrals. That allowed him to eliminate the staff position that handled referrals. Then, he let go of the rest, save one.

When he cut the contracts, he lost more than 650 patients and $12,000 in monthly income. But he was able to withstand the hit because he also practices alternative medicine and has other businesses.

About 33% to 50% of those patients eventually came back, he said.

R. Bastian Wagner, MD, a family physician in suburban Portland, Ore., was able to cut loose from some contracts in 1998 by working close to home.

He and his partner had merged with a managed-care-oriented medical group. Within two years, the bureaucracy of working within the large group and managed care organizations had taken its toll, and Dr. Wagner left to build his own office -- on property near his home in West Linn/Lake Oswego.

Most of his Medicare patients who were in HMOs signed up for other plans to stay with him. It cost them. At the time, the HMO premium was about $30 in Portland. To sign up with non-HMO plans was about $100 a month.

"It was a substantial increase. But I found a majority of my patients jumped at the chance," Dr. Wagner said.

He restricted himself to a few HMO products for his non-Medicare patients, including one associated with hospitals he worked with and others that had a lot of his patients as members.

Today, his workdays are shorter. And he shortened his workweek to four days. "I have much greater control over my overhead with my own office," he said.

The financial outcome is a wash, he said; his earnings now are about the same as if he'd stayed with the medical group and worked longer hours.

Fresno, Calif., physical medicine and rehabilitation doctor Jeryl Wiens, MD, works with only a few PPO contracts, able to do so because he fills a niche market, he said. Most of his patients have chronic neck or lower back pain.

He's never signed a capitated contract. "I just felt that I didn't want to cross that line," he said. "I felt the incentives were to withhold care."

That policy allows him to schedule new patients in one-hour slots and reserve 20 minutes for follow-ups.

He's booked six weeks in advance and sees 10 to 15 new patients a week. "Some colleagues are quite envious that I've been able to maintain a strict fee-for-service practice," Dr. Wiens said.

More money, fewer problems

The LQMG Medical Group in Fresno makes about 10% more today as a result of the decision to drop a major HMO contract after trying to negotiate with the plan for about a year.

About 25% of the group's patients were HMO members, while about 35% of the income was from the plan. The HMO patients utilized the services more.

"We decided we could take the hit," said Roger Brown, MD, an internist with the group.

LQMG did suffer that first year, he said. Staff had to be cut by 25%, from 40 people to 30. The group renegotiated other contracts. It used cheaper supplies.

"As a group, we paid much more attention to coding reimbursement and making sure all of our coding and billing practices were as complete as we could get," Dr. Brown said.

Some of their HMO patients waited until they could change plans, then switched to ones that allowed them to return to the group.

It was also rough going for Robert S. Taylor, MD, a Roseville, Calif., general practice physician, at the start.

In 1989, when he opened his practice, he was told the way he wanted to practice, without HMOs, was obsolete.

"The first day we were open I saw three people. I thought this was a bad thing," Dr. Taylor said. "I starved for the first two years."

Plan after plan approached Dr. Taylor's practice about signing on.

"We said we want to be paid fee for service. We want to be paid for what we do, and we don't want you telling us what we should or shouldn't be ordering," said Beverly Roberts, Dr. Taylor's office manager. "They told us if you don't sign up with HMOs, you're going to go under."

Initially, the practice had trouble getting other doctors to make referrals to Dr. Taylor. Then patients helped Dr. Taylor's cause by paying in cash or calling their health plans demanding that the physician be used.

Aetna, which at the time was forcing some doctors who wanted to do business with its PPOs also sign up with their HMOs, made an exception in Dr. Taylor's case and allowed him to participate solely in the PPO.

Three years later, when the insurer moved to those all-or-nothing contracts nationwide, it told Dr. Taylor's office that it needed to comply. Dr. Taylor said no. For eight months, the office did without about 30% of its patients.

But then Aetna relented and the patients returned.

In the meantime, the office did physicals for truck drivers, pre-employment screenings for grocery store chains and signed with other PPOs.

A year ago, the office stopped taking new patients.

"It was very scary. There were times we were going to break down and sign up," Roberts said. "Now, we see a lot of doctors who've signed up with those HMOs. They've had heart attacks."

ADDITIONAL INFORMATION:

Cutting ties to HMOs

According to physician leaders, chances for success in working in an HMO-free office are better if the practice:

Is an established one.
Has affluent patients.
Is in a community that does not have a dominant employer that covers employees through an HMO contract.
Is prepared for a loss in patients. Some doctors deal with an initial reduction in HMO members by finding other sources of patients by contracting to provide physicals or pre-employment screenings for businesses.
Has patients switch plans to one the office accepts as soon as they're able to.

Clarification

The original headline on this article used the letters HMNOs. The AMNews editorial staff was unaware that HMNo is a registered service mark that is the property of Jonathan Sheldon, MD, and Heather Sowell, MD. Use of this mark is protected by federal trademark registration.AMNews regrets using the mark without the proper permission.