HMO-America   9/96

Decades ago the handwriting was already on the wall--we were warned that if we did not control the spiraling cost of medical care in this country, someone else would...

A few weeks ago I received a call from an East Coast broker asking me to invest in "HMO-America," or something like that. (It seems that the class from my Alma Mater that’s been out making money for 25 years came up on his screen and he was just working his way down the list). He stated that HMO-A was purchasing a group of doctors in Florida and would be expanding into New Jersey. They would be going public, probably within one year, and I could be making a fortune in the process. The dollars that would come my way in the next few years far exceeded what I’ve made in 25 years of practice, cumulatively.

When I pointed out the experience of many physicians with HMOs, he countered, "You doctors are just experiencing the same thing us brokers experienced when Charles Schwab enter the Wall Street Market and cut costs. So everyone just had to work harder and make more sales, just like you have to see patients more efficiently." His understanding was that doctors just loved this type of practice arrangement.

When he mentioned the funds he wanted me to come up with in the next 24 hours, it turned out to be two years’ income or 20 years’ contributions to my SEP-IRA. When I pointed this out to him, he simply responded, "It’s time you got on the investor side and started owning doctors rather than working as a doctor." I pointed out that in view of the editorials and letters I was reading in the business journals and magazines, it appeared that there might be a public backlash against HMOs. He stated that HMOs and their control of doctors was a long time in coming and would not be reversed. When I returned to the office later in the afternoon, he had called back but I declined to return the call. He may had just looked up at the board and saw that ten HMOs were taking a beating on the exchange that day.

Health Maintenance Organizations have been around since prior to the second World War. In 1976 HMOs counted six million members, but their popularity grew and 19 million people were enrolled by 1985. Their mission was to maintain the health of their members. Their emphasis was on "wellness" rather that "illness." They created economy of scale by spreading the cost of individual treatments across the total enrollment. That not only appealed to workers, but to all on a fixed income. This no frills appeal has been so phenomenal that there were 37 million members in 1990 and 56 million in 1995.

In today’s market driven environment, the evolution of for-profit managed care should come as no surprise. Americans spend more money on personal health services than any other country in the world. Whenever a market inflates this rapidly, there are bound to be opportunistic individuals or entities who will find a way to carve out a piece of the fast growing pie for themselves. Consumers want lower, more predictable costs. For-Profit Managed Care Organizations (MCO’s) say that they can meet this demand, and they’ve got the charts, graphs, glossy brochures, and econometric formulas to prove it. So consumers are handing over the big bucks to the MCO’s and they’re letting them have a go at it.

How do they propose to accomplish this? They have utilized a number of strategies. One of the less obvious cost saving measures is that they are using, rent free, primary care offices for which the private practitioner is paying the overhead. Another is to offer physicians performance incentives when they hold down the cost of the care they render.

For Profit HMOs (FP-HMO) must also be differentiated from Non Profit HMOs (NP-HMO) such as Kaiser. To help understand some of the basic differences, we have included a consumer evaluation in this issue.

One cannot do justice to the HMO movement in one editorial, or one issue of this journal, and probably not even in a full volume. Things would change before it could possibly be printed. We invited eight medical directors of the NP-HMOs as well as the medical directors of the Managed Care Organizations that represent the FP-HMOs in our area to tell us about their perspectives on the various HMO issues, the problems, benefits, and the future as they see it.

The following special section contains the six very different articles which were submitted to Sacramento Medicine in response to our invitation. These, of course, only purport to represent the opinions and perspectives of their respective authors. They do not necessarily represent the views of SEDMS, it’s membership, or the editorial board of this publication. Nevertheless, they make very interesting reading.

What implications for us are inherent in this fundamental shift in the way health care is delivered? Can we really continue to live out our oath to "... follow the method of treatment which, according to ...[our] ability and judgment, ...[we] consider for the benefit of ...[our] patients, and abstain from whatever is deleterious and mischievous..." while sparring with the invisible hand of the marketplace? Or will for-profit managed care become a way for claims examiners to practice medicine without a license? Who has the right to exercise control over the choices we make in treating our patients? Who will accept responsibility for action or inaction? And what effect will it have on the quality of life we can offer our patients? These are troubling questions which must be answered, and the sooner, the better.