Most everyone knows the managed-care industry has an image problem.
But did you realize how bad it is?
In a survey released by the public relations firm Porter/Novelli in February 1996, only 10% of consumers thought the managed-care industry was "believable." That placed it a notch above the tobacco industry (See chart).
Being ranked near what may be America's least likable industry proved to be a major shock to managed-care executives in a year of relentless shocks. Wounded by the fire of consumer advocates, media critics and lawmakers, managed care spent much of 1996 in retreat.
But it has begun fighting back. Led by its chief trade group, the American Association of Health Plans, the managed-care industry launched a campaign late last year to improve its standing with consumers, payers and physicians. By doing so, it hopes to turn back the tide of restrictive legislation pushed by the storm of negative publicity in 1996.
Yet, despite what some say are signs of improvement, many industry insiders and observers are wondering if the effort is too little, too late. And some experts are warning that even sterner challenges lie ahead.
Legislative blitzkrieg.From coast to coast and in the nation's capital, lawmakers launched a blitzkrieg on managed care in 1996. States passed more than 100 laws restricting managed-care clinical or administrative practices.
Even in Washington, where federal lawmakers had stayed largely above the fray, Congress mandated a minimum 48-hour maternity stay for mothers and newborns and dictated levels of mental health coverage.
Lawmakers were responding in large part to the barrage of media horror stories about managed care and HMOs. Features in the New York Post, Time magazine and other media outlets portrayed HMOs as greedy organizations that deny care, resulting in patient suffering and death-all for the sake of enriching HMO executives and shareholders in an industry that rakes in $60 billion in revenues annually.
"A year ago we were kind of shocked," says George J. Isham, M.D., medical director and chief health officer at HealthPartners, an HMO based in Bloomington, Minn. "We were surprised and caught off balance."
Isham and countless physicians and healthcare professionals who had worked in managed care for years believed HMOs provided the quality care the nation needed to curb runaway healthcare costs. They thought the results spoke for themselves: Costs were down, and studies showed care was as good or better than under fee-for-service medicine.
"A year ago we were trying to figure out, `Why are they accusing us of these things?' " says Jerry D. Reeves, M.D., senior vice president and chief medical officer at Louisville, Ky.-based Humana.
In the industry's first response to the crisis in public perception, a group of medical directors from several large HMOs toured the country to talk to reporters and editors. But critics of the effort said it didn't improve media coverage very much.
When the Group Health Association of America merged with the American Managed Care Review Association to become the AAHP in early 1996, the new association adopted a philosophy-of-care statement that described what managed-care plans try to do. Its first tenet is, "Patients should have the right care at the right time in the right setting."
But as such, the statement didn't appease critics. A survey last year found media coverage of the industry since the beginning of 1995 had been overwhelmingly negative (Nov. 4, 1996, p. 10).
The last straw was a Wall Street Journal report early in November 1996 indicating HMOs were increasingly performing mastectomies on an outpatient basis over the protests of physicians. The situation threatened to become tagged as another infamous "drive-through" procedure.
Quick response. This time, HMOs moved swiftly. David Jones, Humana's chairman and chief executive officer, says he promptly suggested a meeting of a new AAHP quality committee. The nine executives determined that none of their plans required mastectomies on an outpatient basis and that the procedure was done only when a patient and a physician agreed it was best, he says.
"Our committee unanimously agreed we would not ever require a patient to have an outpatient mastectomy-that it was an issue between the patient and her physician. That was on a Friday. On the following Monday the entire AAHP board met telephonically and unanimously adopted that position," Jones says.
On the following Thursday-Nov. 14-the AAHP publicized the board's decision.
A month later, the AAHP launched its "Putting Patients First" initiative, intended as an ongoing informational program for health plans, enrollees and the general public about what HMOs stand for. As part of the Patients First launch, the AAHP released a policy statement supporting patients' rights to all relevant information about their healthcare, including the basis of utilization review decisions and how participating physicians are paid.
The AAHP also affirmed that its member HMOs do not prohibit any communication between patients and enrollees about their healthcare.
"If anything that's being done (by HMOs) is ruffling feathers-sometimes it's just a perception, and sometimes people are making mistakes-or causing problems for legislators, beneficiaries, employers, we don't want to wait for people to come after us. Our hope is we'll get out ahead of it so there won't be misperceptions," Jones says.
But that strategy may return to haunt health plans. For instance, one healthcare lobbyist says Rep. Greg Ganske (R-Iowa) has used the AAHP's statements against gag clauses to justify legislation he's sponsoring that would ban such clauses. Ganske, a plastic surgeon, has been a leading voice opposing gag clauses in health plans' contracts with physicians.
Ganske contends the statement on such communications is the AAHP's admission that gag clauses are a problem in managed care, the lobbyist says.
