More than anything, Jeffrey Bass, a popular family practitioner in Brookline,
Massachusetts, regrets how the doctor-patient relationship has suffered in the
past three years of the managed care revolution. Trapped in a health care
system that limits the specialists to whom he may refer patients, the
procedures that he can order or the prescriptions he can write, Bass says that
his patients have tired of hearing him say "no." He senses a growing
Jennings is the field producer for FRONTLINE's "Dr. Solomon's
What is interesting, however, is that Dr. Bass does not blame the usual
suspect - HMOs. He's more penitent: "We screwed ourselves. Absolutely. We did
this to ourselves."
It was three years ago that the group of roughly 1,200 doctors to which Bass
belongs started a new approach to negotiating contracts with insurers. As a
large group representing many patients, the doctors agreed that they would take
on more "downside" financial risk for the patients they cared for. While the
insurance companies would give them a monthly payment for each patient in the
practice, it became the doctors' job keep the cost of patient care under the
set, "capitated" amount they received. If they went above that capitated
amount, they shared in the losses. But if they stayed under the limit, they
could turn profits.
"It looked as though there was a lot of money to be made," says Dr. Martin
Solomon, Bass's partner and profile subject of "Dr. Solomon's Dilemma." "So
everybody jumped into it."
Like many trends, doctors taking on financial risk of their patients started
in California. Grouping themselves together in large numbers, doctors there
decided in the late 1980s that they would like to do what they were trained to
do: Take complete charge of their patients' care.
But in the new world of managed care, that meant there had to be a trade-off.
HMOs were happy to give more control over patient care decisions to the
doctors, but only if the doctors would take on more of the responsibility of
the cost of each patient. The more financial risk a group of doctors takes on,
the bigger the potential financial gain - or loss.
Philip Boulter, Medical Director of Tufts Health Plan in Boston, says
that taking on risk was the only way left to get control back: "The physician
groups and the integrated delivery systems believed that by taking over a lot
of the financial controls, they would take over all that goes with it, which
includes medical management and care of the patients. It was a way to get
control of something that they felt they had lost control over."
But the results are in, and, for doctors, it is not looking too good. In
California, it is now estimated that 10 percent of capitated medical groups are
in bankruptcy, and another 20 percent are teetering near the edge. The majority
of Boston's medical practices are mired in losses because they have not been
able to manage the unpredictable nature of treating sick people. What's more,
doctors wanting the independence from HMO oversight have traded that in for
fellow doctors lording over their practices, as well as the ethical questions
brought on when doctors think about money when they make a care decision.
Doctors who just a few years ago thought they could master the business of
medicine like they had mastered the craft of medicine have begun to understand
the difficulty of the task.
It's become a predictable pattern, according to Peter Boland, author of The
Capitation Sourcebook. "Doctors go in with a little bit of arrogance
balanced with a lot of naiveté and without data to base any assumption
of risk," says Boland,. "The health plans figure out by actuarial analysis what
a favorable contract will be to them, and then effectively transfer the risk as
opposed to manage it. Most doctors don't know the difference between risk
transfer and risk management."
The result? It takes about three years for the doctors to realize how
"actuarially intractable" the situation can become, Boland says: "
[Financially] they get skewered."
"It seemed to be the right thing to do at the time," Bass now says in
retrospect. "But it was a mistake."
In Boston, where "Doctor Solomon's Dilemma" takes place, the same forces that
were affecting California medicine - doctors wanting more control over patient
decisions, while at the same time wanting to make more money by taking out the
middleman HMO - began to impact in the mid-1990s. It was this combination of
forces that gave the doctors the financial risk they would now rather not have.
It started in 1994, with the creation of Partners, the parent company
established with the merger of esteemed Harvard teaching hospitals
Brigham-Womens and Massachusetts General. This merger dramatically altered the
Boston medical landscape, according to Andrew Brotman, former senior
vice president at CareGroup, the parent of Boston's Beth Israel Deaconess that
arose in reaction to the formation of Partners. "This was a bold, in-your-face
move, to basically say 'we have a vision of the new world,'" says Brotman.
"They didn't just respond to a changing market. They changed the market."
The reaction at the other Harvard teaching hospitals, Brotman adds, was
"absolutely chilling: There was anger, shock, surprise, even sadness." It was
the end of the old medical gentlemen's club in Boston. And everything Partners
has done since has put competitors like CareGroup, to which Jeff Bass and
Martin Solomon belong, into a reactive position.
