A patient whose insurance company works with the hospitalists of Cogent Healthcare may never see his or her primary care physician upon entering a hospital. The Cogent physician will handle everything from reviewing test results and acting on them to planning discharge orders.
In adopting this approach, Cogent's hospitalists are joining the arena of specialty carveouts, in which physicians carve out a niche and manage the clinical and business aspects of one disease or treatment. It's the opposite of the integrated approach, in which an assortment of services are offered under the umbrella of a large multifaceted organization. Traditionally, behavioral health has been the most common type of care that is carved out, but other specialties commonly involved in these networks include cardiology, gastroenterology, oncology, obstetrics and orthopedics.
Although proponents view such specialization as the hope for improved healthcare quality, anti-managed care backlash has hindered the growth of carveouts. Still, the concept has its followers.
Under carveout arrangements, organizations like Cogent offer insurance companies or other at-risk groups-such as primary care medical groups that work under capitation-package prices to cover certain diagnoses or types of care. Cogent's hospitalists are specialists in inpatient care.
"Carveouts work because they give the most highly trained people responsibility for patient care," says Ronald Greeno, M.D., vice president of network development at Cogent.
Greeno is among a group that believes in the smaller-is-better approach.
Like other carveout providers, Laguna Hills, Calif.-based Cogent, which has contracts covering 700,000 people in eight states, claims to offer efficiencies and cost savings because it concentrates solely on one area of care. Its programs can reduce the time patients stay in the hospital, the company says.
Such cost savings are exactly what insurance companies are looking for when they talk to specialists, says Derek van Amerongen, M.D., national medical director at Anthem Blue Cross and Blue Shield in Cincinnati. But carveout companies seem to be an exception rather than a rule today, he says. "I thought there would be a lot more of this by now."
While many providers and insurers are optimistic about the future growth of carveouts, they admit the arrangements face many challenges. Carveouts need a strong management infrastructure in place to negotiate and manage contracts.
They have to be astute enough to find efficiencies and cost savings in how their physicians practice.
And they must build a large enough network to offer coverage across an insurer's service area, says Guy Masters, vice president at the Camden Group, a healthcare consulting firm based in El Segundo, Calif. "We just don't see a lot of this happening."
In California, where managed-care penetration is high, carveouts seem to be disappearing. In San Marcos, Calif., for example, all transplant procedures used to be carved out of the capitation payments received by Primary Care Associates Medical Group, a 71-physician independent practice association. That meant that if one of the group's patients required a transplant, they were referred to the carveout provider, who took over the case until the patient was discharged from the hospital.
Only one insurance company continues to handle transplants that way, says Terri Douma, director of managed care contracting at the medical group. Several other health plans have looked at actuarial data that show how rare transplants are and have decided the medical group could afford to pay for transplants out of its own capitation fees, Douma says.
The change hasn't caused a problem for the medical group because so far the statistics have been correct, she says. The medical group hasn't had a transplant patient since 1995.
It is extremely difficult to tell whether carveouts truly are declining because no one appears to be keeping track of their numbers, says Bernard Friedman, a senior economist at the Agency for Health Care Policy and Research in Rockville, Md. The AHCPR held a conference last year on the topic and continues to collect research papers about carveouts. "What came out of the conference was a lot of discussion on why carveouts haven't grown as much as everyone expected," he says.
One of the main reasons carveouts have failed to take hold is that they restrict care to certain specialists, says the Camden Group's Masters. "Instead, more and more health plans are offering point-of-service options that open up care to more providers."
In Buffalo, N.Y., insurers are staying away from anything that hints at restricting patients' choice of physicians, says David Hohn, M.D., president and CEO at Roswell Park Cancer Institute. The 100-physician organization has considered taking on risk for cancer care on a per member, per month basis but has found that insurers are trying to expand, not limit, the number of physicians they contract with, Hohn says.
Carveouts are a form of managed care, and managed care seems to be plateauing, says Anthem Blue Cross' van Amerongen. "Our HMO product is not growing anywhere near what we see on the point-of-service side or the PPO side."
Still, carveouts have a lot of potential, he says. "I do think that ultimately this is going to happen. It is something that has to happen."
Insurance companies like carveouts because they define a preset price for services, and health plans like certainty, consultants say. Carveouts also make things easier for insurers by eliminating some of their gatekeeper functions, van Amerongen says.
Like general capitation agreements, carveout companies are paid a fixed price to provide all necessary care for a specific disease or condition in a certain population. The carveout companies pay physicians negotiated fees.
Anthem has carved out some of its behavioral health coverage in Ohio. "The organizations we work with are responsible for patient care, and they are accountable if there is a problem," van Amerongen says. "The health plan has been able to get out of a lot of the micromanagement of care in that area."
Such arrangements are efficient because they give specialists more control over their patients, van Amerongen says.
The initial impetus for carveouts was that specialists should be more responsible for the cost and quality of care, says the AHCPR's Friedman. Yet some providers are concerned that once the responsibility for patient care is transferred from the primary-care physician to the carveout specialist, communication between the physicians may break down, he says.
"People who believe in the primary-care gatekeeper model worry that we may have too many carveouts and that the patient may become a hot potato," Friedman says, "with physicians saying, 'That's your area, you take him.' 'No, you take him.' There's also a lot of suspicion by primary care doctors on how follow-up care will happen."
Cogent's Greeno argues that carveout organizations may be able to help, rather than hinder, the ability of primary care physicians to work with specialists.
Hospitalist physicians who formed Cogent recognized the difficulties and the importance of keeping communication open between primary-care physicians and specialists in a carveout situation, he says. The company was founded in part to help the physicians establish clear procedures for communicating with other physicians and patients' families, Greeno says.
Cogent physicians use a telephone-based messaging and paging system to keep in touch with all medical team members, including the patient's primary-care physician. In addition, a Cogent transcription center faxes discharge summaries to primary-care physicians' offices just hours after a patient leaves the hospital, Greeno says.
That's just the kind of organizational setup specialist groups need to put in place when they begin to offer carveout contracts, says van Amerongen. "A carveout requires infrastructure, an information system and strong physician leadership to succeed."
Gateway Medical, an Indianapolis-based company that offers set fees-or case-rate arrangements-to cover procedures from start to finish for many cardiac surgeries, has built a corporate infrastructure. The company is allowing its physicians to offer the set fees for certain procedures as well as enabling them to collaborate on research and care protocols, says CEO Terry Kopp. The company, which links 300 cardiologists across the Midwest and treated 123 patients through case rates in 1998, is building a database of information from which they will create benchmarks.
"We're expanding the scope of what our physicians are doing through technology," Kopp says. Such efforts also have allowed the company to set prices for its services, he adds.
The company's use of a "case rate" carveout may bode well for its growth, some consultants say. That's similar to the strategy being followed by Roswell Park.
While the New York cancer center found that its insurance companies did not want to buy into per member per month carveouts, they are interested in set fees that cover certain diagnoses, Hohn says. "We can move in this direction through ways other than per member per month capitation payments."
Roswell Park has a set fee in place for bone marrow transplants and next year will pilot a similar fee for the first year of care for a stage one or stage two breast cancer patient, says Pamela Germain, vice president of managed care and outreach. Research and data collection efforts are helping physicians build the care pathway and the case rate, she says.
All specialists have a huge opportunity to "put their money where their beliefs are" with carveouts, says Friedman. "If they think they can provide better, more efficient and less expensive care, they have a chance now to offer a contract. Health plans will listen to what they have to say."
MargaretAnn Cross is an Allentown, Pa.-based freelance writer who frequently contributes to Modern Physician.