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Power struggle: Doctors get mixed results in HMO fight

When a Utah group took on the state's dominant HMO, it learned that their leverage was limited, and that victory comes where you can get it.

By Myrle Croasdale, amednews staff. Dec. 3, 2001.

If you've ever wondered, "Why do I keep signing these HMO contracts without a fight," consider the case of Ogden Orthopedic and Neurosurgical Specialists.

If anyone would seem to have negotiating leverage, it would be this Utah group. They represented 15 out of 16 surgeons in their specialties in the Ogden area.

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The physician group says payments from the Salt Lake City-based Intermountain Health Care have been virtually halved since 1992; fed-up, they decided to hold out for a 38% increase, rather than the 4% Intermountain offered. The physicians also wanted no part in a newly devised risk-based contract. When they didn't get what they wanted, the Ogden group quit Intermountain, thinking that would get management's attention.

It did.

Intermountain executives then refused to talk with the physicians. The health plan ran negative ads against the group, and it began a search to hire doctors to replace them.

After several months of no progress and falling revenue, three of the 15 physicians returned to the HMO.

Those sticking it out have one last hope. Along with 100 of the 130 or so orthopedists in Utah, they joined the Federation of Physicians and Dentists, a physician union. The Ogden group is hoping that public pressure generated from this fight will help them get what they want from Intermountain.

The last straw

It all started roughly a year ago, when Intermountain was renewing contracts with physicians, said Jack Crosland, MD, an orthopedist who has represented the group of 11 orthopedists and four neurosurgeons in discussions with the health plan.

What Intermountain proposed this time, Dr. Crosland said, was a risk-based contract. Since 1992, the Ogden group said, the insurer had cut fees for commonly done procedures by half, and the contract looked like more of the same.

"We have an integrated health system that fully controls this state," Dr. Crosland said. "You either accept [its contract] or you're off. They're arrogant and they told us, 'We've created this group and dollar figure to work at or under, and we don't have to show how we arrived at this number.' "

Intermountain isn't just a health insurer. It owns 22 hospitals, employs 400 doctors in Utah and Idaho, and is a significant presence in the region's health care market. In the town of Ogden, Intermountain has 83,000 members or 25% of the market. Statewide, the plan has a market share of 22%.

Talks between the two parties produced no changes, and in March the physicians began the process to become a fully integrated group in order to legally negotiate as one. They also sent Intermountain a letter stating that they would like to discuss the terms of the contract, but if nothing changed in 60 days they would leave the HMO.

Ken Lester, CEO for the Ogden group, said that besides higher rates, the doctors were looking to end Intermountain's maintenance of exclusive panels and the bureaucracy of the plan's standard practices, such as prior authorizations and preapprovals.

Lester said the HMO has since done away with preauthorization and prior approval. "In some ways that's a victory."

But the money issue remained. During talks in May, Lester said, Intermountain took a conciliatory stance but wasn't willing to budge.

Eventually, Lester said, "The offer was, 'If you'll rescind your resignation, we'll talk to you and work through this proposal, but we're not willing to commit to anything at this point.' The group said, 'We've talked for years. Rescinding our resignations won't do any good.' So they allowed the letter to take effect, and they came off the panel."

The decision left only one orthopedist in the city of Ogden willing to take Intermountain patients.

Lester said talks ended with the health plan refusing to meet with the group once the doctors were off Intermountain's panels.

Intermountain "came back and said it won't recognize us as a group for legal reasons, and it won't negotiate with doctors off the panels, saying that sent the wrong message to other doctors in the state," Lester said.

Intermountain told the group that besides its own plans, it administered 49 other plans, and the doctors could not see any members of those plans either.

By the end of the summer, the younger physicians were having financial problems, and the group decided to try to get talks moving.

"We went back to [Intermountain] and said, 'We'll come back to the exact same panels we were on originally and negotiate issues in a good-faith attempt to get negotiations moving,' " Lester said. The health plan "has basically agreed they'd be willing to negotiate individually, but they're not willing to commit to putting the doctors back on their original panels."

