FREE ESSAY ON THE PROBLEMS WITH HMOS

THE PROBLEMS WITH HMOS

Sarah Cay Bradley
English 320
May 20, 1999
The Problems With HMOs
It was no surprise when I interviewed my English class about HMOs, that out of 13
students, seven currently having HMO coverage, 77% felt HMO healthcare inferior to
traditional insurance. This group closely represents the U.S. population, as HMOs have
become practically synonymous with health care and the idea that Americans are no longer
receiving the quality care they received from unmanaged plans. Managed care plans have
succeeded in dramatically cutting the rate at which medical spending in the United States
has been growing. Does it matter that 100 years after Lincoln freed the slaves that we
have found another way to trade lives for money? HMOs have introduced an innovative way
to provide health services: incentives for doctors not to treat patients. The less a
physician practices, the more the company makes. HMOs make money by not providing a
product. (Physicians Who Care, Internet 1999).
What exactly is an HMO? HMO is an acronym for health maintenance organization. An HMO is
an organization that provides comprehensive health care to voluntarily enrolled
individuals and families in a particular geographic area by member physicians with
limited referral to outside specialists and that is financed by fixed periodic payments
determined in advance. (Merriam-Webster's Dictionary-1996) Sometimes considered a new
concept, HMOs have been around since the 1930s. The difference today is that consumers
are being nudged into them by their employers, in an attempt to hold down costs, and out
of traditional insurance plans, in which the insurer reimbursed the patient directly and
covered most of the cost of medical treatments. To encourage consumers, the HMOs promote
their preventative services. Since the HMO has the patient's money up front, it is
important for them to keep the patient healthy. (Sinclair Community College-1999) An HMO
can also be described as what seemed like a good idea at the time, but quickly became a
concept out of control, thanks to medical bureaucracy, and just plain greed. 
At the beginning of the 1990s, there were nearly 600 HMOs across America and they were
regarded as a practical alternative to escalating medical costs. By 1998, it was clear
that HMOs were out of control, leaving a trail of angry and neglected patients in their
path. Physicians have also begun speaking out against HMOs in increasing numbers.
According to Dr. Daniel J. Esposito, the main problem with HMOs is that, there are no
economic incentives to take care of people. The incentive is not to do anything (More
Trouble With Managed Care PG).
What happened? How could something, which started out so promising, have gone so terribly
wrong? In a survey conducted by Harvard University in conjunction with the Kaiser Family
foundation, it was revealed that 51 percent of Americans polled believe that HMOs are
responsible for the deteriorating quality of their health care. Fifty-five percent
expressed concern that HMOs were more preoccupied with cost-cutting measures than with
providing the best possible medical care for the patients they serve (The HMOs Image
Problem; Public Distrust Can be Cured By Ensuring Patient Rights 8). This certainly does
not sound like the all-purpose solution to quality and affordable medical care the
government was looking for when it began addressing the issue of a national citizens'
health plan back in the 1960s.
What has sparked this widespread public mistrust of HMOs? Part of the problem has been
the exceptional growth of HMOs during the 1990s. By 1996, HMOs boasted a membership of
110 million enrollees, a figure four times higher than 1986 (Evans). The federal
government's attempts at reform have only added fuel to the growing fire. With their
ineffectual price controls and budget slashing, the bottom line is that people are
receiving less health care instead of more -- hospital stays and specialist referrals are
kept at a minimum to defray costs (Evans).
This leads to the question, if people are so unhappy with the cost and quality of HMOs,
why are they continuing to sign up in record numbers? It should be understood that, first
and foremost, an HMO is not a public service organization. HMOs are in business to make
money, and the more people they can enroll, the greater the profit. When the general
public or their employers go shopping for a health care alternative, they are often
unaware that they may become victims of a slick marketing campaign on the part of the
HMO. One such glossy, potential patient-friendly brochure, as quoted in
Consumers' Research Magazine, read, No Medicare deductibles, affordable copayments, and
unlimited hospital stays when medically necessary. Emergency care anywhere in the world.
Virtually no claim forms to file.... Routine physical exams (preventive health services).
