HMOs Feel the Heat

Doctors and hospitals have complained about being stiffed by managed care companies for years. However, the decision of the Catholic Healthcare West chain and St. John’s Hospital in Santa Monica to stop accepting Blue Cross health insurance this month is one more sign that the stakes in this battle are rising sharply. Doctors and hospitals are increasingly willing to take their cases against HMOs to the court of public opinion, and the courts of law.

The campaign began in May when the California Medical Assn. sued Blue Cross and two other health plans for an alleged pattern of paying physicians too little and too late. A month later Catholic Healthcare West joined in with a similar lawsuit against Blue Cross. And in July, one of the state’s largest physician networks, Brown & Toland, sued Aetna US Healthcare for using “unintelligible . . . financial data to shortchange” doctors.

These are huge problems affecting millions of California consumers.

State legislators can help with one issue--late payments to doctors and hospitals. A pending bill by Assemblyman Jack Scott (D-Altadena) would broaden the power of the new Department of Managed Care to audit and penalize health plans that repeatedly delay or deny payment of claims. Lawmakers, however, can do little about the amount being paid. California Medical Assn. President Jack Lewin says that average per-patient rates that insurers pay to doctors each year have dropped 35% since 1993. Insurers counter that they are merely paying what the market will bear, using their market clout to keep health care costs down, as patients and employers want them to do.

Legislators do not have the expertise or the political mandate to get involved in the business of setting the prices that private insurers pay to health providers. But there is one significant way in which legislators can help: They can give employers and patients the objective tools they need to accurately assess the quality of a plan’s health care.

The Pacific Business Group on Health, a consortium of large employers, and the California Department of Managed Care are now preparing one such tool for release this fall: the first statewide report on how successful hospitals have been at performing heart bypass surgeries. Next year, the Department of Managed Care should make good on its promise to develop similar objective tools to assess many more health quality measures.

Physicians and hospitals may complain the loudest, but the biggest victims of the recent upheaval in managed care have been patients, who are rightly concerned about the instability in their plans. A recent survey by Deloitte & Touche found that 28% of U.S. hospitals terminated at least one HMO contract last year, up from 19% two years ago.

The turmoil is certain to increase patient animosity and employer frustration toward managed care. Beefing up oversight of insurers’ payment practices would help, and so would tougher oversight of quality. After that, the answers come harder.