Health Providers Set Up Networks Prior to Reform

Doctors, hospitals, medical clinics and other health care providers have gotten a head start on the Clinton Administration’s proposed health reforms by forming the types of health care networks expected to dominate in a new era of government control.

“In some parts of the country, like Willmar, Minn., and Amherst, Mass., small groups of doctors are forming small practices--doctors who never would have allied with one another,” said Art Caplan, a University of Minnesota medical ethicist who tracks these activities. “But they see down the road the advantages and incentives of going to groups.”

And in cities where large specialty hospitals and other such facilities are located, “there is tremendous pressure” to form contractual relationships with general practice hospitals, most of them in outlying suburban areas, to ensure future patient referrals, Caplan said.

The Mayo Clinic, for example, the world-renowned medical facility in Rochester, Minn., that has attracted kings, presidents and other celebrities as patients, has begun to branch out regionally to ensure a larger patient base in its own geographic area. The UC Irvine Medical Group in Orange County recently established a primary care unit for similar reasons.

Networks of physicians who abandoned their own practices in favor of doctor-controlled groups--bringing together primary care physicians and specialists to build networks that offer a full range of services--would have the clout to compete for business under a system of government-imposed “managed competition,” in which such groups would negotiate to provide care.

And hospitals, outpatient clinics and other types of facilities long recognized for their specialties and expertise have begun affiliating with primary care groups, aware that generalists will be the “gate-keepers” who control access to specialists. Under the proposed reforms, patients will be treated by specialists only if referred by a primary care physician.

“These changes are a direct response to what the health care world has sniffed in the air as health reform,” according to Caplan, who served as a consultant to the White House health care reform task force headed by First Lady Hillary Rodham Clinton. “These changes are taking many forms, and are already rippling through the system nationwide.”

The emerging Clinton plan, while not yet in final form, is expected to group most Americans under large regional purchasing alliances that would act as agents in buying health insurance, ultimately making available to members an array of plans from which to choose. The theory is that these alliances will hold down costs by negotiating with networks of doctors and hospitals for low prices.

Release of the Clinton proposals is not expected before late September. They will then go to Congress, which will have the ultimate responsibility for drafting health reform legislation. In some states, however, reform proposals already have been enacted or are on the drawing board.

With all of this in mind, the prevailing attitude among health providers appears to be that the best defense is a good offense. They prefer to make the changes themselves, rather than be forced into them later.

“You can see many administrators beginning to take the attitude that if we don’t lock in patients by having referral networks, our hospital will be in big, big trouble,” Caplan said. “I think many administrators believe that, in the future, those who survive managed competition are going to be those who have the biggest patient base to draw upon and the most comprehensive set of services to offer,” he said.

The Mayo Clinic has purchased a series of general family practices in such locations as Decorah, Iowa, and Wabasha and Eau Claire, Wis., and also recently acquired a general practice hospital in Eau Claire.

“The Mayo Clinic has never had much to do with its neighbors in Minnesota, Iowa and Wisconsin,” said Caplan, who directs his university’s biomedical ethics center. “It has basically pulled its patients from around the world. But anticipating changes in the way health care is paid for, it has made a number of changes in its strategy.”

The obvious goal is to have primary care physicians in the communities feed patients to the Mayo Clinic when the need for specialists arises. “So why not own the primary care doctors?” Caplan said. “Why not own the middle-level hospital? Why not own everything?”

Dr. Richard Tompkins, Mayo’s director of regional planning, said that Mayo’s changing face is, indeed, being driven by new forces of reform in the marketplace. But he insisted that patients from Minnesota and its surrounding states always have been the foundation of its patient base.

“We are moving in a lot of directions to keep access open,” he said. “We’re trying to drive more contracts for care with payers and trying to firm up and improve relationships with referring physicians so they will continue to look to us as a source. But more critical is that the payer system allow Mayo to be a choice.”

And, he said, regardless of its reputation, Mayo always has regarded the average patient as just as important as its well-known, wealthier clients. “Our basic interest is providing health care for those people who need it with the highest quality and the lowest cost.”

At the UC Irvine Medical Group, Steve Wallin, executive director of the clinical practice group, said that it was formed because “we want to put ourselves in a stronger position for managed care, assuming much of it will be primary care driven.

“We’ve had the cream of the crop as far as physicians are concerned--this is where you want to come if you get really sick.” But, he added, to compete in the managed health arena “we have to compete with primary care physicians as well.”

Doctors also have been responding to the apparent thrust of health reforms, although the dynamics are different from those of the hospitals and clinics.

“If the Clinton proposal has some variant of managed competition, then physicians already in groups will be in better position to adjust to that change--and others will have to catch up,” said Dr. Eugene Ogrod, a past president of the American Society of Internal Medicine and chairman of the board of trustees of the California Medical Assn.

Ogrod is an internist who practiced by himself in the early 1980s and is now part of an 80-physician group in Sacramento. He said that he believes physicians who form affiliations not only benefit from a unified accounting and business system and a common fee schedule but also have the ability to negotiate services and fees “which should give you increased clout” in the new world of health reform.

Caplan said that doctors on this level believe that, “if we don’t get into these groups, we’ll be left out in the cold because the big purchasers of health care are going to want to buy complete services. It’s going to be tough to be hanging out there as a solo provider when the three insurance companies in your state will only pay doctors who are tied into an integrated system that provides services at a fixed price.”

Such dynamics have clearly motivated Dr. Daniel Ein, an allergist/internist in the Washington, D.C., area who has practiced alone for more than two decades but who is currently trying to organize what he describes as “a practice without walls” by bringing together the best physicians in all fields, including primary care.

“In anticipation of what’s coming down the road in the managed competition model, this allows physicians to form their own accountable health plan,” said Ein, a past president of the Medical Society of the District of Columbia.

“We will set up our own vertically integrated delivery system that would have fewer seams than we have now and we would take care of people from the beginning of life to the end of life--and do it better than we do now.”

And it appears that such efforts already have met the informal blessings of the prime architect of the Administration’s plan.

Ein, whose children attend the same school as the Clintons’ daughter, Chelsea, encountered Mrs. Clinton at a sports event there last spring and, while chatting with her, told her of his efforts.

“That’s terrific,” he recalls her saying. “That’s just what ought to happen.”