Doctors’ Authority, Pay Dwindle Under HMOs : Health: Many feel pressured to cut corners and costs. Specialists are hard hit as access to them is curtailed.
San Diego cardiologist William Ceretto seemed to have it all: money, prestige and a thriving medical practice in a beautiful city.
Then FHP Inc. pulled the plug.
Ceretto’s practice has been hemorrhaging since the giant health insurer pulled its contract with him in February. FHP switched his patients to another cardiology group willing to work more cheaply. Gone were 3,000 patients--and half of Ceretto’s income.
“The doctor won’t be in until 2 p.m.,” said a receptionist in Ceretto’s office one recent morning. “He has no patients until then.”
A few years ago, Ceretto was taking home $400,000 a year. Today he’s going broke. He facesforeclosure on the two-story, four-bedroom home that he had remodeled at a cost of more than $300,000. His $70,000 Mercedes--that doctors’ symbol of success--is for sale. He has been talking to bankruptcy lawyers.
“This is destroying me,” he said. “I feel like I wasted my time in school and I’m not of any value anymore. You have trouble dealing with the respectful way that patients still think of you, and the contrast of what you’re being told by the health plans. Inside, you feel worthless.”
From medical offices in musty Mid-Wilshire high-rises to the gleaming towers of prestigious teaching hospitals, many California physicians share these feelings of panic and powerlessness. And with good reason.
Doctors who once topped the medical pecking order have been supplanted by increasingly powerful HMOs which, along with a handful of sophisticated employers, now wield tremendous influence over health care. Doctors who once thought of patients as their own now find it is the HMOs that control these “covered lives,” as patients are known in the jargon of managed care.
“We see bankruptcies all the time and we see doctors closing their offices, walking away and getting nothing for their practices,” said Arthur Shorr, a Woodland Hills health care consultant. “Today, in Southern California, there is not a doctor who doesn’t appreciate that managed care is king.”
Physician organizations are frantically searching for ways to recapture some control. The powerful California Medical Assn. has been pressing lawmakers in Sacramento to pass legislation that would curtail the powers of HMOs. The CMA has also mounted a fledgling effort to create a health plan that would be run by doctors.
For now, though, it is the HMOs that are winning this power struggle--hands down.
“Physicians feel that there is an unlevel playing field, that they have both hands tied behind their backs in trying to contend with large corporate entities,” said Lonnie R. Bristow, a San Pablo, Calif., internist who is president of the American Medical Assn.
Nowhere in the country are HMOs as significant a force as in California, home to some of the nation’s biggest health plans: FHP, Foundation Health, Health Net, Kaiser and Pacificare. The growth of HMOs over the last decade--to the point where 12 million Californians are members--has profoundly affected the state’s 100,000 physicians.
* Demand for physician specialists is shrinking dramatically as HMOs tightly restrict the use of these highly trained doctors. Income in some of the highest-paid specialties--cardiology and orthopedics, for example--has plummeted 30% to 40% in just the past year. Many doctors are working longer hours or taking temporary jobs in other states to supplement their incomes.
* At the same time, family and primary care doctors--generally the lowest-paid in their profession--find their stock rising with better salaries and brighter job prospects.
* In an experience once unimaginable, doctors are being fired or laid off in cost-cutting moves by HMOs and affiliated medical groups.
* Solo practice--which for generations has been a dream of newly minted doctors--is facing extinction in California. Today, financial pressures are forcing scores of independent-minded doctors to sell their practices and join larger medical groups.
An FHP official says that Ceretto was offered a chance to continue seeing health plan members if he joined a large cardiology group, but that he turned it down. Ceretto says he never got a formal offer.
In any event, many doctors who are selling their practices are in for a shock: the value of the business they built may be far less than they thought.
* Seeking to escape managed care’s impact, doctors are leaving California for destinations such as Arkansas, Idaho, Montana or Oklahoma, where HMO enrollment is still scant. More than 2,600 doctors gave up their California licenses last year, according to the California Medical Board.
* Scores of doctors are retiring early or leaving medicine to start new careers as entrepreneurs, lawyers and medical administrators.
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California has long been a magnet for some of medicine’s best and brightest, lured here by good weather, top-notch medical schools and hospitals, and a plenitude of patients.
