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The Problems With Hmos Essay, Research Paper

Sarah Cay Bradley

English 320

May 20, 1999

The Problems With HMOs

It was no surprise when I interviewed my English class about HMOs, that out of 13 students, seven currently having HMO coverage, 77% felt HMO healthcare inferior to traditional insurance. This group closely represents the U.S. population, as HMOs have become practically synonymous with health care and the idea that Americans are no longer receiving the quality care they received from unmanaged plans. Managed care plans have succeeded in dramatically cutting the rate at which medical spending in the United States has been growing. Does it matter that 100 years after Lincoln freed the slaves that we have found another way to trade lives for money? HMOs have introduced an innovative way to provide health services: incentives for doctors not to treat patients. The less a physician practices, the more the company makes. HMOs make money by not providing a product. (Physicians Who Care, Internet 1999).

What exactly is an HMO? HMO is an acronym for health maintenance organization. An HMO is an organization that provides comprehensive health care to voluntarily enrolled individuals and families in a particular geographic area by member physicians with limited referral to outside specialists and that is financed by fixed periodic payments determined in advance. (Merriam-Webster?s Dictionary-1996) Sometimes considered a new concept, HMOs have been around since the 1930s. The difference today is that consumers are being nudged into them by their employers, in an attempt to hold down costs, and out of traditional insurance plans, in which the insurer reimbursed the patient directly and covered most of the cost of medical treatments. To encourage consumers, the HMOs promote their preventative services. Since the HMO has the patient?s money up front, it is important for them to keep the patient healthy. (Sinclair Community College-1999) An HMO can also be described as what seemed like a good idea at the time, but quickly became a concept out of control, thanks to medical bureaucracy, and just plain greed.

At the beginning of the 1990s, there were nearly 600 HMOs across America and they were regarded as a practical alternative to escalating medical costs. By 1998, it was clear that HMOs were out of control, leaving a trail of angry and neglected patients in their path. Physicians have also begun speaking out against HMOs in increasing numbers. According to Dr. Daniel J. Esposito, the main problem with HMOs is that, “there are no economic incentives to take care of people. The incentive is not to do anything” (”More Trouble With Managed Care” PG).

What happened? How could something, which started out so promising, have gone so terribly wrong? In a survey conducted by Harvard University in conjunction with the Kaiser Family foundation, it was revealed that 51 percent of Americans polled believe that HMOs are responsible for the deteriorating quality of their health care. Fifty-five percent expressed concern that HMOs were more preoccupied with cost-cutting measures than with providing the best possible medical care for the patients they serve (”The HMOs Image Problem; Public Distrust Can be Cured By Ensuring Patient Rights” 8). This certainly does not sound like the all-purpose solution to quality and affordable medical care the government was looking for when it began addressing the issue of a national citizens’ health plan back in the 1960s.

What has sparked this widespread public mistrust of HMOs? Part of the problem has been the exceptional growth of HMOs during the 1990s. By 1996, HMOs boasted a membership of 110 million enrollees, a figure four times higher than 1986 (Evans). The federal government’s attempts at reform have only added fuel to the growing fire. With their ineffectual price controls and budget slashing, the bottom line is that people are receiving less health care instead of more — hospital stays and specialist referrals are kept at a minimum to defray costs (Evans).

This leads to the question, if people are so unhappy with the cost and quality of HMOs, why are they continuing to sign up in record numbers? It should be understood that, first and foremost, an HMO is not a public service organization. HMOs are in business to make money, and the more people they can enroll, the greater the profit. When the general public or their employers go shopping for a health care alternative, they are often unaware that they may become victims of a slick marketing campaign on the part of the HMO. One such glossy, potential patient-friendly brochure, as quoted in

Consumers’ Research Magazine, read, “No Medicare deductibles, affordable copayments, and unlimited hospital stays when medically necessary. Emergency care anywhere in the world. Virtually no claim forms to file…. Routine physical exams (preventive health services). Prescription drug discounts, dental coverage, vision coverage” (Evans). As we all know, if it sounds too good to be true, it IS NOT TRUE. Language in HMO plans is purposely ambiguous and is intentionally subject to broad interpretation. The flyers frequently mention “unlimited hospital stays,” but never clearly define what these stays are for (Evans PG). Then, of course, there is also the equally vague qualifier, for treatments that are “medically necessary” (Evans PG). What does this mean? What may constitute a medical necessity for the patient may not for the HMO. Because the HMO is the provider and paying the medical bill, it is responsible for making a determination as to medical necessity, not the patient or his physician. The patient is primarily concerned with his or her medical condition, whereas the HMOs main focus is the costs which will be incurred in treating this ailment.