At the end of January, the AAHP announced policies on patients' appeals rights and emergency care. And in March, it said member plans that violate its patient-centered policies would be barred from the organization.
The latest Patients First policy statements, to be announced this week, deal with another set of sensitive issues. In an effort to get physicians on board, the statements recommend that health plans involve doctors in designing, directing and monitoring quality-improvement programs, practice guidelines, utilization management and drug formularies, which all should be based on current medical information.
Rejecting glitz. Although some industry public relations executives have complained that the Patients First initiative is not visible enough because it doesn't use advertisements, the AAHP says member plans want a solidly grounded program in place first and a demonstrated commitment to its principles. The group doesn't rule out using advertising in the future.
The initiative has no special budget, with the AAHP using existing resources to finance the effort's limited expenses.
Karen Ignagni, AAHP president and CEO, says she has received positive feedback from members of Congress for not mounting a "glitzy ad campaign" and for providing research data to support HMOs' positions.
Humana's Reeves notes an irony when comparing managed care with another industry in trouble. When research pointed to the deadly effects of tobacco use, the tobacco industry responded successfully with ads showing "cowboys on horses and sexy women."
For HMOs, the situation is reversed: It's the HMO industry that has the research showing HMOs provide good care, yet the negative anecdotes multiply and get media attention.
The news media are not interested in the countless positive stories of care provided by HMOs, executives say. HealthPartners' Isham contends the media do not want "a story about the $19 million in uncompensated care that we have provided in downtown St. Paul. Or the four family practices in rural Wisconsin that we operate at a loss."
What HMO executives are doing with Patients First is disseminating the philosophy-of-care and policy statements throughout their organizations. They also are meeting with physician groups and state and federal legislators to listen to their concerns and to share statistics that show managed care has provided good care.
Getting the message across to health plan employees may be an important first step toward reshaping managed care's image, said one public relations executive active in corporate image turnaround.
"We have found with increasing frequency . . . that people inside the organizations are key to understanding the clarity of the message," says Richard Hyde, executive managing director with public relations firm Hill & Knowlton in New York.
Although Hyde and another leader in the corporate image turnaround business have no direct knowledge of managed care's image campaign, the principles they outline for an effective campaign appear to be the blueprint the AAHP is following.
The first steps are to identify the strengths and weaknesses of an industry through polling and then stop any practices consumers particularly dislike.
If consumers mistakenly believe companies are engaging in practices when they are not, or if consumers believe certain practices are bad when they are not, then the companies or industries must clearly communicate those facts to the public.
But because many physicians are counted among managed care's opponents, the industry may be suffering from a "market assault" by a variety of opponents, says Eric Dezenhall, president of Nichols-Dezenhall, a Washington-based public relations firm.
In the doctor-vs.-HMO duel, managed care may also be handicapped by what Dezenhall calls the "Hollywood question" as asked by directors-namely, "Who do we like?"
That's an important question when squaring off against the American Medical Association, which historically has been effective in deploying its members both in political lobbying and public relations.
"In a debate between a family doctor and a big corporation, I think the family doctor wins," Dezenhall says.
Making progress? Kathy Lewton, senior vice president and co-director of the national health practice at Porter/Novelli in Chicago, says she is much more optimistic about HMOs' ability to turn public perception around.
"A year ago, two years ago, HMOs were very focused on their business goals and objectives and weren't focusing heavily on their image," she says. "Now, I sense that leaders are aware, and there are lots of different kinds of efforts to do really substantial things-not just buff up their image, but do things right. They've listened to customers and physicians. The corner has been turned. There's recognition of the problem, and they said, `OK, let's do some things about it.'*"
But are they acting on the problem too late in the game? "You can talk about timing forever. The point is they're doing something," Lewton insists.
A Louis Harris Associates poll released March 31 showed 51% of consumers thought managed-care companies were doing a good job of serving their customers (See chart, p. 42). Although that's still just a notch above tobacco companies-the lowest on the ladder-Lewton interprets the favorable rating as a signal of improved customer perception.
The managed-care industry was just emerging and, therefore, not surveyed when Harris did previous polls, so any change in the industry's general perception can't be quantified. The poll also isn't directly comparable with the "believability" ratings of the previous year.
The Harris poll found 79% of consumers thought pharmaceutical companies were doing a good job of serving their customers.
"The pharmaceutical industry was getting battered three or four years ago," Lewton says. "They got together as an industry and said, `We've got to deal with this,' and now they've shown marked improvement over the last couple of years. I don't doubt managed care will be able to do this same thing."
Trouble still brewing. Meanwhile, managed care's opponents continue to organize, and legislative proposals are becoming more radical. A bill in California would require HMO medical directors themselves to physically examine an enrollee before denying coverage of a medical procedure.
