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Page 6 of 10
Controlling the flow of dollars.
Before Phase 4 of his 18 Month Plan begins, Gekko continues paying his physicians on a discounted fee-for-service basis (i.e., they get paid for every service they provide, at a somewhat lower fee schedule than for Medicare). But for any HMO during the 1990s, the pot of gold at the end of the rainbow is capitation. And Gekko institutes capitation with great relish during Phase 4.
Under his capitation plan, FTP primary care physicians (PCPs) get paid a fixed amount per month for every FTP patient they follow in their practice. No matter how much or how little medical care they provide for that patient, the PCPs get paid only the capitated amount. But Gekko doesn't actually pay them the full capitated rate up front - they get only 90%. He keeps the last 10% as a "withhold," which he fashions as an additional incentive.
Thus, at the end of the year, if FTP meets its financial goals and the PCP meets certain performance requirements, Gekko distributes the last 10%. If not, FTP keeps the money. It is possible, of course (if FTP's financial goals are exceeded and the physician's performance is rated "excellent"), for the PCP to receive a bonus in addition to the 10% withhold. And Gekko sees to it that at least a few PCPs get such a bonus each year, just to let his physicians know that such a thing is within the realm of possibility. Capitation fee schedules are renegotiated each year with each PCP, based on how "well" the PCP has done in the previous year.
It's a shame Gekko's number crunchers can't yet figure out a way to capitate specialists as well, but so far it's too complicated. The accountants cannot guarantee him that he'd make money capitating specialists. Some day they'll have sufficient data to pull it off, but for now he continues paying his specialists on a modified fee-for-service basis. Gekko knows he needs alternative measures to control the behavior of the specialists.
The performance measures that determine whether a PCP does or does not get his 10% withhold at the end of the year are a vital part of Gekko's plan. There are a few token "quality performance measures," of course, that monitor whether the doctors are aggressively treating hypertension and screening for high cholesterol and the like. But Gekko wants to make sure his doctors know what he really means by performance, so he doesn't try to disguise the fact that the bulk of FTP's performance measures have to do with fiscal performance.
Each quarter, a dark-suited FTP representative (a "Practice Consultant") visits each PCP with a "Performance Report." The Performance Report accounts for every dollar that FTP has had to spend during the past quarter on patients enrolled in the PCP's practice.
"Your patients cost us an average of $439 apiece during the past quarter, Dr. Smith," the Practice Consultant might say. "That compares unfavorably with the mean of $348 achieved by your peer PCPs, and even less favorably with the target of $294 that would be required for you to receive your portion of the year-end withhold. Now, Dr. Smith, let's examine this report in more detail to see if we can figure out where all that money is going."
So Dr. Smith and the helpful Practice Consultant look things over. They notice that Dr. Smith referred ten patients to cardiology practices during the past quarter. The Valley View Cardiology practice ended up spending an average of $6247 on the five patients Smith sent them, but the Cormatic cardiologists only spent $4593 taking care of the other five. They both agree that substantial savings could have been realized by referring more patients to Cormatic, and fewer to Valley View.
"Of course," the Practice Consultant says, "we would never tell you how to practice medicine."
"Of course," Dr. Smith replies.
It is a thing of beauty. Look what Gekko has accomplished here. By rapidly gaining control of physicians' means of livelihood (i.e., their access to patients), he is able essentially to dictate the terms of their surrender.
Those terms put fiscal pressure on doctors at several levels.
Since they are paid a capitated rate, there is financial pressure on the PCPs to keep patients out of their offices. Office overhead is often figured on an hourly basis, so the more time a patient spends in the office (i.e., the more office overhead that patient consumes) the less profit (or the more loss) the physician realizes on that patient. Under many capitation rate schedules, more than two office visits per patient per year will result in a net loss for the PCP. This is why many doctors now take great pains to head off office visits by requiring patients to go through a screening process before letting them in the door. (All too often, it seems, that screening consists of a telephone interview with thick headed, thin skinned, minimally trained "assistant." If you've ever wondered why doctors would ever want to employ such obviously off-putting personnel, now you know.)
Of course, HMOs themselves sometimes pitch in to discourage patients from visiting doctors' offices, humanely relieving their doctors of some of the burden. In 2002, for instance, Kaiser Permanente was called out (by a disgruntled nurses' union) for paying bonuses to clerks in three northern California call centers, for limiting the medical services provided to patients who called in with medical problems. Specifically, Kaiser had set up a quota system that paid these minimally trained clerks bonuses equal to 2 - 4% of their salaries, in return for not making doctors' appointments, for not transferring calls to a registered nurse for further evaluation, and for keeping the average call time under four minutes. When the story made the news Kaiser admitted the story was true, but said that now they had stopped. (Leaving one to wonder whether, instead of paying bonuses to the clerks to get them to do their jobs well, the company might have reverted to more traditional and less humane incentives such as threats, terminations and arbitrary scheduling practices.)
HMOs do not directly control patients' visits to medical specialists - patients are referred to specialists by their PCPs. So to control expenditures by specialists, the pressure needs to be applied to the PCP. This is done by ultimately holding the PCP personally accountable for whatever money the specialist ends up spending on a referred patient. These specialist-ordered expenditures will affect the PCP's end-of-year "bonus," and will impact on the next year's capitation rates.