But today, supply and demand are out of kilter. In California’s biggest cities, roughly 60% of doctors are specialists. Yet HMOs say they can operate most efficiently with one primary care physician for each specialist. Already, HMO pioneer Kaiser Permanente says that 57% of doctors in its Southern California region are primary care doctors, while 43% are specialists.
So what was once an abundance of riches in California has become an anachronism in the era of managed care.
“In any other marketplace, the redundancy or oversupply gets squeezed out,” said Ian Morrison, president of the Institute for the Future, a Menlo Park think tank. “But doctors usually can’t do anything else.
“If you’re a redundant investment banker, you can reinvent yourself as a businessman,” he said. “But if you’re an invasive cardiologist, you can’t change careers and make $500,000” a year.
In fact, the shrinking of the physician work force in California has begun.
“Three to five years from now, there will be specialties where it will not be possible for people to continue to make a living,” said Raymond Schultze, former director of the UCLA Medical Center.
Everywhere they go, doctors are confronted with similar gloomy forecasts. The combination of financial loss and the psychological impact of seeing much of their authority usurped by insurers has taken its toll not only on the likes of Ceretto, but many others.
“Doctors generally are depressed, and their greatest sense is the feeling of losing power,” said Elaine Rodino, a Santa Monica psychologist who counsels physicians in her practice. “In psychoanalytical terms, it is the feeling of being castrated.”
“You have an angry, demoralized profession feeling confused and threatened,” said Stanley Pappelbaum, a La Jolla managed care consultant for doctors. “I can’t imagine that’s in the best interest of the patient.”
Brentwood psychiatrist Daniel B. Borenstein says doctors feel “a sense of impending dread” about their job prospects as HMOs--still an oddity in many parts of the country--gain momentum nationwide.
The mental health managed care industry has estimated that it will need no more than 25% of the current number of psychiatrists. “If managed care were to dominate all medical care,” Borenstein said, “that would mean that 75% of us would be put out of business.”
Already, some medical groups have been trimming their networks of doctors, citing cost-cutting pressures from HMOs. Hundreds of specialists in Northern California were handed pink slips this year by Hill Physicians Medical Group, a large medical group management firm.
For Joseph Martel, a Rancho Cordova ophthalmologist, the bad news came in a form letter from Hill’s board of directors. The medical group, the letter stated, “has determined that it was necessary to reduce the number of providers in some specialty pools from current levels. . . . Accordingly, this letter will serve as notice of termination of your HMO participation agreement with Hill.”
Martel, who heads the Martel Eye Medical Group, says he felt betrayed by Hill’s action. “These HMOs came into our community and used our name to recruit patients,” he said. “Then when they had grown to a substantial size, they eliminated us.”
As a result, the Martel group has lost hundreds of patients, many of them poor and Latino. And because Martel is no longer part of the Hill network, Hill’s primary care doctors are not referring new patients to his group any more, Martel says, placing his practice in financial jeopardy.
The episode is significant because the eye doctors are fighting back, having filed an antitrust lawsuit that legal experts say could foreshadow future skirmishes between doctors and managed care organizations. The lawsuit, in U.S. District Court in Sacramento, also accuses Hill of various violations of the Knox-Keene Act, the 20-year-old California law under which HMOs are regulated.
Hill, based in San Ramon, Calif., denies any wrongdoing and says the specialist cuts were a necessary response to a hotly competitive marketplace.
“The HMOs rolled back their premiums and reduced the rates they were paying Hill,” said Angela Bradstreet, a San Francisco lawyer who represents the firm. With a network in which specialists outnumbered primary care doctors 3 to 1, Hill had too many specialists to operate efficiently.
“In order to provide the best quality care at the lowest possible cost, they needed to streamline,” Bradstreet said.
And, she noted, the Martel doctors’ contract with Hill specifically gave Hill the right to cancel without cause on 30 days notice.
Rosemary Kelly, a Sacramento lawyer for the eye doctors, said the case raises questions about how much control a managed care firm can wield over patients and providers.
“Doctors can’t get on these HMO panels unless they sign these contracts,” she said. “But once you sign them, have you given up all your rights? . . . With factory workers, you often have unions to protect them and guarantee certain procedural rights. But these doctors feel they have absolutely no control over their practices or their own lives.”
