A Doctor-Friendly Alternative to Managed-Care Plans

By Terry, Ken | Medical Economics, January 15, 1996 | Go to article overview

A Doctor-Friendly Alternative to Managed-Care Plans


Terry, Ken, Medical Economics


Two years ago, Houston FP Harold Fields lost 10 percent of his practice when Aetna and Prudential PPOs terminated him without cause.* Now he's excited about a local alternative to managed-care plans--one that provides more patient choice and physician autonomy.

Called the Houston Health Care Purchasing Organization, it consists of about 30 large, self-insured employers and an affiliated small-business buying group that contract directly with IPAs, PHOs, and individual physicians. What Fields likes most about the employer coalition is that its fee for-service network includes about 70 percent of the doctors and all 57 of the hospitals in Houston.

Compared with the health plans, he says, "There's a much bigger choice of physicians. And HHPO isn't restrictive of tests and referrals, like most of the HMOs are. That's a big plus for the patients and the physicians."

While the large employers have individually retained utilization review firms, Fields says he has found them relatively easy to deal with. He and other doctors also say that HHPO pays better than HMOs and most PPOs.

Nevertheless, in the two years since HPPO's inception, most coalition employers have seen their health costs decline or level off, says HHPO President Ralph Smith. In contrast, overall health outlays rose an average of 7 percent in Houston during 1994.

Smith claims direct contracting has saved money by reducing employers' administrative expenses (see page 50).

Although HHPO covers 120,000 people, doctors haven't seen much business from it yet because there are so many of them in the network. But physicians hope it will grow and bring them more patients. They also believe that its effort to collect and feed back to them quality-of care data will restore the focus to what really matters.

"What HHPO is doing will be increasingly important because of its quality information," says general internist David Pate, who heads a primary-care network at St. Luke's Episcopal Hospital. "Both physicians and hospitals have been disturbed that all the discussions about reforming health care have centered on price. A lot of us are real happy to see that somebody has started to look at quality."

Urologist Paul Handel, who represents the Harris County Medical Society on HHPO's board, says the coalition members are acutely aware of this issue. "The employers have assured us that they won't just go for the bottom dollar," he says. "They're not interested in squeezing the doctors and hospitals as tightly as they can. They realize there's a' point below which there will be a real compromise in care."

Ralph Smith argues that if HHPO's quality data are used properly, the alliance can reduce costs without heavy-handed oversight of doctors. "What we've built in the past are controls to regulate the amount of care given," he says. "In the future, we need to help physicians provide more effective care."

While this spiel sounds very similar to what some managed-care plans and medical groups are saying, HHPO is doing something different: "It's cutting costs while maintaining a high degree of patient choice.

Is it too good to last? Well, there are signs that indicate HHPO could be heading for trouble. But however it turns out, the Houston experiment will be watched closely as employers and providers across the country try direct contracting. It will also provide a test case for whether doctors can police themselves well enough to compete with tightly managed health plans.

Holding down costs with a broad panel

Houston is still in an early phase of managed care, notes internist Jacque Sokoloi', a healthcare consultant and chairman of Coastal Physician Group. The city has ice as many hospitals and specialists as it needs, and health costs there are still well above those of areas with heavy managed-care penetration. When capitation becomes dominant in Houston, Sokolov predicts, HMO premiums will drop 25. …

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