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Managed Care Transforms Health Care Industry
Health care providers say managed care has gone too far
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Business New Haven
10/6/1997
By: Lori Green
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Connecticut's health care community saw it coming, but no one still standing has been left unaltered. The managed care machine seemed to be moving in from the West - where it had already won major market share battles. Some Connecticut health care providers, such as hospitals and the independent ambulatory care centers, were cornered immediately. Others, mainly physicians, and specialists in particular, scrambled to close ranks in defense of their territory - but to no avail. Working consumers, dazed by the rapid-fire onset of new coverage complexities, were quickly herded by their employers into the new system, while many retirees and children still wait at the turnstiles for entry.
However it happened, taking the managed care cure for swelling medical costs has produced a few undesirable side effects and there's no turning back.
Hardly anyone can even remember Hillary Clinton's campaign to install a single-payer health insurance system. That memory has been wholly overtaken by what was once regarded as the arch nemesis of quality health care in America: market forces.
Today more than 50 percent of the state's residents are enrolled in some type of managed care health plan and a full 90 percent will be within the next two years. Perhaps even more - if Governor John G. Rowland's proposed health care plan, HUSKY (Health care for Uninsured Kids and Youth), wins coverage for the state's uninsured: 12 percent of adults and 11 percent of children. HUSKY, which could cost the state up to $55 million per year, calls on HMOs not only to bid on provider contracts, but also to “use charitable donations to further increase access” for uncovered children not poor enough to qualify for Medicaid.
While it's still too early to determine with certainty who in the industry will thrive and who will feel more pain, there are those who are adapting quickly and successfully. “For companies who now have full managed care replacement for their employees in Connecticut, quality indicators and outcomes are improving,” says Ted Nussbaum, managing consultant at Watson Wyatt Worldwide's Stamford office. “Re-admissions, questionable admissions, preventable illnesses and co-morbidity rates are all coming down. Employers have experienced significant reductions in cost compared with their use of the indemnity plans. Employee satisfaction is very high...and best practices are still evolving.”
Managed care companies, in spite of their best lobbying efforts, are about to have the state's Office of Health Care Access take more of an active interest in their operations and recordkeeping. Yet, in other sectors, life's gotten a lot tougher than that.
Physicians and hospitals are still honing survival strategies, with physicians proving that they are the quicker studies. For example, according to Waton Wyatt surveys, the size of an HMO's membership is the top factor in a physician's decision to join a health plan's provider network. Doctors understand that means more people reading magazines in their waiting rooms. Only 44 percent of physicians said that a plan's reputation among patients factors into their decision at all.
On the hospital front, fewer people are being admitted for shorter stays so “hospitals have to have a [growth] plan,” advises Nussbaum. “And maintaining market share is not a good one. Hospitals as we know them today will become obsolete.” Nussbaum is unimpressed by horizontally integrated hospital systems. “Linking two sinking ships together doesn't make them float.”
That's why hospitals are now trying to partner more tentatively, in order not to find themselves over-committed if a marriage turns out to be unproductive. Says Ralph Cortese, Wallingford-based Connecticut Hospital Association's (CHA) manager of planning and community health, “The verdict is still out as to whether bigger is better. Hospitals are rebuilding to generate income and keeping a close eye on the bottom line.”
Empty beds are being eliminated or converted for short-term or out-patient use. Capital expenditures for medical technologies are declining in favor of investments in information systems, and tighter system-wide utilization controls are in place. While Cortese does not foresee the state's hospitals going the for-profit route of institutions like Columbia/HCA, regulatory provisions do allow for some ownership of for-profit entities.
However agile physicians appear to be at playing by the new rules, privately they still mourn the death of entrepreneurial medicine. That was when new pharmaceutical therapies or treatment plans could be implemented without first obtaining time-consuming payer approvals. Says Jerome Combs, M.D., a veteran staff pediatrician at St. Raphael's, “HMOs stifle innovative treatment. Advances occur too rapidly for HMO guidelines to keep up, especially in the case of invasive diagnostics or surgery. Managed care has made the reputation of surgeons and physicians irrelevant - the question [patients now ask] becomes 'are they in the network.'”
Other independent providers agree, even those well-positioned to prosper in the projected high-growth markets, such as home health care, rehabilitation medicine, and services for the aging and Medicare populations. “Entrepreneurialism is being squashed,” says Laurie Kendall-Ellis, owner of the West Haven-based Allied Health Rehabilitation. “Patients are not being offered options, and treatment goals are time-frame driven. A new middle ground needs to be found.”
Kendall-Ellis believes her center's challenge is to avoid being absorbed by a large medical entity. And to that end she and other members of the Connecticut Independent Therapeutic Alliance (CITA), a trade association of privately-owned outpatient practices, are forming strategic alliances and seeking participation in as many insurance and state reimbursement plans as possible.
From the vantage point of the industry titans, big is definitely better: Increased financial stability brings, among other good things, a greater product mix to offer consumers. Anthem-Blue Cross, with 900,000 policyholders in Connecticut, is hoping that independent “Blues” in other states will join in under Anthem parentage.
“Consolidation is still going on here. Small independents such as ConnectiCare and Oxford Health Plan will either be acquired or become acquirers,” says Albert May, director of corporate communications at Anthem-Blue Cross' headquarters in West Haven.
“Our traditional indemnity membership is down to about ten percent and shrinking. We don't sell indemnity to employers anymore.” To ensure future growth in their new incarnation as a national managed care player, the company is targeting market segments such as Medicaid, small business and workers compensation. Insurance giants such as the Travelers and CNA are busy placing long-term care policies on the shelves and educating consumers on the projected costs of home health care and nursing homes.
But in this industry, being big doesn't always mean you get to run the playground. Pharmaceutical heavyweights such as Bayer, recently ranked No. 99 on a Wall Street Journal listing of “The World's 100 Largest Public Companies,” have their own quarrels with managed care, foremost being the use of restrictive formularies - lists of reimbursable drugs from which doctors can prescribe.
“Formularies are a short-sighted way to save money. It has been shown in studies that in fact they increase spending,” says Thomas B. Lilburn, Bayer's director of state and government affairs office based in West Haven. “One of the tenets we hold in our industry is that no one should come between the patient and his or her doctor. Medicaid patients in particular are very vulnerable.”
Doctors, along with many public health advocates and pharmacists, echo Bayer's dissatisfaction with HMO policies that dictate which medications doctors can prescribe for their patients. Says Combs, “If you've had good results in the past using, say, Ceftin on a patient with sinusitis, suddenly you find that you can no longer prescribe it based on the patient's insurance provider's formulary.”
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