The Martel group’s problems demonstrate the precarious and conflicting situation that many doctors describe. They decry some of the key cost-saving strategies of HMOs, such as “gatekeeper” primary care physicians who must authorize diagnostic tests and specialist referrals.
Yet, doctors who do not accept HMO contracts--and their numbers are dwindling--are watching their practices erode as employers push more workers into HMOs and as enrollment in the ranks of Medicare HMO members continues to grow.
Employers have been demanding tiny increases--or even rate rollbacks--in HMO premiums. The HMOs, in turn, have been demanding that physicians accept lower fees.
But accepting HMO patients is no guarantee of financial success for doctors. Many who say they reluctantly accept HMO patients complain of being caught in a Catch-22: They need HMOs to channel patients to them, but the payments they receive are getting so stingy in California that many doctors say the money does not cover their overhead.
Doctors typically receive a set fee per month for each HMO member who signs up with them. In Southern California, primary care doctors are receiving so-called capitation payments of as little as $8 per member--about the lowest rate in the country. The idea is that the doctor gets a large group of patients, many of whom are healthy and require little care. In theory, the doctors’ “profits” on healthy patients are supposed to more than compensate for “losses” on sick patients who may require lots of expensive care.
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The impact on doctors can be profound. By most accounts, the most frustrated group is specialists in their 50s or 60s who are unwilling or unable to adapt to the startling changes taking place in medicine.
Experts say that many of these doctors resisted signing HMO contracts for years, and now find themselves locked out of the health plan networks. As more of their patients are pushed into HMOs by employers, their practices are in decline.
Before long, there may not be a place in medicine for the Wayne Nishigayas of the world.
Nishigaya, 51, has been practicing family medicine in Anaheim for more than two decades. But his once-thriving practice is now teetering on the brink of failure.
In the last few years, Nishigaya has watched with increasing apprehension as the other six family doctors in his office building have retired early or sold their practices to join large medical groups in Orange County.
Nishigaya says his practice may not last more than another few months.
He has 3,000 HMO patients in his practice. The health plans pay Nishigaya an average of $10 per month for each one. Patients typically are required to pay $5 or $10 per office visit, although some plans require no co-payment.
“But I can’t even put the patient in the room for $15,” Nishigaya said, explaining that the costs of his own salary, malpractice insurance, office rent and other overhead expenses do not allow him to earn a profit on the HMO patient.
“The only way to be profitable is to have a very large population of people who are very healthy or to get lots of patients and then save money by denying them access. That is what a lot of the big medical groups are doing,” he said.
But, said Donna Roth, Nishigaya’s office manager for two decades: “Dr. Nishigaya is not the kind of doctor who says, ‘This shot is costing me money, so I won’t give the shot.’ ”
The net result, according to Nishigaya, is that he is losing $7,000 a month on his HMO clientele, a figure only partly offset by the higher fees he receives from patients with traditional insurance and those who pay cash.
Others have advised Nishigaya to accept more HMO patients, spend less time with them and cut back on some services.
“But I’m just not ready to alter the way I practice,” he said. “It’s hard for me to say, ‘This is an HMO patient and I have to take care of them differently.’ ”
To make ends meet, Nishigaya is foregoing his own salary every other month. He made about $125,000 after taxes last year. This year, he expects to make about half that amount.
For the first time, he is seriously considering joining a big group practice or getting out. He went in with a partner to invest in some service station mini-markets (“I thought maybe I could sell Twinkies,” he jokes). He is looking into the import-export business.
“I’ve been in family practice for 25 years and I really enjoy what I do,” Nishigaya said on a recent afternoon. “The first people I saw today were a couple of longtime patients, and I really feel that they need me. I have a purpose here and I really accomplish something. Can I give that up?”
If Nishigaya decides to sell his practice, he may be in for a rude surprise. Doctors’ practices are dropping in value fast--more fallout from the physician oversupply. That is especially troubling for older doctors near retirement, who may have counted on getting a nice sum for their practice to help ensure a financially comfortable retirement.
Primary care practices are selling for up to one-third less than they did three years ago. Some cardiology, radiology and urology practices are worth only half what they were several years ago, said Trish Anderson, a director of Medical Pathways Management, a Torrance consultant.
“We’re seeing a lot of physicians who are just shellshocked when you tell them the value,” Anderson said. “We advise these doctors to start saving money now. Unfortunately, their lifestyles often are ones that cannot be easily trimmed.”
