Depending on whom you talk to, John Lewin, M.D., has the vision of a reformer or of a dreamer.
As Hawaii's Director of Health from 1986 to 1994, Lewin was responsible for important expansions of the state's program of near-universal health coverage. Concerns of access and accountability still drive him in his current role as president of the California Medical Association.
"There's a rebellion of doctors in California who have no problem with managed care per se but have a problem with the emphasis on cost containment rather than cost and quality. The for-profit element has just got to be too much for people, both patients and providers," said Lewin, who became president of the association last year.
Meanwhile, the number of uninsured in the state is rising, from 6 million to nearly 7 million in the past year and a half, Lewin said. This will "lead to an implosion of the healthcare system. There will be no resources left to take care of the uninsured."
Although skeptics say doctors themselves want to control the system and its profits, Lewin believes all players can make reasonable profits and still plow earnings back into healthcare. This spring, the association's physician-owned and -operated health plan, California Advantage, will go head-to-head against the state's for-profit HMOs and pressure them into playing "the ethical way," Lewin said.
California Advantage's 7,000 physicians each paid $1,000 to become shareholders who will never get any dividends or investor income. "It's a not-for-profit philosophy in a for-profit structure," Lewin said. It's designed to make it difficult for the organization to be bought out, the way other doctor-owned networks have been, he said.
The plan is fully staffed and developing contracts. It is submitting a proposal this month to the Health Insurance Pool of California, the state's purchasing pool for small employers. John Gray, California Advantage's president and chief executive officer, said the plan will market through brokers to large employers beginning in May, and coverage will begin in July.
The plan's physician network is projected to grow to about 15,000 this year, Lewin said.
"We'd like to shoot for 2 million members two years from now, making us a major player in the marketplace-a big enough player to change the context of the market" and affect the way for-profits behave, he said.
"We hope that our competition will bring them closer to the way we believe health plans should operate," allowing more premium money to flow to providers and "reducing the amount of income leaving the system," he said.
The plan will offer multiple products, beginning with a PPO and an exclusive-provider organization, which operates like an HMO but with more flexibility for enrollees. California Advantage will apply this year for a Knox-Keene license, which it must have in order to offer an HMO, Gray said.
The plan will grow by offering premiums that are 10% to 20% below the "best-priced" competitors, Gray said. When fully operational, profits will be at 10% for administrative expenses vs. the 20% to 30% taken by insurance programs and HMOs, Gray said.
Although observers doubt that a new HMO can break into the saturated California marketplace this late in the game, Lewin has a ready answer: "There are a lot of restaurants in San Francisco, but new ones open every year because they serve better food, and they're succeeding. The whole point (to California Advantage) is value, a better product for both patients and providers. The current system in California has put both patients and providers secondary to investor income. That will be unsuccessful as a long-term business strategy," he said.
Maureen O'Haren, director of legislative affairs at the California Association of HMOs, said, "We welcome competition and think all products ought to be out there." But she noted that physician-started and -operated HMOs are not new. Some have evolved into the big for-profit HMOs Lewin criticizes.
For example, Fountain Valley-based FHP was started by a physician. Qual-Med, owned by Woodland Hills-based Health Systems International, was launched by Malik Hasan, M.D., HSI president, chairman and CEO.
A recent study of six doctor-owned medical groups in California conducted by researchers at the Berkeley School of Public Health and published in the New England Journal of Medicine shows that "doctors act no differently" in cutting costs than staff-model HMOs, she said. The study showed, in fact, that the medical groups, which work under full-risk contracts, cut hospital use 40% below commercial HMOs in California in 1993.
As far as the doctors in California Advantage, "they're either going to go out of business or learn to do managed care," O'Haren said.