Since doctors really do want to take good care of their patients, most PCPs will refer when they really think it's necessary. But to whom do they refer? In the old days, they referred to the specialists they thought gave the best care, or who were the most congenial, or who invited them to the best golf outings, or who were their brothers-in-law. The new fiscal incentives are so powerful that they tend to override any of these considerations.
This is how HMOs control specialists indirectly: A cardiologist whose referrals have fallen drastically is all ears when the friendly FTP Practice Consultant shows up in her office with facts and figures. Learning that she is spending a lot more money than her peers in providing patient care (and that her referring PCPs also have been provided with the same data), leaves her with two choices. Either cut out some of the services she is providing, or go out of business.
Gekko's operational plan has at least one other major benefit. Visualize what happens, if you will, when a patient with a chronic illness shows up for the first time in the office of a PCP. Most likely the PCP immediately has visions of $100 bills flying out the window. He gets paid no more for delivering care to that sick patient (who may require office visits at least on a monthly basis), than he does for a healthy 18 year old he will not see at all. And, odds are he'll end up having to refer the patient to at least a couple of specialists during the course of the year. The PCP has already seen his income fall by more than 10% each of the last two years, and has had to lay off office personnel to boot. He just can't afford to absorb any more cuts.
So, is he happy to see that patient? Or is he frustrated, and maybe even angry (at the patient, at the system, and at himself)? Under such circumstances, it would only be human nature to begin sending the patient subtle messages that indicate she's not really welcome. During office visits the physician is more likely to seem disinterested, distracted, or rushed - off-putting. He may be a little less accommodating when she needs to schedule an appointment; he may drag his feet when she sends him a stack of disability applications to fill out. He may be a little slower than necessary to return her calls. And after a while, the patient is likely to get the message and switch PCPs, or better yet, to switch health plans altogether.
By appropriately incenting his physicians, Gekko has thus established a highly effective adjunct to his cherry-picking program. His physicians want just as badly as he does to avoid the sick, and by their words, actions and deeds are able to directly discourage the more expensive patients from staying with FTP.
Making the destruction of the doctor-patient relationship legally binding.
Gekko is happy with the results of his 18 month plan, but wishes to reinforce and formalize the message he has successfully delivered to FTP's physicians. He wishes to make that message legally binding. When it is time for him to rework his physician contracts, Gekko asks his attorneys to come up with language that does just that, and they are happy to accommodate him:
"The physician agrees not to take any action or make any communication with patients or patients' families, potential patients or potential patients' families, employers, unions, the media or the public that would tend to undermine, disparage, or otherwise criticize FTP or FTP's healthcare coverage. The physician further agrees to keep all proprietary information such as payment rates, reimbursement procedures, utilization-review procedures, etc., strictly confidential."
Gekko likes the language. It is plain and straightforward. His physicians, completely without choice, sign the new contracts with nary a peep of complaint. Gekko has made an assertion to his doctors. He has said, "You work for me, and me alone. You're all mine." His doctors, by their legally-affixed signatures, have acknowledged that assertion.
Gekko has sought a place at the table with FTP doctors and their patients, and now he has it. In fact, he is at the head of the table.
What Gekko has just done is to add a classic "gag clause" to his physician contracts. The final insult to a doctor's professional integrity, a gag clause prohibits the doctor from disclosing certain types of information to his or her patients. The forbidden information is likely to be material to the patient's ability to accurately assess the doctor's medical advice, and therefore the lack of that information may impact on the patient's health. So from a purely practical standpoint, gag clauses are a threat to patients.
But from a more philosophical standpoint, what the gag clause represents - by the fact that HMOs used them with impunity and physicians signed them with little more than a whimper - is a formal death certificate for the physician-patient relationship. It officially and legally certifies that the doctor's first loyalty is to the integrity and reputation of the HMO, which supersedes any loyalty or duty that might exist toward the patient.
Gag clauses attracted a fair amount of criticism in the late 1990s, but essentially only from the standpoint of it's not being nice to "gag" physicians from telling their patients what they need to know. Little has been said about the implications of HMOs having had the audacity to include gag clauses in physician contracts in the first place, and of physicians quietly and timidly signing them by the tens of thousands.
In response to the voiced concerns over gag clauses, the General Accounting Office more recently conducted a study to assess their continued prevalence in HMO contracts. The report concluded that gag clauses are no longer a problem, and for the most part they don't even exist any more.
The reason "gag clauses" don't exist anymore is that the HMOs, feeling the heat, have converted them to "business clauses." Generically, business clauses require the signer (usually an employee) to agree not to disparage the business, not to encourage clients to use some other business instead, and not to break confidentiality with the business. In other words, business clauses are merely gag clauses somewhat reworded, and then relabeled.
In this manner, HMOs have asserted that, since they are a business, they have a right to the same protections as any other business. And if assertion of those business rights require the business' contractors (i.e., doctors) to forego previous arrangements and understandings (i.e., the doctor-patient relationship), well, that's business. The GAO, apparently, was swayed by this argument.
Various proposed Patients Bills of Rights require striking gag clauses from HMO-physician contracts. Presumably (now that they are just business clauses), that has already been accomplished. But even if all such clauses - whatever they are called - are struck from every contract this very day, the damage has been done.
For, when HMOs asked physicians for a declaration of loyalty that superseded all other loyalties, physicians gave it. Removing gag clauses from contracts at this point doesn't change the fact that, when asked, physicians signed. Once a dog learns to heel, you can get rid of the leash - the dog still heels just fine. The HMOs have more than made their point.
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