TOPICS > Health

A Report on Health Maintenance Organizations

January 9, 1996 at 12:00 AM EDT


SPENCER MICHELS: Sixty-five-year-old Belle Shayer suffers from post polio syndrome, a degenerative disease which weakens her physically. Like 37 percent of Californians, she is a member of a Health Maintenance Organization or HMO. These organizations provide or arrange for medical services in exchange for a pre-paid fee. One in five Americans is a member. But Shayer says she ended up in this exercise class for the physically disabled because her HMO failed to allow her the kind of therapy she wanted.

BELLE SHAYER, HMO Member: By the time you fight through the system to get to where you need to go, you’ve expended time and energy because they don’t know how- they didn’t know where to send me. I had to leave the HMO because I needed to find a doctor who would be my advocate, who would work with me as hard as I’m working to keep myself going as long as possible, and try to put off the- as what I’ve been told- is the inevitable for as long as possible, and the HMO was not willing to do that for me.

SPENCER MICHELS: Shayer says there are some things HMO’s do well. She praises their efforts for her when she had breast cancer. In fact, a variety of surveys indicate between 70 and 90 percent of HMO patients are satisfied with their care, and a new study of patients has found that those treated in HMO’s had about the same medical results as those treated by traditional medical practices. Nevertheless, HMO’s are on the defensive because of complaints from patients like Belle Shayer and in a case now before an administrative judge, the family of Carley Christie. Three years ago, this then nine-year-old Northern Californian was diagnosed with a rare form of kidney cancer.

CARLEY CHRISTIE, Former Cancer Patient: I had very bad pain in my stomach, and I went to see my doctor about it, and I had a lot of tests done, and a few procedures, and finally I had an operation done and they told me I had a disease called Wilm’s Tumor, and I was really upset, because I knew I was going to lose my hair, and actually I thought it was pretty cool in a way because I didn’t like my hair before, and I had to go through chemotherapy, and that was painful.

SPENCER MICHELS: Carley Christie’s medical clinic, the Palo Alto Medical Foundation, and her HMO, Take Care, assigned a clinic urologist to remove the tumor and the kidney. But when her parents discovered that the surgeon had never removed a Wilm’s Tumor, they searched out a different surgeon.

HARRY CHRISTIE, HMO Member: And we found that at Stanford, talking to our pediatric oncologist at the hospital, that they had a surgeon there who was well versed in removing tumors from children, and we asked to have that surgeon actually do the surgery, with the surgeon from the clinic assisting.

HARRY CHRISTIE: We have racked up $40,194 at Children’s Hospital.

SPENCER MICHELS: Carley’s father, Harry Christie, and mother Katherine were told the HMO would not pay for the outside surgeon, nor for hospital costs, but they hired him anyway, and after the operation, which they paid for, they wanted to sue the HMO, but they found they couldn’t because of what they signed.

HARRY CHRISTIE: It says you’ll agree to arbitration in lieu of any other legal remedies.

SPENCER MICHELS: You can’t sue?

HARRY CHRISTIE: Cannot sue. One of the features of HMO’s is a medical consumer cannot sue an HMO.

SPENCER MICHELS: The Christies eventually won the arbitration against the HMO but had to pay legal fees. Still, Harry Christie felt the system was wrong, so he went further.

HARRY CHRISTIE: I then filed a formal complaint with the Department of Corporations, asking them to take decisive action over the fact that we had been badly handled and denied appropriate care.

SPENCER MICHELS: The Department of Corporations regulates and oversees HMO’s in California. It staff spent a year investigating the Christie case. Commissioner Gary Mendoza levied a fine of $1/2 million against the HMO, partly he says because it retaliated against the family by not paying the hospital bill. This was the first such fine ever assessed.

GARY MENDOZA, California Corporations Commissioner: There’s a lot of competition going on in the market place, and there’s a lot of focus on controlling costs. We want to make sure that the quality of care is not compromised in the era of continued focus on containing costs, and we don’t want to see any family treated the way the Christies were treated. And the facts in the Christie case were so egregious that we thought it was absolutely essential to send a very strong signal.

SPENCER MICHELS: The Christies’ HMO, Southern California-based Take Care, which is now part of FHP, declined an on-camera interview. A written statement asserts that Carley’s assigned surgeon was well qualified to do the surgery and that she received appropriate care. In the wake of the Christie case, the HMO is now vigorously contesting the fine and has filed suit against the Department of Corporations, seeking to halt hearings on that fine.

TECHNICIAN: Take in a medium breath and hold it now.

PATIENT: Oh, okay.

TECHNICIAN: (talking to patient) The table’s going to move.

SPENCER MICHELS: The other 31 HMO’s in California are trying to figure out how they can deal with the issues raised in the case. At Lifeguard, a medium-sized HMO near San Jose, medical director Dr. Joseph Aita says his HMO offers an alternative. It’s an optional plan at additional premiums and co-payments called Point of Service for using outside physicians.