Prescription drug discounts, dental coverage, vision coverage (Evans). As we all know, if
it sounds too good to be true, it IS NOT TRUE. Language in HMO plans is purposely
ambiguous and is intentionally subject to broad interpretation. The flyers frequently
mention unlimited hospital stays, but never clearly define what these stays are for
(Evans PG). Then, of course, there is also the equally vague qualifier, for treatments
that are medically necessary (Evans PG). What does this mean? What may constitute a
medical necessity for the patient may not for the HMO. Because the HMO is the provider
and paying the medical bill, it is responsible for making a determination as to medical
necessity, not the patient or his physician. The patient is primarily concerned with his
or her medical condition, whereas the HMOs main focus is the costs which will be incurred
in treating this ailment.
However, what the HMOs advertisements do not tell us is that inefficiency has always
categorized HMOs. In 1995, it was reported, that over 25% of HMO members said they waited
more than 12 days for a scheduled appointment with their primary care doctor... In more
than one-third of the HMOs, up 50% of the members said consistently busy telephone lines
and the mirage of phone numbers and transfers caused them to sometimes give up scheduling
an appointment.... In 52% of HMOs, up to 50% of disenrollees said their doctors failed to
refer them to a specialist when needed.... In 40% of the HMOs, from 11% to 50% of
disenrollees reported the medical care they received from their HMO caused their health
to worsen (Evans and Kline 10).
What happens when your physician and your HMO administrators do not agree? Let's look at
the following case study. Sandy C. had struggled with her weight all of her life.
Finally, when her 5'2 frame ballooned to 260 pounds, she was considered at high risk for
hypertension, heart attack and diabetes (Kowal). Her internist recommended a stomach
reduction surgery to curb her urge to overeat. According to Dr. John Cosgrove, who is
chief of laparoscopy at Long Island Jewish Medical Center, The benefits of the surgery
for those classified as morbidly obese are clear. When you do this surgery, patients live
longer (Kowal). However, one year after this proposed surgical procedure, this obese
young woman is still waiting. Why? Quite simply, Sandy's HMO refused to pay the $10,000
price tag, and the surgery could not be afforded otherwise (Kowal). Sandy's HMO
determined that this procedure did not constitute a medical necessity and would create
more problems than it would ultimately solve, and therefore, have repeatedly denied the
surgeon's compelling efforts to cover the surgical cost (Kowal PG). Sandy is naturally
upset and unable to understand her HMOs reluctance to authorize the surgical procedure,
lamenting, I work for a living, but I can't have surgery that my doctor says is necessary
for my health. I think it is so unfair (Kowal). 
Another case recently reported by MSNBC News, the story of the Kuhl family of Kansas City
causes us all serious concern over US health care. Mary Kuhl's husband, Buddy, suffered a
heart attack in 1989. The Kuhl's HMO refused rehab services; they said he didn't need it.
Mary explained that her husband "was going to have a catheter run to find out exactly
where the blockage was, and what damage it had caused. We went to have the procedure
done, and we waited all day, and finally they came in and said that the HMO was denying
the procedure." After several delays and denials, Buddy Kuhl collapsed in his yard and
died in the arms of his wife. This same type of situation could happen to any of us, and
does happen everyday.
HMOs cost cutting has a devastating impact on both the born and the unborn. In Louisiana,
when Florence Corcoran entered her eighth month of what had been considered a high-risk
pregnancy, it had been recommended by her physician that she enter the hospital (Cohn 6).
Despite the fact that Ms. Corcoran's obstetrician's recommendation was also approved by
another physician, her HMO would not approve the hospitalization. Instead, it opted for
home health care for ten hours each day (Cohn 6). Shortly thereafter, when the assigned
nurse was off-duty, there were sudden complications, and the fetus died (Cohn 6). If this
was not tragic enough, Ms. Corcoran was then informed that she could not file a suit for
damages because of the 1974 Employment Retirement Income Security Act, a federal health
benefit regulation which prohibits the filing of pain and suffering lawsuits (Cohn 6).