"Managed care as we know it will die, and we have a program to hasten that demise," writes Bryant Welch in a March letter announcing the formation of the Legal Center for Patient Protection, which is facilitating lawsuits against managed-care organizations. Welch is CEO of the group. The center's first president, Harold Eist, M.D., is an arch foe of managed care. Eist is president of the American Psychiatric Association.
The AAHP's mission to restore managed care's image couldn't come at a more critical time for the industry. Members of Congress now have drafted more than 100 bills dealing with managed care.
Among the bills are bans on gag clauses; bans on incentive arrangements that limit medically necessary services; and requirements that health plans cover emergency services without prior authorization when a "prudent layperson" would believe his or her symptoms merit emergency care.
Rep. William Thomas (R-Calif.), chairman of the House Ways and Means health subcommittee, says he believes the health plans' campaign already has yielded results.
He notes that since the "flurry of legislation" to control managed care was introduced when Congress convened in January, little action has been taken because members better understand the issues.
Indeed, warns HCFA Administrator Bruce Vladeck, the decision to legislate by headline and create bureaucratic oversight of health plans-rather than change their internal practices-could fray the reins that managed care has pulled tight on healthcare cost growth.
"Then, what we're going to do is take whatever savings have been produced by managed care and eat them up in paperwork*.*.*.*although in the name of deregulation it would all be private-sector paperwork," Vladeck says.
Even some of the sponsors of legislation targeting health plans contend they simply want to reduce the temptation of high-quality plans to cut corners like some greedy competitors.
"What we basically want to set up is a situation where the bad actors can't undercut the good actors," says a staff member for Rep. Edward Markey (D-Mass.). Markey is a co-sponsor of anti-gag-clause legislation with Ganske.
David Friend, M.D., global director of the healthcare consulting practice at Watson Wyatt Worldwide in Boston, objects to the marketing focus of Patients First. Friend says the AAHP plans are "coming out on things they've been nailed on. They've had their hand caught in the cookie jar. The marketing is fine, but the proof is what they are really doing."
Friend, who works with healthcare buyers, says, "I would rather have (HMOs) just do it and let the customers see that they're doing it. But they're much better at marketing than anything else. That's part of the problem because a lot of them are really lacking" in other areas.
Friend predicts serious trouble on the horizon for HMOs, as attorneys gear up to file class-action lawsuits charging fraud based on product warranty. The suits will charge that HMOs made promises they didn't deliver on, thus fraudulently misrepresenting their product, he says.
"They think they have a PR problem now!" Friend says.
Executives at California HMOs say their plans already abide by the philosophy-of-care and policy statements of Patients First and have for some time. HMOs enjoy 30% of the health insurance market in the state.
Nevertheless, they support the initiative.
Susan Whyte Simon, a spokeswoman for Cypress, Calif.-based PacifiCare Health Systems, says her plan supports Patients First because "it's needed. The more you go outside California, the more you understand how much it's needed."
She says, "When you've seen one HMO, you've seen one HMO. We need to create industry standards so when you hear the term HMO, you basically know what you're getting."
Embracing regulation. But one HMO executive in California, who wished to remain anonymous, says Patients First is "very directed at legislative concerns inside the (Washington) Beltway. But we still have a challenge facing us with press coverage all across the country. In my view, the AAHP campaign is not addressing that."
Another objection is raised by a source in the not-for-profit HMO industry who asked not to be identified. He says he supports Patients First but thinks some regulation may be needed to enforce standards. "The feeling among some HMOs is that voluntary standards are not sufficient," he says. "You have to come to a rational management of a regulatory process."
David Hansen, a healthcare strategy consultant based in Fremont, Calif., says Patients First, "while helpful, may not adequately address the underlying reasons why the general public has a skepticism" about managed care.
The prime reason is "the vendor of healthcare services holds more information than the receiver, and in that kind of unbalanced trade the receiver will be skeptical. Some regulatory frameworks can answer that and allow a marketplace to function better, leaving the receiver to feel more empowered or protected," Hansen says.
Hansen believes a regulatory framework that is "as appropriate to healthcare as financial regulation is appropriate to the financial sector" would assure consumers they won't be taken advantage of. That framework could come from a quasi-governmental body such as those found within the financial and insurance worlds, like the Financial Accounting Standards Board, he says.
Steve Zatkin, vice president of government relations at Kaiser Foundation Health Plan, confirms Kaiser and other HMOs are "looking carefully . . . for ways that would allow the most effective operations and regulatory structures."
Kaiser supports the AAHP efforts, he says, "but there have been some who have argued that they may not be enough because not all plans are AAHP members and not all are regulated.
"We think it's prudent to look more broadly at the issue even as we support the Patients First initiative," Zatkin says. "Certainly, a case can be made for national standards that apply to all plans."