Fed up with late payments and increasingly restrictive contracts, a growing number of physicians who work under managed care have decided it's time to stop griping and try some more aggressive tactics.
In February, the New York County Medical Society filed for two arbitration proceedings against Norwalk, Conn.-based Oxford Health Plans on behalf of the society's several hundred members. Charging a "pattern of delays, denials and detours from acceptable practice," the society is seeking more than $140 million in unpaid back fees from Oxford, which is among New York state's largest managed-care providers.
The physicians sought arbitration with the American Arbitration Association instead of filing a legal suit because Oxford contracts require in such situations that arbitration be tried first. Society attorney Jeffrey Ruggiero says he expects the hearings will begin sometime in the next few months.
In the first filing, the society is seeking to hold Oxford to a fixed schedule for processing provider claims. In the second, member physicians have joined to file multiple arbitration claims for payment. Because there is no such thing as class-action arbitration, each physician must file individually. The society has set up a hot line to encourage more physicians to join the arbitration, which it hopes will include physicians in surrounding counties soon.
"This is the first time the medical community is fighting back in an organized way to combat abuses in the managed-care system and force it to adhere to a rational set of standards," says society President Valentine Burroughs, M.D.
New York City internist Margaret Lewin is among the physicians participating in the filing against Oxford. In August, she left her 30-physician group practice to practice solo and exclusively fee-for-service. She says she could no longer afford to practice managed-care medicine. Specifically, the burden of having to wait for late payments from Oxford was threatening to put her out of business.
"At one point, 80% of my office visits were Oxford, but less than 20% of my income was coming from there," she says. "I couldn't keep my practice based on expecting an insurance company to pay the bill. It was costing me more to collect the money than I was getting back." Without Oxford, Lewin says, her patient volume is down and her income is up.
The action against Oxford is the largest and most dramatic example of physician muscle-flexing across the country. In Texas, physicians are pressuring insurance regulators to investigate HMO abuses (see related story, page 48). In Florida and Ohio, physicians have been walking away from Aetna U.S. Healthcare contracts because they are "too restrictive." The AMA, which has been conducting legal reviews of those contracts at the request of state medical societies, has asked for a meeting with Aetna to discuss specific concerns about the Florida contracts.
The AMA's review uncovered "serious inequities in the contract," and expressed "concern about the impact of this contract and others like it."
Representatives of the Ohio and Florida Medical Associations say if negotiations don't resolve the contract disputes, they will consider using legal action.
To some observers, the recent flurry of physician activity is a reflection of the growing pains of a nascent (managed care) industry.
"I don't view a certain amount of litigation or fighting over (managed care) as an inherently bad thing. There's always concern over too much litigation, but it's part of the process of settling some currently unresolved important issues in how this should work," says attorney Doug Hastings of the Washington-based firm of Epstein, Becker & Green.
Troubles at Oxford, which has about 1.9 million enrollees, began last fall when a computer error led to the plan's underestimating what it owed providers for patient care. Poor third and fourth quarters sent stocks tumbling and the company scrambling to turn itself around. Oxford recently sold off a minority stake and appointed a new CEO (see below).
New York state Attorney General Dennis Vacco began investigating Oxford in February 1997, prompted by provider complaints. On July 31 Oxford agreed to pay 9% interest on all claims not paid within 30 days and submit quarterly compliance reports to the attorney general, according to Mark Carey, a spokesman for the attorney general. In December, the state Department of Insurance fined the company $3 million for violating state insurance regulations.
Complaints about late payments, however, continued to trickle in throughout the fall, and last month Vacco subpoenaed Oxford's financial records. "It appears there is a significant and ongoing problem," Carey says.
Burroughs and other New York area physicians agree. Oxford accounts for 25% of Burroughs' patients, and he says he saw little improvement in claims processing through the winter. "Payments are tremendously delayed, anywhere from three to six months to more," he says. "Very few claims are taken care of within a 14-day time period. We have a number of people who had to drop out because they could not continue to run their businesses. The strain on their staffs to put in calls and wrestle with the Oxford people all day long trying to get paid was too much."
After fall and winter negotiations between physicians and Oxford failed, the society filed for arbitration, Burroughs says. Oxford spokeswoman Nicole Reilly acknowledges the computer troubles caused a backlog, but says the payment cycle has been greatly reduced. She also disputes the allegation that Oxford owes $140 million. "The $140 million is, to say the least, a gross overstatement. Our records show it's closer to $45 million statewide."
Oxford issued a brief written statement expressing disappointment with the medical society. "We have been working diligently with members of the society to resolve issues between us," it said. "What is perhaps most disappointing to us is that the society has resorted to the legal system to resolve claims that we have demonstrated we are willing to pay."
Regardless of Oxford's ability or willingness to pay, the arbitration may encourage more physicians to seek legal solutions to managed-care disputes, Burroughs says.
"This could be a watershed type of movement with far-reaching implications," he says. "I think it could provide physicians with an additional tool to use against the big managed-care companies to get them to give us more of a say in (decisionmaking)."
Attorney Hastings hopes that as both sides line up on the litigation playing field, the ultimate goal of improving healthcare delivery is not lost. Leaders on either side must plan their actions with not only their own long-term goals but also the healthcare systems' goals in mind, he says.
"We're going to continue to see litigation and legislation. That's how policy gets made in this country. But if we look at it at the end of next year, will the result be progress?"