Do HMO members have adequate rights? Unfortunately, in 1998 the House of Representatives
rejected a bill that would allow patients or their estates to sue HMOs and other insurers
for denial of treatment. But there is much controversy over this issue and several
pending bills. Presently consumers lack adequate rights in three areas: consumer
information; access and quality; and appeal/grievance rights. Except for emergencies, all
care must be authorized by a primary care physician, limiting access to specialists. In
fact, when attempting to get a referral says Dr. Stephen Cohen (Founder of Physicians Who
Care, MSNBC internet 1999) "When the person on the other end of the phone line doesn't
even know how to pronounce the name of the disease, it's ridiculous.". If a referral is
granted, according to the HMOs guidelines, the choice of doctors is usually limited and
those contracted by the HMO may not have the expertise to treat the medical problem.
Grievances must be handled by an appeal to the HMO, the same entity which denied care in
the first place. Moreover, the grievance process can take months or longer, in some cases
resulting in serious harm to the enrollee. There are no statutes in place to allow for
malpractice cases against HMOs, enrollees are usually forced into a binding arbitration
case. Under federal law, workers enrolled in employer-sponsored health plans can sue
their HMO to recover the cost of treatment that was wrongly denied, but they cannot go to
court to seek compensation for pain and suffering and to seek punitive damages. (Dallke)

Patients are not the only losers in the web of the HMO scheme. Physicians are also
becoming victimized by HMOs as are their patients. But in this case, it is financial
rather than physical. Like HMOs, physicians are paid a fixed amount for each patient, and
this figure does not vary. In other words, if the patient doesn't show up for treatment,
the amount is not adjusted. What this means is that if there are any savings, the
physician benefits. However, when there are not, which is most often the case, the
physician, not the HMO, assumes the liability. Simply stated, The patient is costing the
physician money the minute she walks in the door (Evans). 
"Managed care replaces Hippocratic ethic with veterinary ethic. The owner paying the
bill, the HMO, makes the decision. If they decide "Fifi" isn't worth the cost, the needed
care is not given. Managed care is perverse. It destroys patient choice. It leaves the
ethics of our profession in ruins." (Jane Orient, MD). Dr. Linda Peeno testified before
the U.S. House of Representative Committee on Commerce on May 30, 1996. She began her
testimony. "In the spring of 1987, as a physician, I caused the death of a man. Although
this was known to many people, I have not been taken before any court of law or called to
account for this in any professional or public forum. In fact, just the opposite
occurred: I was rewarded for this. It brought me an improved reputation in my job, and
contributed to my advancement afterwards. Not only did I demonstrate I could indeed do
what was expected of me, I exemplified the "good" company doctor. I saved a half million
dollars. The man died because I denied him a necessary operation to save his heart. I
felt little pain or remorse at the time. The man's faceless distance soothed my
conscience. Like a skilled soldier, I was trained for this moment. When any moral qualms
arose, I was to remember: I am not denying care, I am only denying payment. At the time,
this helped avoid any sense of responsibility for my decision." 
As a medical director, Dr Peeno's priority was to protect the interests of the business,
not the patients. There is no code of ethics for the "company doctor". The physician code
of ethics addresses clinical physicians, not physician executives. On previous occasions
Dr. Peeno was reprimanded for not denying enough care. She was even told by the HMO to
use data which was known to be inaccurate to justify a denial. At one point she was
assigned the task of presenting to a group of 500 medical directors and nurse reviewers
how her plan had used the denial process to get specialists' costs down. If physicians do
not play the game they can be labeled "unsuited for managed care." So, while HMOs are
advertising that you and your doctor, not an administrator, make your medical decisions,
your doctor is actually acting as a medical director, for the good of their employer.
(Peeno 1)
Apparently, some of the largest HMOs are also the slowest-paying ones. For example,
Oxford Health Plans, an HMO covering New York's metropolitan area owed millions to both
participating physicians and hospitals (Terry 44). They blamed the delay on computer
glitches and payments which had been advanced to medical practices. However, these
excuses were considered lame by the physicians who were owed money in light of the HMO's
profits increasing 65 percent at the end of the second quarter of 1996 (Terry 44).
According to Dr. Michael Rutigliano, whose private practice was owed $50,000 by Oxford
Health Plans, It's obviously very frustrating -- and it can certainly cause cash-flow
problems (Terry 44). What is really the cause of the delay in HMOs paying physicians?
