Tuesday, July 05, 2011

Here Comes Your New Doctor, Brought to You By UnitedHealth

A long time ago, practicing physicians were mainly self-employed solo practitioners. As health care became more bureaucratic, physicians formed group practices as partnerships, which sometimes employed additional junior or part-time physicians. Some physicians worked for non-profit practice foundations, often affiliated with academic medical institutions, sometimes with non-profit physician-run health insurers, like some Kaiser plans. However, traditionally, almost no practicing physicians were employed by for-profit corporations. In fact, until about 30 years ago, it was considered unethical for physicians' practices to be "commercialized, or treated like a commodity in trade." (See posts here and here.)

That is all changing, and apparently quickly.

We recently discussed how a private equity company, Cerberus Capital Management, bought out a formerly non-profit hospital system, Caritas Christi, and its associated physicians' practices. Thus, what were formerly Caritas Christi physicians ended up employed by for-profit Steward Health Care, owned entirely by Cerberus (see this post).

For-Profit Health Insurance Companies Hiring Physicians to Take Care of Their Patients

Not it is commercial health insurance companies rushing to hire physicians, as reported by the Washington Post and Kaiser Health News:
United health services wing is quietly gaining control of doctors who treat patients covered by United plans — buying medical groups and launching physician management companies, for example.

It’s the latest sign that the barrier between companies that provide health coverage and those that provide care is crumbling.

Other large insurers, including Humana and WellPoint, have announced deals involving doctors in recent months, part of a strategy to curb rising health costs that could cut into profits and to weather changes to their business arising from the federal health law. But United is the biggest insurer by revenue, making the trend much more significant.

As they are supposed to do, the reporter clearly included both sides of the story, including how UnitedHealth justified its new business strategy:
Employers and other customers 'are saying, I want more value for the dollars I spend in health care,' said Dawn Owens, chief executive officer of OptumHealth, United’s health services subsidiary. But, 'there’s also a realization that the delivery system isn’t ready for that kind of change. That’s where we come in.'

The tools needed to control costs and improve care are things insurers have 'invested in over the years,' she said. 'The provider community doesn’t have those tools.'

The article even got a UnitedHealth board member to provide a somewhat confusing defense of the new practice:
Gail Wilensky, a United board member and health official in President George H.W. Bush’s administration, said the insurer doesn’t seek to control every doctor who sees patients enrolled in its health plans. Typically, insurers contract with doctors to care for their policyholders. She also cautioned the strategy is in the early stages and has not yet proven its success.

'It’s just trying many different ways to see what appeals to the American public and what adds value,' she said. 'Whether it will actually mark the trend of the future, I don’t know.'
"Incentivizing" Doctors to Do Less

At least the WaPo/ Kaiser Health News story cautiously tip-toed up to the obvious potential downside of commercial health insurers employing doctors to see patients, the issue of whose interests such employed physicians might put first:
Many patients insured by these companies are going to see much tighter management of their care.

'Health-care costs are still going to rise,' said Wayne DeVeydt, chief financial officer of WellPoint, which entered the business of running clinics in June with the announcement that it would acquire CareMore, a health plan operator based near Los Angeles that owns 26 clinics. 'But the only way to stem those costs in the long term is to manage care on the front end.'

That means enlisting doctors. Their orders drive most health-care spending, including the wasteful share: treating heart patients with expensive stents when cheaper drugs might work, or overusing high-tech imaging devices, for example. By managing doctors directly, insurers believe they can reshape the practice of medicine — and protect their profits.

For instance, Cigna, another large insurer, saves 9 percent on patients treated by doctors in a Phoenix medical group it controls, said Stephanie Gorman, president of Cigna Arizona. Cigna has expanded the group over the past 18 months in response to the health law, and it now serves patients at 32 locations.

'The doctors, at the end of the day, control the patients, and currently they’re financially incentivized to do more tests, more procedures,' said Chris Rigg, a Wall Street analyst for Susquehanna Financial Group. 'But, if they’re employed by a managed care company, they’re financially incentivized' to do less.

That thought unnerves consumer advocate Anthony Wright of Health Access in Sacramento, who worries that profit pressure could affect care. But Wright also said there may be upsides to more tightly managed care: 'No patient wants to get more procedures than they actually need.'
How Doing Less Can Harm Patients

Let us look at that from a different angle. Commercial insurance companies increase revenue when they decrease their "medical losses," that is, the money they pay for policy-holders' care. Physicians employed by such companies, but who take care of patients who may be those companies' policy-holders, could be "'incentivized' to do less." That is more than "unnerving."

It is widely accepted that many patients get tests and treatments whose benefits do not outweigh their harms, and the costs of such interventions increase the costs of health care while doing patients no good, and perhaps harm. If we could eliminate those unneeded tests and treatments, we could decrease costs and improve patients' outcomes.

Yet another important driver of health care costs are tests and treatments whose benefits outweigh their costs, but which are priced much higher than could be justified by their benefit/harm ratio. It could also be that many tests and treatment are priced fairly.

So "incentivizing" physicians to do less across the board could very well harm patients by depriving them of interventions whose benefits outweigh their harms. It appears that for-profit insurers who hire physicians are likely to place their physician employees in a situation in which incentives to do less may conflict with the physicians' duties to do what is best for each patient.

That is more than unnerving.

Hiding Physicians' Commercial Employment

That this new sort of employment requires much more scrutiny very quickly is also suggested by how the commercial health insurance companies are trying to hide their new relationships with physicians. As reported in the article, UnitedHealth Group's subsidiary:
Optum and its Collaborative Care unit have acquired Memorial Healthcare IPA and AppleCare Medical Management in Orange County, Calif., as well as WellMed Medical Management, which runs clinics in Texas and Florida. Collaborative Care also launched Lifeprint in Phoenix.

