HMO financial incentives encouraging limits on patient care are under attack in Texas.
Late last month, outgoing Texas Attorney General Dan Morales sued six HMOs, accusing them of illegally offering financial incentives that encourage physicians to limit medical care to patients. The lawsuit, filed in Travis County District Court, names as defendants Aetna Health Plans of North Texas, Aetna U.S. Healthcare, Humana Health Plans of Texas, NYLCare Health Plans of the Gulf Coast, NYLCare Health Plans of the Southwest and PacifiCare of Texas. Aetna purchased NYLCare in July of last year.
The Morales suit, along with another pending suit involving incentives, could affect the future of all risk arrangements between providers and managed-care companies in Texas.
The Morales suit alleges the HMOs forced the physicians into a conflict of interest: Either the doctors provide all the care they deem medically necessary and risk reducing their compensation, or they limit the amount of care provided and receive financial bonuses.
Morales asked the court to force the HMOs to eliminate such incentives, fine the HMOs, and order them to pay attorneys' fees and court costs.
Most risk arrangements are either globally capitated or reward physicians with withholds or bonuses based on utilization rates.
Texas and 16 other states have statutes that make illegal any incentives to limit or deny medically necessary care.
"I think that Texas, which seems to be putting itself in the forefront of state regulation of these risk pools, is going to have to struggle with how much risk is too much risk," says Lawrence Foust, an attorney with Jenkens & Gilchrist in Houston. Foust studies the legal implications of physician incentives. "I don't think anyone would argue that a little risk provides an incentive to provide smart care and appropriate care, but too much risk does in fact create incentives to deny medically necessary care."
At press time, Humana spokesman Ross McLerren said he had not had time to review the lawsuit, but he defended the company's contracts. "Humana does utilize physician contracts that have been filed with, reviewed by and approved by the Texas Department of Insurance and HCFA. We believe that these contracts provide appropriate incentives to physicians to enhance medical care and services, especially in areas of preventive care."
Humana and Health Texas Medical Group of San Antonio are two of the defendants named in a second suit attacking HMOs' financial incentives. Five patients with chronic disabilities and the physicians who treated them allege Humana's system of financial incentives encouraged physicians at Health Texas Medical Group to limit and deny healthcare. All five patients are current or former enrollees in Humana Gold Plus, Humana's Medicare HMO.
The lawsuit, filed in U.S. District Court in San Antonio, claims the patients' disabilities required substantial time, treatment and expense. It charges the doctors were motivated to deny care because Humana's contracts offered the medical group a financial incentive to stay below a set number of referrals, hospitalizations and other criteria.
The former patients also claim the medical group purposefully subjected them to inconvenience, delays and poor treatment so they would transfer to another clinic. The patients sued under both the Americans with Disabilities Act and the state law prohibiting financial incentives that limit and deny necessary treatment.
In late November, a federal district judge denied motions by Humana to dismiss the HMO from the lawsuit. Humana had argued the patients failed to exhaust administrative remedies under Medicare and lacked standing to sue under the Americans with Disabilities Act.
The decision "is a major development for the law holding HMOs accountable for their misconduct," says plaintiffs' attorney Robert Provan.
Foust says managed-care companies and physicians alike are keeping a close eye on what happens in Texas.
"It's my perception that the provider community is divided," he says. "Many providers see this as perhaps driving a welcome return to fee-for-service medicine. Other providers fear this will presage an as-yet-unknown, but even more draconian, method of payment."