DR. JOSEPH AITA, Lifeguard HMO: If you want to go see a physician at the Mayo Clinic because you just have this nagging concern that you want someone else to see you, you still have a benefit.

SPENCER MICHELS: Ultimately at issue is whether HMO’s in their zeal to reduce costs cut back on essential medical services. Dr. Aita says they do not, though costs are a consideration.

DR. JOSEPH AITA: If a physician feels that a referral to a cardiologist is needed, or if a cardiologist feels that a coronary arteriogram or a heart bypass surgery needs to be done, if it is medically necessary, it should be approved. You have to be mindful of the costs. The costs can’t override what the outcome is. If every one of your colleagues feels that this level of care is what we should be rendering and it gives a good outcome, then there shouldn’t be somebody rendering three times that level of care.

NURSE ON PHONE: Hi, Mary. This is Joanne from Lifeguard. And I was calling you back on the patient we were speaking about yesterday.

SPENCER MICHELS: Before the HMO okays treatment, its nurses get on the phone with doctors’ offices to review requests for some procedures and referrals to be sure they are covered by the plan and medically necessary.

OTHER NURSE ON PHONE: Can we do the review related to the requested MRI for this patient?

SPENCER MICHELS: But not all doctors are convinced this works to the patient’s benefit.

DR. TONI BRAYER, Internist: I don’t like the idea that as a physician I have to answer to anyone other than my patient. That patient is my responsibility and that’s who I want to advocate for, and the whole picture with HMO’s right now kind of comes between that.

DR. TONI BRAYER: (talking to patient) Hi, Terry.


DR. TONI BRAYER: So we’re going to take off that cyst finally, huh?



SPENCER MICHELS: Dr. Toni Brayer is a San Francisco internist in a small group that has contracts with 15 HMO’s. While sympathetic to cost reduction, she complains that HMO’s restrict her choice of what drugs to prescribe. Further, getting authorization to make referrals or do procedures is now an expensive hassle that requires a full-time employee.

PERSON ON PHONE: (recorded message) Thank you for calling the Mass Mutual’s Benefits Department. All of our representatives are busy. Please stay on the line. Your call will be answered in the order in which it was received.

DR. TONI BRAYER: You have to call and get authorization. The authorization number, you know, is always busy, or you get put on “hold,” or you get Musac, or you get phone mail.

PERSON ON PHONE: I’m trying to find out if a Dr. Osborne is covered. He’s an orthopedist. So you don’t have a list of any of the providers? I’m trying to find out if a Dr. Osborne, who’s an orthopedist, if he’s covered.

DR. TONI BRAYER: You know, there’s a million different ways that they can stall you and make it very difficult to just refer a patient, which should be so simple.

SPENCER MICHELS: She is angry that insurers rate her based on how much she spends.

DR. TONI BRAYER: The bottom line is they say I’m too expensive, and I look at the categories. I was not only expensive in how- in how often I saw patients, but I was also too expensive in how- in pharmaceutical drugs that I wrote for, and in services, maybe X-ray services, or physical therapy services. I think the bottom line is they don’t want you to spend any money on any patient.

SPENCER MICHELS: Many doctors view HMO ratings as threats to their livelihood. They are afraid they will be dropped from provider panels unless they reduce costs.

DOCTOR: Have you been having any shortness of breath or chest pain?


SPENCER MICHELS: Dr. Eric Kohleriter isn’t worried. He’s also an internist in part of a large group practice that enthusiastically contracts with eight HMO’s, including Lifeguard. In most case, the group gets a set fee per year for each patient enrolled. 75 percent of the practice is managed care, most of that with HMO’s.

DR. ERIC KOHLERITER, Internist: The group has learned to adapt to it, to embrace it, and to learn how to apply it in an effective manner, and I think that’s the key.

SPENCER MICHELS: Dr. Kohleriter believes his patients get better preventative care with HMO’s, because when they get sick, it costs the doctors money. As for patients demanding certain procedures or specialists-

DR. ERIC KOHLERITER: In many cases, you can’t just automatically accede to any demand that a patient has. I want to go to a neurosurgeon because my back’s sore. Well, fine, you might, in fact, need back surgery, but maybe a course of physical therapy with inflammatory medications and conservative care is not only less expensive but is also better quality.

SPOKESMAN: Good morning. State of California, Department of Corporations, this is Joseph. May I help you.

SPENCER MICHELS: A new phone bank at the California Department of Corporations reflects the increasing controversy over HMO’s. The California legislature recently funded this 800 number for use by HMO members who have a complaint. Two thousand calls came in the first month, and the legislature is now holding hearings looking into the quality of care being delivered by HMO’s.