Many believe it is so that the HMOs can draw as much interest on the money as possible in
their own account before having to turn it over to the designated physicians (Terry 44).
HMOs, of course, vehemently deny this charge and blame the private practices for
inaccurate record keeping and unfamiliarity with the HMO policy process, which they
maintain is responsible for the payment delay (Terry 44). However, even HMO
representatives have admitted that it is probably next to
impossible for private practices to keep up with HMOs evolving policies, which seem to
change daily (Terry 44). Again, these losses for physicians mean higher costs for
patients as the vicious cycle continues.
Are there any winners in the HMO process? Well, maybe this is something you should
decide. In 1996 there were 20 for-profit, publicly traded companies which owned HMOs,
registered with the Securities and Exchange Commission. The SEC reported that Mr.
Wiggins, CEO of Oxford Health Plans (the largest and slowest-paying HMO) was paid $29.1
million in 1996, and held an additional $82.8 million in unexercised stock options. The
25 highest paid HMO executives among these companies had an average compensation of over
$6.2 million, and average unexercised stock options of $13.5 million. (Families USA
Study) Ron Pollack, executive director of Families USA, summed it up very well, "when HMO
executives make many millions of dollars in compensation, that may be okay. But when
those same HMO executives complain about pennies being spent for basic consumer rights,
that is pure hypocrisy. Managed care companies are considerably more cost conscious when
they oppose the establishment of consumer rights than when they approve compensation for
their top executives." (Slass)
How can potential HMO enrollees protect themselves from being a worst-case scenario?
Educating oneself on the proposed HMO is the best strategy. In other words, leave nothing
to chance. Know exactly what you're getting into. If an employee has no input as to which
HMO he may join, he or she can still question the HMO representative. Some of the most
important questions include: How long has the HMO been in operation? Usually, a gauge of
two to three years may be used (Luciano PG). If the HMO has operated for less than three
years, what experience does it bring to its new operation (Luciano PG)? What is the
working relationship between the HMO and the doctors and hospitals with whom it has
established contracts? Ask the HMO representative to supply a list of telephone numbers
to assess if the working relationship has been a good one, or has been problematic
(Luciano PG). Although HMOs are forbidden to divulge names of their members, if you know
of anyone currently enrolled in the proposed HMO plan, ask the person to evaluate the
HMO's coverage and general satisfaction (Luciano PG).
The unfortunate reality is, the problem with HMOs is probably going to get worse before
it gets better. However, like it or not, HMOs are a permanent fixture in the health-care
landscape. Unless the government can institute some actual reform that does not involve
its quick fix cost-cutting measures (such as the ineffective fixed cost per patient
practice), which is highly unlikely, HMOs in the future are going to be synonymous with
'wrongful death,' rather than patient care.
Works Cited
Cohn, Jonathan. Managed Careless (Legislation on Health
Maintenance Organizations). 
The New Republic May, Volume 218, number 11: 6
Dallek, Geraldine. "Do Members Have Adequate Rights Within HMOs?."
HarperPerennial, Internet: 1999
Esposito, Daniel J.. "More Trouble With Managed Care".
Internet: 1999
Evans, M. Stanton, and Kline, Malcolm A. The Trouble with HMOs. 
Consumers' Research Magazine (July 1995): Volume 78, number 7: 19
The HMOs' Image Problem; Public Distrust Can Be Cured By*
Ensuring Patient Right. Los Angeles Times (Home Edition).*BR*
(7 Nov. 1997): p. 8.*BR*
Kowal, Jessica. The HMO Backlash / Patients, Doctors Demanding
More Coverage. 
Newsday 28 January 1997
Luciano, Lani. Health Care: HMO, Yes or No? You May Soon Be
Asked -- Perhaps Even Pressured. 
Money 1 July 1988 
Peeno, Linda. "Physicians Who Care".
Internet: 1999
"Sinclair Community College Study"
Internet, www.sinclaircollege.edu: 1999
Slass, Lorie. "Families USA Study Examine Executive Compensation in Managed Care."
Internet, www.hmopage.org: 1 April 1998
Bibliography
attached to paper