HMO Domination in Houston

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Aetna Tries to Soothe Doctors’ Fears

Houston Chronicle

Aetna U.S. Healthcare is the managed-care company many physicians love to hate.

Once a genteel company that earned the nickname “Mother Aetna,” the giant health insurer is coming under fire from Houston-area doctors as it prepares to take over more than half of the HMO contracts in the Houston area.

Last July, Aetna bought NylCare, Houston’s largest HMO insurer, and by June it is expected to close on its acquisition of Prudential HealthCare, giving it 53 percent of the Houston-area HMO market.

The physicians fear that such dominance will shrink choices for doctors and patients, slash reimbursement rates and, ultimately, reduce the quality of care.

“It will concentrate a lot more power in the Aetna U.S. Healthcare organization,” said Dr. Paul Handel, immediate past president of the Harris County Medical Society. “Aetna will have a tremendous amount of bargaining power. I have truly lost sleep over it. ”

Houston doctors may have reason to be concerned, especially if an analysis of complaints against HMOs conducted by the Texas Department of Insurance for the Chronicle is any indication.

The numbers show that of the five largest HMOs in the Houston area, Aetna leads in the number of statewide justified complaints against it. When ranked among all HMOs in Texas, Aetna has racked up the second-most justified complaints per 10,000 members.

The complaints cover nine categories and include quality-of-care issues, contracts with doctors and marketing practices. Though they come from both patients and doctors, the bulk are lodged by physicians.

The difference since the Aetna-Prudential announcement is that now doctors are organizing and have gone public with their complaints.

The Harris County Medical Society, which represents 8,000 physicians, for example, has announced its support for the American Medical Association‘s position against the merger, asking the U.S. Justice Department to review the matter.

“This new firm . . . would be large enough to dictate premium prices and plan options to employers and patients,” the ANA said in a letter to the antitrust division of the U.S. Justice Department. “By increasing its market power, Aetna will also continue to drive medical decisions based on financial and stockholder expectations.”

Consumers for Quality Care, a health care watchdog group in Santa Monica, Calif., also has asked the Justice Department to halt the transaction.

“As Aetna comes to rule the HMO world, we start living by Aetna‘s standards, and Aetna has been a bad boy on the block,” spokesman Doug Heller said.

Aetna spokeswoman Jill Griffiths rebuts the American Medical Association‘s charges.

“The facts do not bear out the picture as the AMA paints it,” she said. “We will have less than 10 percent market share nationwide.”

Aetna‘s $ 1 billion deal with Prudential would make Aetna the biggest HMO nationwide, providing coverage to one in 10 Americans. More than half the nation’s 550,000 physicians will have contracts with the new Aetna.

Tim Brown, regional manager for Aetna U.S. Healthcare in Dallas, said the merger will increase choices for Aetna and Prudential members – not limit them.

“There are significant differences in the networks. It would actually add physicians to the network,” he said.

But doctors fear Aetna‘s new size will only create more problems for them and their patients, pushing up the number of justified complaints.

In fiscal 1998, for every 10,000 enrollees statewide, 14.31 justified complaints were filed against Aetna, according to the insurance department, placing it first among the Houston area’s largest HMOs. NylCare had the second highest rate of complaints, 7.55, and Prudential the third highest, 5.14.

The department considers a complaint justified if there’s an apparent violation of state law, department rules or policy provisions. A complaint is also justified if there’s a valid concern that a prudent layperson would consider below customary business or medical practice.

An “unjustified” complaint would be one in which the HMO paid a claim in question, the legal time limit for payment had not expired or the HMO plan does not cover the benefit.

Brown counters that often complaints may be valid but may not be Aetna‘s fault. For example, doctors often work in an independent practitioner association, which then contracts with Aetna.

When the association changes its doctors’ fees, it may neglect to inform Aetna and the doctors then get incorrect payments.

Moreover, Brown said, the current brouhaha has mushroomed into a political debate.

“There have been very concentrated, concerted efforts by medical societies and the Texas Medical Association to make this a public issue,” Brown said, adding that these groups have solicited doctors’ offices, encouraging them to submit everything they think is wrong.

And what problems are doctors having with Aetna?

They complain of drastic fee cuts without prior explanation, untimely payments that drag for months before they’re resolved, and stringent, all-or-nothing contracts that force doctors to participate in all of Aetna‘s plans, including its lowest-paying HMO plan.

Consider the case of Dr. Simon Fredericks, a plastic surgeon who teaches at Baylor College of Medicine. After 40 years of signing contracts with Aetna, he dropped out of the Aetna network last June.

