For better or worse, managed care has become the third party in just about every medical decision. Thomas LaGrelius, M.D., a family practitioner in Torrance, Calif., thinks it's for the worse, and he's set out to do something about it.
LaGrelius is president of the Independent Doctors Traditional Practice Association of the South Bay, or INDOC, which he calls the future of patient-oriented healthcare. He says he hopes his group will mean the end of "damaged care," his term for managed care.
INDOC is a private doctor referral network with a twist: Members must terminate all HMO contracts by January 2000 and be committed to ending all managed-care pacts as soon as possible thereafter.
"This organization is for doctors who refuse to be managed by third-party payers and are committed to getting rid of all HMO business," LaGrelius says.
Each physician pays a $500 fee to join and in return becomes part of the group's referral network. If doctors don't meet the January 2000 deadline, they lose access to INDOC's marketing support.
In the group's promotional literature sent out to the community, the message is clear: "Inside the INDOC network you can trust your doctor because that doctor works only for you, not your employer or your insurance company. You are the manager!"
LaGrelius got the idea for the group in summer 1997. "I tried to assess who was doing a lot of HMO work and who was doing little and who hates it as much as I do," he says. "I sent out 300 invitations and got responses from 75."
With that response, he launched INDOC in January 1998. He set up membership in four categories: In the top group are physicians with no managed-care contracts (six members), and in the bottom nonvoting category are doctors with more than 50% of their business connected to managed care (two members). Most of INDOC's 102 physician members are in the middle two categories, which allow PPO and some HMO contracts to account for less than 50% of the physician's business.
"If a doctor has any involvement with an HMO, they can't be a board member, and if it accounts for more than 50% of their business, they can't vote," LaGrelius says. "This organization is for doctors who talk the talk and walk the walk."
Despite LaGrelius' enthusiasm, this is not a national trend. A spokesperson for the American Association of Health Plans says statistics show an increasing number of doctors are becoming involved with managed care. And data from the American Medical Association show that 92% of all physicians had managed-care contracts in 1997, compared with 88% in 1996, and managed care accounted for 49% of physician revenues in 1997, compared with 44% in 1996.
LaGrelius counters that INDOC is trying to buck the trend and hopes to change it, which begs the question of whether it is a financially feasible alternative.
LaGrelius believes it is and gives the example of an INDOC member, a pediatrician, who terminated all his HMO contracts in February 1998 and lost 35% of his practice.
"At the end of the year he had lost only $3,000 and had more time to spend with his patients," LaGrelius says. "He's delighted that he did it."
Leonard Scuderi, M.D., a cardiologist and vice president of INDOC, recalls his wife, an internist, having a similar experience. Frustrated with HMOs, she resigned all her contracts and gave her patients six months' notice.
"She discovered that her patients were switching from the HMOs to PPOs or (medical savings accounts) and coming back to her," Scuderi says. "That was very gratifying to her. She now has more time with her patients and more control of their care."
The financial catch to this innovative approach is finding alternatives to HMOs. INDOC pushes MSAs. With this option, individuals and workers at companies with fewer than 50 employees obtain catastrophic medical coverage with a high deductible (typically about $6,000) and then set up a tax-deferred MSA to take care of most costs below that level. The problem is MSAs are not available to the general public, a situation INDOC and others are lobbying to change on federal and state levels.
In the meantime, PPOs and point-of-service coverage through managed-care companies are the next best thing. POS plans allow patients to go to out-of-network physicians for higher premiums and deductibles. PPOs typically require patients to stay in the network -- which usually has more doctors than an HMO -- unless they receive a physician referral.
"PPOs aren't so bad," LaGrelius says. "The big problem is they started like INDOC (did), and we all signed up. But physicians had no clout, and fees kept dropping. The only way to survive was to double and triple patient volume. You can't do a good job that way. Now I only see 25 patients a day, max, and I only use PPOs that don't control fees. We also offer discounts to some patients that can't work out their insurance problems so they can continue coming to the doctor of their choice."
LaGrelius acknowledges that managed care evolved for a reason: Medical costs had spiraled out of control. "Employers and the government had a legitimate beef," he says. "The reason we had the best medical care in the world is because we had this blank check (through fee-for-service insurance), and we were unwilling to go back and empower patients."
Giving patients power, LaGrelius argues, is the best way to control costs. If patients know what procedures cost, they will make cost-conscious choices and help control medical spending.
Stephen Lemkin, M.D., an oncologist and president of the largest independent practice association in Torrance, does not buy into INDOC's philosophy.
Lemkin says privately indemnified patients make up only 5% of his practice. "That's for rich people, not the general population," he says. "LaGrelius wants to go back to fee-for-service. I would, too, but it broke the bank. If you think you're going to increase the number of private patients, it's just fantasy."
That's not to say Lemkin has ignored growing problems with managed care. "Managed care was a great idea. It cut costs 30% and provided healthcare for $120 a month," he says. "Now it is driving prices up, and more and more people are becoming uninsured. They can't walk into LaGrelius and get care; they can't afford it.
"And this whole patient responsibility for cost control is a fallacy. A patient can't make a decision on a $2,000 MRI scan. It can't work."
But increased pharmacy costs, legal attacks on HMOs and growing demand for medical care are pushing insurance costs higher and reducing physician fees, and that is a problem, Lemkin says.
"We lost $1 million on Medicare last year, and we're think of dropping it because we've cut to the bone. The legislative pressure that forced two-day hospital stays for pregnancies is ridiculous. That cost us $1 million last year," he says. "The managed-care reimbursements are a problem. Right now we're spending 95% on medical care. We can't continue that because overhead is 10%."
Lemkin believes patients need to take more responsibility -- but for the coverage they are buying, not procedures. "Explain to them what they are buying, and let them buy what they can afford," he says. "We have 50 million uninsured in this country, and we need to provide them some sort of basic coverage."
Lemkin knows there are no easy solutions. He maintains that the public and physicians have been burdened with the cost, and now maybe the answer is shifting the burden to pharmaceutical companies. "It's their turn," he says.
William DeMarco of DeMarco & Associates, a Rockford, Ill.-based company that sets up and organizes physician-owned enterprises, says every market nationally has given control of medical dollars to third parties. He agrees with Lemkin that pharmaceutical companies will have to share some of the cost burden. He sees merit in INDOC's approach and understands Lemkin's point of view. His answer to the dilemma is more a combination of efforts.
"There are good HMOs out there," DeMarco says. "The question that a physician must ask is, 'What can managed care do for me that I can't do for myself?' When you set up something like INDOC, your patients have to believe you are worth the extra cost. If not, then you have a problem. You must help them control costs, too.
"I think the best avenue for physicians is to get rid of bad, nonpaying managed-care companies and have two or three good ones who are working for them. It needs to be a symbiotic relationship. I discourage getting rid of all managed-care companies because it could be perceived as a boycott. Set minimum criteria, and get rid of everyone who doesn't meet it."
The future, DeMarco believes, is direct contracting between physicians and employers and physicians and consumers.
"It's a natural alliance, and it's already happening in some areas," DeMarco says. "INDOC is an example of direct contracting with consumers via MSAs, and I think we'll see more of that in the future. Doctors working directly with employers is next, setting up a plan directly with an insurance company and offering it to employers."
W.A. Weronka is a healthcare communicator based in Los Angeles.