However, what the HMOs advertisements do not tell us is that inefficiency has always categorized HMOs. In 1995, it was reported, that over 25% of HMO members said they waited more than 12 days for a scheduled appointment with their primary care doctor… In more than one-third of the HMOs, up 50% of the members said consistently busy telephone lines and the mirage of phone numbers and transfers caused them to sometimes give up scheduling an appointment…. In 52% of HMOs, up to 50% of disenrollees said their doctors failed to refer them to a specialist when needed…. In 40% of the HMOs, from 11% to 50% of disenrollees reported the medical care they received from their HMO caused their health to worsen” (Evans and Kline 10).

What happens when your physician and your HMO administrators do not agree? Let?s look at the following case study. Sandy C. had struggled with her weight all of her life. Finally, when her 5′2″ frame ballooned to 260 pounds, she was considered at high risk for hypertension, heart attack and diabetes (Kowal). Her internist recommended a stomach reduction surgery to curb her urge to overeat. According to Dr. John Cosgrove, who is chief of laparoscopy at Long Island Jewish Medical Center, “The benefits of the surgery for those classified as morbidly obese are clear. When you do this surgery, patients live longer” (Kowal). However, one year after this proposed surgical procedure, this obese young woman is still waiting. Why? Quite simply, Sandy’s HMO refused to pay the $10,000 price tag, and the surgery could not be afforded otherwise (Kowal). Sandy’s HMO determined that this procedure did not constitute a medical necessity and would create more problems than it would ultimately solve, and therefore, have repeatedly denied the surgeon’s compelling efforts to cover the surgical cost (Kowal PG). Sandy is naturally upset and unable to understand her HMOs reluctance to authorize the surgical procedure, lamenting, “I work for a living, but I can’t have surgery that my doctor says is necessary for my health. I think it is so unfair” (Kowal).

Another case recently reported by MSNBC News, the story of the Kuhl family of Kansas City causes us all serious concern over US health care. Mary Kuhl?s husband, Buddy, suffered a heart attack in 1989. The Kuhl?s HMO refused rehab services; they said he didn?t need it. Mary explained that her husband ?was going to have a catheter run to find out exactly where the blockage was, and what damage it had caused. We went to have the procedure done, and we waited all day, and finally they came in and said that the HMO was denying the procedure.? After several delays and denials, Buddy Kuhl collapsed in his yard and died in the arms of his wife. This same type of situation could happen to any of us, and does happen everyday.

HMOs cost cutting has a devastating impact on both the born and the unborn. In Louisiana, when Florence Corcoran entered her eighth month of what had been considered a high-risk pregnancy, it had been recommended by her physician that she enter the hospital (Cohn 6). Despite the fact that Ms. Corcoran’s obstetrician’s recommendation was also approved by another physician, her HMO would not approve the hospitalization. Instead, it opted for home health care for ten hours each day (Cohn 6). Shortly thereafter, when the assigned nurse was off-duty, there were sudden complications, and the fetus died (Cohn 6). If this was not tragic enough, Ms. Corcoran was then informed that she could not file a suit for damages because of the 1974 Employment Retirement Income Security Act, a federal health benefit regulation which prohibits the filing of pain and suffering lawsuits (Cohn 6).