Aetna has become in the last year the worst benefits payer of any HMO or PPO in the state of Texas,” Fredericks said. “Previously, Aetna was an excellent company to do business with. (Now) they have a philosophy of ratcheting down the fees. Squeeze the provider. Someone out there will do it for that fee.”

Fredericks’ resignation was triggered when he received, without explanation, a dramatically reduced fee from Aetna to reimburse him for an operation to reduce a woman’s breasts – $ 2,021.84 – less than one-third of Aetna‘s normal reimbursement.

Dr. Carlos Farari, a general surgeon in Houston, echoes those sentiments. “It bothers me that they keep cutting those reimbursements based on arbitrary measures that nobody knows. When you try to find out why those rates were cut . . . you never get to the person who made the decision,” Farari said.

He said the average reimbursement from most insurance companies for gastroplasty, or stomach stapling, ranges from $ 3,200 to $ 3,600. But he said Aetna paid him less than half of that, prompting him to leave the Aetna network in 1996.

“They will always find a doctor who will do it for less, but it will get to the point where nobody will do it,” Farari said.

Aetna‘s Brown contends Houston’s reimbursement fees with its large doctor groups haven’t changed “in a long time.” Contracts with individual doctors are reviewed annually. Fees are tied to a percentage of what Medicare pays.

“Procedures change. Some of them are no longer as complicated as they once were because of technological improvements. So fees will change,” Brown said.

But not everyone believes the new Aetna spells doom.

Alex Chernoff, managing director of Chernoff Diamond & Co. in New York, points out that bigger and fewer managed-care companies will give the doctors more clout. With only three remaining national insurers – Aetna, United Healthcare Corp. and Cigna Corp. – doctors will have to compete on the quality of services they give.

“If Aetna does not treat its physicians as well as Cigna treats its physicians, that will come through,” Chernoff said. “I don’t think Aetna or Cigna or any of them are so short-sighted as to not recognize that they will need the cooperation and goodwill of the provider network to eventually command the business they want to get.”

Brown, Aetna‘s regional manager who oversees Houston, calls the company’s relations with doctors “good and fair.” There are 4,826 physicians in Aetna‘s Houston-area network of doctors with a turnover rate of 4.6 percent.

Aetna wants to make sure it doesn’t repeat in Houston the almost daily war it waged with Dallas doctors.

Disputes erupted in mid-1997 and grew to include four groups of Dallas physicians over fees and a dearth of information from Aetna, which the doctors said they needed to manage their patients’ care. About 800 doctors dropped out of Aetna‘s Dallas network.

“It’s really very depressing,” said Dr. Robert Gunby, immediate past president of the Dallas County Medical Society. “(Aetna) said all this is a bunch of greedy doctors refusing to cooperate. That is not the case. They’ve been so difficult to work with, so obstructive.”

If it’s a public relations war, Aetna has been taking steps recently to polish its hard-nosed image.

Last week it announced it was implementing an external review process that allows its 6 million HMO members to appeal the health plan’s decisions to neutral, independent doctors. Eighteen of the 30 states where Aetna operates already have the right to appeal to independent reviewers, including Texas.

Aetna has rewritten its contracts for physicians “to make them less legalistic and more user-friendly,” Brown said.

Doctors had contended the contracts had “gag” language that limited what doctors could say about Aetna to patients, said Rocky Wilcox, general counsel at the Texas Medical Association.

Now Aetna encourages doctors to discuss with patients all pertinent details of their condition, whether or not a particular treatment is covered by Aetna. Texas will be among the first three states to use the new contract.

Wilcox said the new contracts are still unconscionable. For example, he said, Aetna retains the right to change or add products any time; the doctors must accept the new deal; and any new fee schedule.

Physicians’ complaints about untimely claims payments prompted Aetna to start a pilot project last August in New Jersey and New York of electronic payments and referrals, allowing doctors to be paid within 15 business days. It’s expected to be rolled out nationally by the end of the year.

“When (physicians) have raised issues, we’ve addressed them. We’ve tried to be responsive,” Brown said.

Chernoff said Aetna has learned from its mistakes.

Aetna U.S. Healthcare is not in business to turn off doctors. The fact that they have a methodology which the doctors do not agree with . . . just makes them challenging to deal with,” Chernoff said.

But Uwe Reinhardt, a health economist at Princeton University in Princeton, N.J., warns doctors have good reason to be concerned atAetna’s mammoth new size.

“When you have 53 percent of the market, that’s an awfully big gorilla for an independent doctor to face. When something gets that big, the market isn’t balanced,” Reinhardt said. “If you have many sellers and only one buyer, that’s obviously a very lopsided market.”

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