When Partners soon began negotiating contracts with health insurers that gave
them more of the financial risk for their doctors' patients, it was only a
matter of time before CareGroup would be forced to do the same. Taking on risk
had become more and more popular in states like California, Arizona, Florida
and Minnesota. Being capitated at that time was potentially lucrative. This was
because the health care system was still bloated with inefficiency left over
from the days of traditional, fee-for-service medicine, when doctors had
control over every decision and were paid more depending on how much service
they provide. Any cutback could mean tremendous savings.
Many primary care physicians at CareGroup wanted the risk. "It looked very
attractive," says Solomon. "There were plans involved in capitated contracts
around the country that were raking in millions of dollars because of the way
they were managing their care."
There were, of course, other CareGroup doctors who protested the notion of
letting money influence the care they gave. And then there were those who
simply didn't understand what was going on. "I know a lot of the physicians who
were presented with the agreements, told to sign on the bottom line, and didn't
even know what they were getting into," says one doctor at the Joslin Center, a
provider group within CareGroup renowned for the treatment of diabetes.
By many accounts, however, doctors at both Partners and CareGroup in Boston
wanted the chance to take on risk. Around the region there had been sporadic
efforts by medical groups to take on risk with capitated contracts, many highly
profitable. At the same time in the mid-1990s, HMOs were becoming the target of
animosity by doctors all over the US. They were, after all, the entities that
had forced them to move away from the fee-for-service model of care.
So physicians in Boston - many Harvard-trained, and, as a group, arguably the
most sophisticated practitioners of health care in the world - thought the
gamble would pay off. What they didn't realize was that their timing was off,
and that managed care, which during the early 1990s had been quite a profitable
endeavor for the HMOs enforcing it, was destined not to be an industry with
sustainable profits. By 1997, when CareGroup doctors started to take on more
risk-based contracts, managed care companies were all too happy to limit their
exposure, ceding the patient risk to doctors.
It may be true that doctors willingly sought the risk contracts, but physician
groups most likely would not have acceded to the capitation arrangements if it
hadn't been for broader economic pressures. Those pressures started with
employers, upset with health care inflation, using managed care to force
medical providers to cut costs. Then came the mad dash between provider groups
for more patients to make up for the diminished revenue.
In Boston, the competition between Partners hospitals and CareGroup hospitals
became so intense that insurers saw an opening. According to Brotman, Partners
negotiated the first risk arrangements with the "big three" insurance companies
in Boston: Harvard Pilgrim, Tufts and Blue Cross-Blue Shield. The insurers
quickly used those agreements to leverage the transfer of risk at CareGroup.
The threat was simply that if the provider group didn't agree, there was always
a competitive alternative for the insurers' patients at Partners.
"I wouldn't call that choosing to take risk," says Brotman, who now is the Vice
Dean at New York University Hospital. "I would call that choosing to take risk
with a cocked gun at one's head. It was clear, however, that the market had
fundamentally changed, that the insurance companies were all going to take the
posture that if you wanted to negotiate contracts as a large integrated
delivery system, the bottom line was there had to be some risk associated with
In retrospect, many health professionals in Boston believe, the desire to
maintain unfettered control of patients and desire for more money may have led
doctors to misunderstand the difficulty of being, in essence, insurers. But
were they as naïve about the ways of managed care companies as some
Not according to Philip Boulter, the Medical Director at Tufts. While he
admits that Tufts "encouraged physicians to take [financial] responsibility on,
it's only when they're ready and when they have the systems to do it." But the
motivating principle has been clear. "In their pursuit of control, they
understand that who controls the money controls the game, if you will. Not that
health care's a game. It's not, it's a very, very serious, serious, important
thing to all people. But with financial control comes financial risk and it is
a challenge to balance the control needs you have as a physician and the
financial stress that that can put on the system."
Bass, says that he hates being an administrator of money. In taking the risk
of care, he is now put in a position of seeming to be a bad guy in the
patient's eyes. He's the doctor who refuses to refer patients to receive an MRI
the day after a pain medication is first taken and hasn't worked. He derides
the many patients that complain and then go find a primary care physician who
will prescribe the procedure.
To compensate, he's developed complex relationships with his patients around
the idea of influencing expectations. If a person with a backache is led to
believe the pain medication won't work in two days, but in two weeks, for
instance, they won't complain. "I'm comfortable with the system now, and I
think I can act in the patient's best interest and be well meaning. The trick
is convincing the patient. What bugs me the most now is the friction between me
and the patient. It has become so adversarial."
inside the dilemma ·
financial incentive ·
cost v. care
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