Do HMO members have adequate rights? Unfortunately, in 1998 the House of Representatives rejected a bill that would allow patients or their estates to sue HMOs and other insurers for denial of treatment. But there is much controversy over this issue and several pending bills. Presently consumers lack adequate rights in three areas: consumer information; access and quality; and appeal/grievance rights. Except for emergencies, all care must be authorized by a primary care physician, limiting access to specialists. In fact, when attempting to get a referral says Dr. Stephen Cohen (Founder of Physicians Who Care, MSNBC internet 1999) ?When the person on the other end of the phone line doesn?t even know how to pronounce the name of the disease, it?s ridiculous.?. If a referral is granted, according to the HMOs guidelines, the choice of doctors is usually limited and those contracted by the HMO may not have the expertise to treat the medical problem. Grievances must be handled by an appeal to the HMO, the same entity which denied care in the first place. Moreover, the grievance process can take months or longer, in some cases resulting in serious harm to the enrollee. There are no statutes in place to allow for malpractice cases against HMOs, enrollees are usually forced into a binding arbitration case. Under federal law, workers enrolled in employer-sponsored health plans can sue their HMO to recover the cost of treatment that was wrongly denied, but they cannot go to court to seek compensation for pain and suffering and to seek punitive damages. (Dallke)

Patients are not the only losers in the web of the HMO scheme. Physicians are also becoming victimized by HMOs as are their patients. But in this case, it is financial rather than physical. Like HMOs, physicians are paid a fixed amount for each patient, and this figure does not vary. In other words, if the patient doesn’t show up for treatment, the amount is not adjusted. What this means is that if there are any savings, the physician benefits. However, when there are not, which is most often the case, the physician, not the HMO, assumes the liability. Simply stated, “The patient is costing the physician money the minute she walks in the door” (Evans).

?Managed care replaces Hippocratic ethic with veterinary ethic. The owner paying the bill, the HMO, makes the decision. If they decide ?Fifi? isn?t worth the cost, the needed care is not given. Managed care is perverse. It destroys patient choice. It leaves the ethics of our profession in ruins.? (Jane Orient, MD). Dr. Linda Peeno testified before the U.S. House of Representative Committee on Commerce on May 30, 1996. She began her testimony. ?In the spring of 1987, as a physician, I caused the death of a man. Although this was known to many people, I have not been taken before any court of law or called to account for this in any professional or public forum. In fact, just the opposite occurred: I was rewarded for this. It brought me an improved reputation in my job, and contributed to my advancement afterwards. Not only did I demonstrate I could indeed do what was expected of me, I exemplified the ?good? company doctor. I saved a half million dollars. The man died because I denied him a necessary operation to save his heart. I felt little pain or remorse at the time. The man?s faceless distance soothed my conscience. Like a skilled soldier, I was trained for this moment. When any moral qualms arose, I was to remember: I am not denying care, I am only denying payment. At the time, this helped avoid any sense of responsibility for my decision.?

As a medical director, Dr Peeno?s priority was to protect the interests of the business, not the patients. There is no code of ethics for the ?company doctor?. The physician code of ethics addresses clinical physicians, not physician executives. On previous occasions Dr. Peeno was reprimanded for not denying enough care. She was even told by the HMO to use data which was known to be inaccurate to justify a denial. At one point she was assigned the task of presenting to a group of 500 medical directors and nurse reviewers how her plan had used the denial process to get specialists? costs down. If physicians do not play the game they can be labeled ?unsuited for managed care.? So, while HMOs are advertising that you and your doctor, not an administrator, make your medical decisions, your doctor is actually acting as a medical director, for the good of their employer. (Peeno 1)

Apparently, some of the largest HMOs are also the slowest-paying ones. For example, Oxford Health Plans, an HMO covering New York’s metropolitan area owed millions to both participating physicians and hospitals (Terry 44). They blamed the delay on computer glitches and payments which had been advanced to medical practices. However, these excuses were considered lame by the physicians who were owed money in light of the HMO’s profits increasing 65 percent at the end of the second quarter of 1996 (Terry 44). According to Dr. Michael Rutigliano, whose private practice was owed $50,000 by Oxford Health Plans, “It’s obviously very frustrating — and it can certainly cause cash-flow problems” (Terry 44). What is really the cause of the delay in HMOs paying physicians? Many believe it is so that the HMOs can draw as much interest on the money as possible in their own account before having to turn it over to the designated physicians (Terry 44). HMOs, of course, vehemently deny this charge and blame the private practices for inaccurate record keeping and unfamiliarity with the HMO policy process, which they maintain is responsible for the payment delay (Terry 44). However, even HMO representatives have admitted that it is probably next to

impossible for private practices to keep up with HMOs evolving policies, which seem to change daily (Terry 44). Again, these losses for physicians mean higher costs for patients as the vicious cycle continues.

