Health Care: Cost-Conscious Care

In praise of HMOs


"Torture by HMO" is the title of a March 18 column by Bob Herbert in The New York Times. Herbert tells the story of a North Carolina family with a baby suffering from leukemia. Their health maintenance organization insisted that the child undergo treatment in another state, at great cost and inconvenience. Herbert condemns the HMO's "inflexible and thoroughly inhumane" policies, adding that "humanitarian concerns are not what corporate care is about. In the competition with profits, patients must always lose."

This portrait of HMOs as soulless money-making machines has become increasingly popular in recent years, as skyrocketing health care costs have driven a shift from fee-for-service medicine to managed care. Critics such as Harvard Medical School professor David Himmelstein contend that HMOs reward doctors for providing less care, trapping them in a conflict between their incomes and their patients' welfare, and impose "gag clauses" that forbid them to discuss this conflict with patients. "The bottom line is superseding the Hippocratic oath," write Jeff Cohen and Norman Solomon in their syndicated column. "Cost-cutting edicts from HMO managements put doctors in a box….Faced with directives to help maximize profits, many physicians are under constant pressure to shift their allegiance from patients to company stockholders."

From my perspective as both a physician and a patient in the same HMO, these charges do not ring true. I do not doubt that HMOs, like any other business, sometimes serve their customers poorly. But there is no reason to believe that managed care systematically undermines patient welfare because of the imperative to cut costs. To the contrary, I have found that efficiency is perfectly compatible with compassionate, effective health care. (Since this article was written, I have myself become a cancer patient. Thus far, my care has been unsurpassed. I have the option of being treated outside my HMO, but would not think of going anywhere else. I expect from my plan the same level of care as a patient that I have provided as a physician.)

My plan delivers care at several neighborhood health centers. Each member chooses a "home" center and a primary care physician at that center. Surgical, pediatric, obstetrical, and mental health services, as well as radiology, laboratory, pharmacy, and physical therapy, are all provided under one roof. While our "staff model" HMO does not offer as extensive a choice of physicians as many "network" HMOs, our arrangement does offer economies of scale and strict control of physician quality. Surveys consistently show that patients rate quality of care above greater choice of providers.

I am paid a straight salary and modest bonuses tied to both the plan's profitability and a patient satisfaction index. Frequent advisory audits help me and my patients sort out health care they need from health care they want. My goal is healthy, satisfied patients and a financially sound business. Every day, I put my professional reputation on the line. So does my HMO. Our challenge is to cut costs without cutting quality. Fortunately, there are many ways to do this.

Changing the venue of medical care from hospital to outpatient center, office, or home is the most important factor driving health care costs down and quality up. Hospitals are very expensive pieces of architecture. They are also complex places and therefore potentially hazardous to your health. Despite rigorous safeguards, medication and treatment errors can and do occur. As many as 15 percent of hospitalized patients go home with a hospital-acquired infection, often caused by antibiotic-resistant organisms. Furthermore, most patients do not wish to be in a hospital. In the last three years, my HMO has reduced hospital use by 25 percent.

Inguinal hernia repair is one of the most frequently performed operations. Just a few years ago, the cost of this operation included a preoperative night in the hospital, one to two hours in the operating room under general anesthesia, and up to five postoperative days in the hospital. The patient had to take four to six weeks off work, and the recurrence rate was 10 percent. In 1996, at my HMO, this operation requires 40 minutes of surgery in a free-standing, outpatient surgical center under local anesthesia using a $100 plastic-mesh plug. Patients have less discomfort, return to unrestricted work in one week, and enjoy a recurrence rate of less than 1 per 1,000. This approach to hernia repair has been technically feasible for several years but was usually employed sporadically, at the discretion of the surgeon or the patient. In the era of cost containment, it has rapidly become the standard in the profession, regardless of reimbursement mode.

Thanks to the innovation of laparoscopic surgery, 80 percent of my patients who need their gallbladder removed can undergo the operation as outpatients and return to work in a week. The original inspiration for this procedure was the development of miniature video cameras, and the early reports were dismissed as mere technical wizardry. But as it became clear that laparoscopic gallbladder removal was not only safe but much less expensive than conventional surgery, surgeons quickly adopted the procedure as the standard approach, and patients demanded it.

