Anger From The Coast…California Physicians and Groups Lash Out At HMOs

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Modern Physician

Physicians in California, like Peter Finch’s newsman Howard Beale in the movie Network, are as mad as hell and not going to take it anymore.

The object of their wrath, however, is not Big Networks but Big HMOs. After years of doing little more than complaining about low capitation rates and other problems, doctors are fighting back. “They’re changing their strategy (through) legislation, litigation and the media,” says an annoyed Bobby Pena, spokesperson for the state’s main HMO group, the California Association of Health Plans, whose wrangles with physician groups and the California Medical Association are getting more strident.

Indeed, the tactics physician organizations have taken in the past few months, which would have been unthinkable just a year ago, suggest a much more stiff-spined and sophisticated approach to their relations with managed care organizations.

Among recent developments:

* On May 25, the CMA filed a lawsuit against California’s three largest for-profit health plans, accusing them of violating federal racketeering laws — the same laws that put John Gotti and other mobsters in jail.

The complaint alleges that WellPoint/Blue Cross of California, HealthNet (Foundation) and PacifiCare used “coercive, unfair and fraudulent means to dominate and control physician-patient relationships for their own financial gain.”

* On June 30, the largest provider group in Orange County, St. Joseph Health System, shocked health plans when it announced it would stop accepting new patients from the 17 HMOs with which it does business “effective immediately.”

“Something has changed,” says St. Joe’s chief medical officer, Elliot Sternberg, M.D.

Others put it more dramatically. “Hardball!” said Sacramento healthcare consultant and attorney Ron Kaldor. “The shot heard ’round the world,” thundered consumer advocate Jamie Court, head of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

* On July 1, the day after St. Joe’s closed its doors to new HMO patients, a large Orange County medical group, Greater Newport Physicians, threatened to terminate its contract with PacifiCare unless the insurer agreed to increase capitation rates for Greater Newport’s 40,000 PacifiCare patients.

* And on July 17, one of San Francisco’s largest and most prestigious IPAs, Brown & Toland, filed a lawsuit on behalf of its 1,600 physicians against AetnaUSHealthcare. It accused the Blue Bell, Penn.-based health plan of breach of contract, unfair and deceptive business practices, and using “unintelligible (and) unusable” financial data to shortchange the IPA out of possibly millions of dollars, according to the group’s founder and director, Michael Abel, M.D.

Brown & Toland’s suit may be the largest ever brought against a health plan by a California medical group. The case is expected to be heard in a San Francisco Superior Court this month.

Add to this list an increasing number of less visible but no less dramatic moves by other medical groups to opt out of their contracts with health plans, and it’s clear that California doctors have been emboldened, in a way they’ve never been before, to challenge the hand that feeds them.

“Doctors are no longer willing to take it or leave it,” declares the man many would say is leading the charge against HMOs, Jack Lewin, M.D., the CMA‘s outspoken CEO. “Over the course of the next round of negotiations, there will be a lot of medical groups who just say no to plans,” says Lewin, who a few months ago led a march of 500 angry doctors to the state Capitol in Sacramento to protest against managed care “excesses.” The doctors railed against capitation rates, which Lewin says have dropped, on average, 35% since 1993, a period during which the cost of living increased more than 25%.

Notes Josh Fisher, a senior healthcare analyst at W.R. Hambrecht in San Francisco, “Doctors are now trying to get back in control of what they’re paid for services.”

Why now? “It may be that doctors are taking advantage of the fact that public opinion has turned against HMOs, which creates an environment that supports a backlash,” says Brown & Toland CMO Tom McAfee, M.D.

Pena says he believes that, after years of flat premium rates that forced plans to hold the line on reimbursements, physicians finally reached the boiling point. “The strain on them has been brewing, and seeing other medical groups go under (such as) FPA and MedPartners has made them more nervous.”

It’s not just in the courts and the court of public opinion that California physicians are taking on the HMOs, it’s in the California Legislature and in Washington. Lewin and the CMA are working with sympathetic politicians to pass new laws, the most important of which may be those allowing physicians to negotiate collectively with health plans without violating antitrust regulations.

Although Lewin says the bills would allow doctors to collectively negotiate with health plans to increase their bargaining clout, Pena brands them as “attempted collusion (among) doctors.”

Lewin also holds over the heads of health plans the threat of providers contracting directly with employers and consumers for health insurance, thus bypassing the plans completely. “I don’t think they (physicians) really want to do this,” Lewin says, “but they may be forced to.”

California’s million-plus state employees retirement system and the heavyweight Pacific Business Group on Health are considering direct contracting.

Even small physician organizations, emboldened by the steps that big doctor groups have taken, are feeling their oats.

Ted Mazer, M.D., an otolaryngologist and medical director of a 300-member IPA, Mercy Physicians Medical Group in San Diego, says, “More and more groups are asking to renegotiate their contracts, or telling the plans they won’t maintain coverage unless cap rates are increased or they switch to fee-for-service.”

Things have gotten so bad, he says, that the San Diego Medical Society is organizing a doctors’ rally similar to the one the CMA held in Sacramento, along with a media blitz aimed at legislators, civic clubs and others. Mazer says doctors traditionally haven’t been the type to take it to the streets, but in California in the year 2000, their reluctance is waning.

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