Physicians are feeling the pinch as health plans shift some or all of the risk for drug benefits to medical groups.
Minneapolis-based Medica Health Plans last month sent a warning letter to hundreds of contracted physicians about prescription drug use. It said that for the first time the physicians could lose all their annual fee withholds, an amount set aside as a financial incentive to them, if they do not reduce expenditures on costly treatments like certain heart drugs and antidepressants.
The average physician in the plan stands to lose $5,000.
Medica says its pharmacy costs surged 18% in 1996, more than any other expense. And it's not alone. HMOs traditionally have been big advocates of prescription drugs, which can prevent more expensive treatments such as hospitalization. But drug utilization has shot up for various reasons recently, hurting plan's earnings.
Now health plans are pushing physicians to change prescribing habits by putting them at risk for drug utilization.
But often pharmacy risk is a money loser for medical groups, experts say.
"Ninety percent or more of the medical groups I represent lose money on pharmacy," says Noah Rosenberg, an attorney with the Los Angeles firm of Rosenberg & Kaplan, which has negotiated prepaid contracts for providers in about 20 states.
The number of HMO enrollees covered by plans that share pharmacy risk with providers has increased sharply, up 95% in three years, to 24.6 million in 1996 from 12.6 million in 1993. For 1996, that translates to nearly one-third of total HMO enrollment.
Most medical groups work under partial-risk arrangements, such as withholds. A handful of groups take full risk.
Jack Raber, a Seal Beach, Calif.-based pharmaceutical services consultant, says many medical groups want the big chunk of potential revenues from pharmacy risk, but most don't have the policies and infrastructure to manage it, particularly under full-risk contracts.
For example, most groups don't have mechanisms to change physicians' bad habits, such as prescribing brand-name drugs when a generic will do or yielding to patients' requests for a particular drug that's been advertised.
Perry Cohen, a pharmaceutical services consultant based in Glastonbury, Conn., views full pharmacy risk as a step appropriate only for large medical groups that have tamed hospital and specialist utilization.
Others note the importance of monitoring prescribing patterns.
One difficulty in managing prescription costs is that HMOs use different formularies, or prescribing guidelines. Some medical groups are establishing their own formularies to gain more control over drug utilization, Cohen says. To justify hiring a pharmacist for such an endeavor, a group needs at least 70,000 prepaid health plan enrollees, he says.