The challenge of providing better care at lower cost has spurred not only the development of new procedures but the resurrection of old ones. Pilonidal abscess, a chronic and painful anorectal condition, used to be treated with radical surgery in the hospital. Recovery was frequently prolonged and painful. I now treat this problem with a 20-minute office procedure. Patients can return to work in two days, and the recurrence rate is less than 2 percent. This procedure was first described 15 years ago but languished until managed care created the incentive to implement it on a wider scale.

Open-heart surgery is expensive. Traditionally, the payer is billed separately by the hospital, the surgeon, and the anesthesiologist. My HMO recently negotiated a contract in which we pay a flat fee per operation that is about half our previous cost. As for concerns that surgeons might offer less surgery for less money, our studies show no change in mortality or morbidity since this contract went into effect. Beyond the question of ethics, no reputable provider group would risk a lucrative contract with a large HMO by delivering less than first-class care. Based on this experience, we are exploring package pricing for other high-cost procedures, such as organ transplantations.

Childhood asthma is a distressing and sometimes frightening problem for parents and children. Our studies showed that repeated visits to the emergency room were not only unnerving for families but accounted for a substantial portion of the cost of treating asthma. Through an aggressive program of family education, we are teaching our patients how to handle most asthma attacks at home, even how to give adrenaline injections. A nurse practitioner is available by telephone 24 hours a day to advise families whether a visit to the hospital may be necessary. Emergency room visits are down 40 percent in the last two years. So far, we have noted no adverse effects on patient care, and the response from families has been almost entirely positive.

Treatment of minor lacerations used to involve a trip to the hospital emergency room and frequently entailed a long wait. On nights and weekends our health centers are now staffed with specially trained physician assistants who repair 90 percent of all minor lacerations. In the first year this program has saved more than $100,000 in hospital emergency room charges while taking care of our patients better and more quickly.

For many of our patients with chronic wounds, such as bedsores and diabetic ulcers, treatment has often involved lengthy stays in rehabilitation hospitals or prolonged, expensive home visits by nurses. Under our wound-care program, most patients with chronic wounds can be treated directly at our health centers under the supervision of a physician. In most cases, patients and their families can be trained to do the daily wound care at home. In the first year, this program saved more than $70,000 in outside utilization costs.

Patients needing hip replacement surgery are often elderly and suffering from other medical problems. We now begin physical therapy evaluation in the patient's home prior to surgery. By knowing the level of family support and the location of stairs and bathrooms, we can much better prepare the patient for recuperation and rehabilitation. The new approach has cut the average hospital stay in half, eliminated the need for intermediate rehab hospital care in many cases, and accelerated recuperation.

For the past three years, my HMO has followed a policy of early discharge after childbirth. The childbirth program includes comprehensive prenatal education, post-partum home visits, and individual screening. A 16-year-old first-time mother with no family support and no telephone at home is not sent home in 24 hours. But 70 percent of women with uncomplicated vaginal deliveries are discharged in 24 to 36 hours. And despite the recent brouhaha over "drive-thru" deliveries, a recent survey documents that 90 percent of our patients are satisfied with their care–the same percentage as before the early discharge policy was adopted. There is no evidence that the health of mother or infant has been compromised. Most mothers and their babies belong at home with an attentive family, rather than in a potentially dangerous hospital.

Unnecessary diagnostic tests are probably the most familiar example of American medicine's spendthrift ways. Our computers are now set up so that every time a physician orders a laboratory test or X-ray procedure, a window on the screen displays the cost. Before managed care we neither knew nor asked. Preliminary analysis shows that this minor innovation has significantly reduced the ordering of routine laboratory and X-ray tests, especially among medical residents (physicians in training).