In some cases, the company obscured its role. For instance, a Collaborative Care business, NextDoor Health, which is partnering with a local doctors group to open retail clinics at Wal-Mart stores in Texas and other states, describes itself on its Web site as 'a privately held LLC based in Minneapolis.' United is based just outside of Minneapolis.
The Mirror Image: "Leakage Reduction"

Note that the essential conflict caused by a doctor hired to take care of patients by a company that profits from decreasing care across the board is the mirror image of the conflict caused by a doctor hired by a for-profit hospital system. In the latter case, the doctor is hired by a company which profits from increasing those services which are particularly well reimbursed. So we noted previously that doctors hired by the for-profit Steward Health Care system were being pushed to reduce "leakage," that is, referral of patients outside of the system for well-reimbursed services. "Leakage reduction" could also harm patients, although in a more subtle way, perhaps. Doctors incentivized to refer more patients within the system for well-reimbursed services, which are now mostly invasive procedures and high-technology tests may get patients to undergo interventions which are unnecessary, and sometimes whose harms outweigh their benefits, thus leading to adverse effects without any benefits.


So in my humble opinion, the sudden rush of for-profit health care companies to hire doctors to take care of patients ought concern patients, health care professionals, and health care policy makers a lot. Physicians employed by for-profit corporations whose revenues are affected by their own decisions have serious conflicts of interest.

Just how bad these conflicts are may be difficult to determine, because there seems to be little public knowledge about how physicians are actually "incentivized" by these corporations. Note that the WaPo article never discussed the details of the incentives the insurance companies imposed on their employed physicians. Note also that our previous discussion of "leakage" reduction was not based on any public knowledge about how the employed physicians might have been influenced to reduce leakage.

Also, just how frequent these conflicts may be may also be difficult to determine, because it appears that employed physicians do not always reveal who their employers are.

What is To Be Done?

I strongly suggest that

- Find out if their physicians are employed, and if so, by whom.
- Find out what incentives their physicians have, if employed, to recommend more or less care of certain types.
-  Find out whether other aspects of the physicians' employment arrangements, e.g., contractual confidentiality clauses, could affect his or her relationships with patients
- Avoid doctors employed by for-profit companies who have incentives to provide more or less care than what may be best for the patient

- Do not accept any employment offer or contract which has incentives to provide more or less care than is best for individual patients
- Who are already employed disclose to their patients such employment, and any incentives it may provide to provide more or less care

- Rapidly investigate the extent that for-profit companies whose revenues depend on physicians' decisions are hiring physicians to take care of patients, and the incentives and influences that these companies use to affect physicians' decisions
- Develop regulations that force disclosure of all such employment and relevant incentives and influences
- Consider whether such "commercial practice of medicine" ought to be once again banned.


InformaticsMD said...

She also cautioned the strategy is in the early stages and has not yet proven its success.

'It’s just trying many different ways to see what appeals to the American public and what adds value,' she said.

And what is these schemes, in their "early stages" (i.e., experimental) subtract value, and harm and kill patients?

It seems medical experimentation without consent is once again in vogue.

-- SS

Unknown said...

This adds to the list of questions we as patients must ask our providers. We need to do our homework and find doctors who are comfortable taking our questions. I found this helping in shaping my questions: http://whatstherealcost.org/video.php?post=five-questions

Keith said...

I don't think there is very much distinction that exists between non profit and for profit hospitals anymore. They both strive to maximise profit it seems, with the only difference in where this profit goes. But in both senarios, you have CEOs that are incentivised to maximze profit and thus there own income.

It has been shown that non profits devote no more to charity and community endeavors than for profits, and the laws regulating non profit institutions and how much they must contribute to obtain their tax exemption, is incredibly weak with no guidlines as to what is reasonable.

Non profits are employing physicians in droves and subtlely encouraging them to refer in house. This will be no different from what for profits will do. The goverment has worked hard to stop physicians from owning directly the testing equipment and facilities since this seems to encourage overutilization, but this just creates the opportunity for health care institutions to do the same with their employed physicians as cover (probably why we are seeing so many physician aquisitions at present).

At any rate, it is just another swing of the pendulum between our laisse faire system of medical care (competition will hold down prices) and the HMOs we saw in recent years. It has all just been rebranded and repackaged with no mention that it is the HMO concept in sheeps clothing.

Roy M. Poses MD said...

I agree that the distinctions between non-profit and for-profit hospitals/ hospital systems and insurers/ managed care organizations are decreasing.

However, if the non-profit hospital systems were only giving subtle encouragement to refer in-house, the problem would be manageable.

I suspect that the for-profits that are currently buying practices and hiring physicians are going to use much stronger tactics than just subtle encouragement.

Keith said...


You are right about no profits vs for profits only in respect to how profits are used. For profits have sockholders to satisfy, so the dollars are not used for actual health care. Non profits must use their profits to reinvest. But what we get as a result is hospitals that build ever more elaborate hospitals with gleaming marble lobbies and waterfalls, along with concierge services. They also buy fancier toys to market as the latest and greatest treatment. Hard to tell often which is the better use of these excess funds.

Oh, and they both reward the hospital buisiness hierarchy with ever increasing raises (because we have to have the best CEO and we are competing for these people with the for profit marketplace) so these costs have risen exponentially as well as compared to us mere mortals.

Derek said...

But what we get as a result is hospitals that build ever more elaborate hospitals with gleaming marble lobbies and waterfalls, along with concierge services.

AKZ management