Are there any winners in the HMO process? Well, maybe this is something you should decide. In 1996 there were 20 for-profit, publicly traded companies which owned HMOs, registered with the Securities and Exchange Commission. The SEC reported that Mr. Wiggins, CEO of Oxford Health Plans (the largest and slowest-paying HMO) was paid $29.1 million in 1996, and held an additional $82.8 million in unexercised stock options. The 25 highest paid HMO executives among these companies had an average compensation of over $6.2 million, and average unexercised stock options of $13.5 million. (Families USA Study) Ron Pollack, executive director of Families USA, summed it up very well, ?when HMO executives make many millions of dollars in compensation, that may be okay. But when those same HMO executives complain about pennies being spent for basic consumer rights, that is pure hypocrisy. Managed care companies are considerably more cost conscious when they oppose the establishment of consumer rights than when they approve compensation for their top executives.? (Slass)

How can potential HMO enrollees protect themselves from being a worst-case scenario? Educating oneself on the proposed HMO is the best strategy. In other words, leave nothing to chance. Know exactly what you’re getting into. If an employee has no input as to which HMO he may join, he or she can still question the HMO representative. Some of the most important questions include: How long has the HMO been in operation? Usually, a gauge of two to three years may be used (Luciano PG). If the HMO has operated for less than three years, what experience does it bring to its new operation (Luciano PG)? What is the working relationship between the HMO and the doctors and hospitals with whom it has established contracts? Ask the HMO representative to supply a list of telephone numbers to assess if the working relationship has been a good one, or has been problematic (Luciano PG). Although HMOs are forbidden to divulge names of their members, if you know of anyone currently enrolled in the proposed HMO plan, ask the person to evaluate the HMO’s coverage and general satisfaction (Luciano PG).

The unfortunate reality is, the problem with HMOs is probably going to get worse before it gets better. However, like it or not, HMOs are a permanent fixture in the health-care landscape. Unless the government can institute some actual reform that does not involve its “quick fix” cost-cutting measures (such as the ineffective fixed cost per patient practice), which is highly unlikely, HMOs in the future are going to be synonymous with ‘wrongful death,’ rather than patient care.

Cohn, Jonathan. “Managed Careless (Legislation on Health

Maintenance Organizations).”

The New Republic May, Volume 218, number 11: 6

Dallek, Geraldine. ?Do Members Have Adequate Rights Within HMOs?.?

HarperPerennial, Internet: 1999

Esposito, Daniel J.. ?More Trouble With Managed Care?.

Internet: 1999

Evans, M. Stanton, and Kline, Malcolm A. “The Trouble with HMOs.”

Consumers’ Research Magazine (July 1995): Volume 78, number 7: 19

“The HMOs’ Image Problem; Public Distrust Can Be Cured By*

Ensuring Patient Right.” Los Angeles Times (Home Edition).*BR*

(7 Nov. 1997): p. 8.*BR*

Kowal, Jessica. “The HMO Backlash / Patients, Doctors Demanding

More Coverage.”

Newsday 28 January 1997

Luciano, Lani. “Health Care: HMO, Yes or No? You May Soon Be

Asked — Perhaps Even Pressured.”

Money 1 July 1988

Peeno, Linda. ?Physicians Who Care?.

Internet: 1999

?Sinclair Community College Study?

Internet, www.sinclaircollege.edu: 1999

Slass, Lorie. ?Families USA Study Examine Executive Compensation in Managed Care.?

Internet, www.hmopage.org: 1 April 1998


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