Much criticism of HMO care focuses not on common procedures such as these but on rare, emotionally charged illnesses. The cover story in the January 22 issue of Time, for example, chronicles the experience of a woman with advanced breast cancer whose HMO refused to pay for bone marrow transplantation. In such desperate cases, everyone understandably feels that something ought to be done. But the truth is that bone marrow transplantation for advanced breast cancer is a dangerous and expensive treatment of no proven benefit. This kind of case must be handled on an individual basis with consummate compassion and understanding, but it should not divert our attention from the myriad ways in which good medical care can be delivered for less money.

The significance of the potential conflict between physician income and patient welfare has also been exaggerated. First of all, it is offensive to me and the overwhelming majority of my colleagues to suggest that we would pad our bank accounts by obstructing or denying necessary medical care to our patients. I hew to an ethical standard of care, and so does my HMO. I am first and foremost the advocate of my patients, but always within the constraints of appropriate care and limited resources. More care is not always better care, and wishing that medicine could be exempt from the laws of economics does not make it so.

While there are various arrangements by which physicians are compensated under managed care, the incentives are to provide neither too little care nor too much care but optimal care. Under managed care, the worst course I could follow is to provide less than optimal care. Delay in diagnosis or treatment would only invite more expensive diagnosis and treatment down the line (and probably a lawsuit as well). Denying needed care is not only bad ethics; it is bad business.

As for the highly publicized "gag clauses," which have been outlawed in Massachusetts and a number of other states, my HMO does not have one. HMOs are entitled to insist on the confidentiality of proprietary information, but my HMO and most others encourage physicians to discuss financial incentives, covered benefits, and care options with patients. Many physicians are understandably dispirited by what they view as the demise of traditional health care and by projections of a 150,000-physician glut by the year 2000. But grievances and frustrations should be discussed with management and peers. Discussing them with patients can only erode an already embattled doctor-patient relationship.

Despite the charges of conflict and carnage, the evidence suggests that most physicians and patients are adjusting remarkably well to the managed care revolution and that the quality of care remains high. Studies have consistently shown that HMO patients are at least as satisfied with their care as patients receiving traditional fee-for-service care. A recent survey by CareData Reports, a New York health care information firm, revealed that, among members of 33 HMOs nationwide, nearly 80 percent were satisfied with their care. (The lowest ratings were not for quality of care but for administration and communication.) A 1994 study of 25,000 employees conducted by Xerox showed that HMO patients were significantly more satisfied with their overall care than were fee-for-service patients. In a 1994 Federal Employee Health Benefits Program survey of 90,000 federal employees, 86 percent of HMO members said they were satisfied with their plans, compared with 82 percent in fee-for-service plans. Interestingly, a 1994 survey by Towers Perrin revealed that patient satisfaction with HMO care rose with years of membership.

The results of research using objective measures have been similar. A 1996 study by KPMG Peat Marwick found that, in cities where most health care was provided by HMOs, costs were 11 percent lower, hospital stays 6 percent shorter, and death rates 5 percent lower than in cities where most care was provided under fee-for-service arrangements. A study recently published in the Journal of the American Medical Association looked at costs and outcomes of treatment for several chronic illnesses. Compared with fee-for-service specialists, HMO primary care physicians used 40 percent fewer hospital days and 12 percent less drugs. At four- and seven-year follow-ups, patient outcomes were the same.

A 1995 North Carolina study looked at the cost and outcome of treatment for lower-back pain. Costs for a single episode ranged from $169 in an HMO to $545 at a fee-for-service chiropractor, while outcomes were identical. As David Nash, an HMO expert at Jefferson Medical College in Philadelphia, told the Chicago Sun-Times last year, "Overwhelmingly, the published evidence supports the notion that quality of care in the managed care arena equals, if not surpasses, the care in the private, fee-for-service sector."

The shift to managed care unquestionably imposes greater responsibility on patients. More information is becoming available to enable them to compare costs and benefits and make intelligent choices. We ought to disabuse ourselves of the notion that we can have a perfect health care system in which no one is ever misdiagnosed, mismanaged, or missed altogether. But high-quality medical care at an affordable price is not only possible under managed care; it is a reality.

David Jacobsen (djacobsen@bics.bwh.harvard.edu) is a surgeon with Harvard Pilgrim Health Care in Boston.