Intermountain has its say

Jerry Edgington, Intermountain's vice president of health plans, said the company, like the rest of the health insurance industry, was having to pass on rising costs to members and couldn't afford to pay physicians higher rates.

"Employers are struggling with cost issues," he said. "We've established a fee schedule for specialty groups that is consistent throughout the state. For Ogden, the schedule is same as in Salt Lake City, St. George and Provo."

While the lack of access to Ogden orthopedic and neurosurgical specialists has caught the public's attention, patients have yet to start leaving Intermountain plans, Edgington said.

"We haven't seen a change in our market volume as a result of this issue," Edgington said. "Three percent of our population used these doctors in a one-year period, so complaints are fairly small in terms of numbers." The insurer has been sending patients an hour away to Layton, Bountiful and Salt Lake City.

Now the Ogden group is asking the Federation of Physicians and Dentists to work as its third-party messenger. In this role, the federation can share details of negotiations between physicians who, barred by antitrust laws, cannot discuss terms directly with each other.

Jack Seddon, executive director of the federation, is working with the Ogden doctors. He said there was little physicians could do to get insurers to change, beyond taking drastic steps like the Ogden group.

"Doctors have few cards with antitrust laws, while insurers are protected," Seddon said.

Specialists may have more leverage, but if the HMO has a history of controlling the size of its panel, like in Utah, that can be a problem. "Exclusivity at the expense of other groups drives down reimbursement rates," Seddon said.

Dividing a group is a quick way to eliminate its leverage. Dealing with the physicians as individuals, despite their formation of an integrated group, is legal when insurers use a two-tier contracting system.

A lot of payers' sign-up practices are to contract with individual physicians and subject them to credentialing. This way the insurer can dismember a group and keep those on its panel from extending participation to group colleagues, according to physician advocacy organizations.

Intermountain is no stranger to this method, Seddon said.

It "probably wants everyone to reapply so they can pick and choose who is on their panel, which destroys why they would be integrated as a group," Seddon said. "On-call and cross coverage becomes a real problem if some are not on the plan."

Intermountain may use another method for getting around the Ogden group. It can hire its own physicians.

Seddon said it wasn't unusual for an HMO to bring its own doctors into a city to undermine negotiations with area physicians.

"You see that all the time," he said. "The insurance company says, 'I'll bring in my own.' Most insurers find it's not cost effective."

Intermountain's Edgington said this was not a done deal. "We've evaluated the possibility of recruiting physicians, but I can't say right now that we'd hire a doctor for Ogden," he said.

The marketplace will rule

Steve Harris, an attorney on health care law with Harris Kessler & Goldstein, Chicago, said consumer choice might be the greatest bargaining chip for physicians.

"Ultimately, the marketplace is going to dictate access to a panel," Harris said. "Patients have to be upset to drive an hour when they have services available locally. "

While Intermountain contends that its market share is steady, Ogden CEO Lester said big employers might not stick with the health plan since it lacks orthopedic and neurosurgical specialists in Ogden.

"We've been successful in talking with other plans," Lester said. "We definitely could see the market change" for Intermountain.

ADDITIONAL INFORMATION:

Take it or leave it?

What you should know about leverage in negotiating:

Only employed physicians can bargain collectively, says Physicians for Responsible Negotiation. Doctors who work for a hospital fall into this category. Self-employed physicians, even those who work together as a single business, don't have this option.
Doctors who work as a group must be fully integrated as a business to approach an HMO with one voice. Yet the law allows HMOs to still treat members of an integrated group as individuals. This leaves the option of working with a third-party messenger, which entails negotiating reimbursement rates for each physician without revealing what the others are asking or getting.
Public pressure seems to be one way to break the impasse with HMOs. If patients are complaining or dropping the health plan, physicians may find more leverage.