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Nishigaya’s contention that the cost-conscious practices of HMOs force doctors to give less care and compromise their professional standards is strongly disputed by the managed care industry.
HMO officials contend that patients in HMOs get better quality care because there is more emphasis on preventive services such as routine physical exams, immunizations for children and mammograms. They also say that HMOs and their medical groups monitor doctors’ performances and patient satisfaction more closely than traditional insurers.
Doctors in solo or small practices, in the HMOs’ view, are dinosaurs who are failing in managed care because they have not adapted to it. And to be sure, many doctors prefer working in managed care and are doing well financially.
Arthur Ramos thought about private practice after he completed his medical studies at UC Irvine and a family practice residency at Whittier Presbyterian Hospital.
“Private practice is typically the dream that most physicians have,” said Ramos, 37. “But it was pretty much the lifestyle of managed care that appealed to me.”
He went to work at a Downey clinic for Mullikin Medical Centers, a large Los Angeles-area managed care medical network. Unlike the long, unpredictable hours of many doctors in private practice, Ramos works 40 hours a week, gets three weeks vacation a year and a week for professional training seminars and the like. And though Mullikin is known for tightly controlling physician practices, Ramos enjoys his freedom from the hassles of running his own medical practice: hiring and firing employees, buying expensive new equipment and lots of paperwork.
“At 5 o’clock, I can go home and enjoy my family,” Ramos said. “Being a father and husband is an equally important role I play. Some of my friends in private practice, they work hard and very long hours.” Because he has fewer administrative duties, “it frees up my time to practice medicine. I’m basically doing what I’m supposed to be doing--seeing patients.”
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Doctors who are less satisfied with managed care are finding that, as HMOs grow more powerful, speaking out against them can be hazardous to a physician’s professional health.
Many of the physicians who agreed to be interviewed by The Times for this series asked that their names not be used. They repeatedly expressed fears of reprisal by HMOs or managed care medical groups. “They’ll drop me from the network if I say anything against them,” was the repeated refrain.
Indeed, those fears may speak the loudest to the waning power of physicians. Stereotypically, doctors not long ago were treated like gods by their patients, even if they were ridiculed as arrogant, opinionated and egotistical. Now these same doctors fear losing their jobs for speaking their mind.
Doctors say their concerns are founded on the contracts they sign with HMOs, some of which prohibit doctors from criticizing the plan.
It is stories like that of Jeffrey L. Marxen, a La Mesa, Calif., orthopedic surgeon, that raise such fears.
In late March, Marxen sent a letter to doctors in the Sharp Community Medical Group complaining about the low payments he received for HMO patients as a member of the Sharp group. He said the HMOs were paying 20% below the cost of operating his office.
“I’ve been told that my problem is that I am providing the same level of care to capitated patients as patients with, as one colleague put it, ‘real insurance,’ ” Marxen wrote. “Unfortunately, I cannot in good conscience ration my professional obligation in this manner. . . . My general impression is that [HMOs] have the effect of systematically limiting patient access to timely, appropriate diagnosis and treatment.”
Six weeks later, Marxen got a tersely worded letter from Dr. Paul R. Reeb, president of Sharp, a big San Diego medical group. “Pursuant to Section 8b of your Specialty Care Professional Services Agreement with Sharp Community Medical Group,” Reeb wrote, “please consider this letter as notice of termination.”
Marxen’s contract had been yanked, with 60 days notice and no explanation of the reasons.
Marxen, who says he supports many aspects of managed care, wrote back to Reeb and demanded to know why he had been fired. Reeb responded with a letter that said, in part:
“Given your expressed views of managed care and Sharp Community Medical Group, we did not feel that it was in the best interest of you, SCMG and the patients for you as a dissatisfied physician to continue as a provider.”
While Reeb’s letter cited Marxen’s “lack of commitment to quality,” Marxen blames the HMO system for making it difficult to give his patients the kind of care he believes is appropriate.
“I’m told I need to see two or three times as many patients,” Marxen said. With that many patients, “you can’t even ask people how their golf game is. I like to actually talk to my patients, to ask them what’s wrong with them and take their medical histories.”
The firing “has created a lot of mental turmoil and anxiety,” Marxen said. “We’ve had patients who can no longer see me call and ask, ‘Is something wrong with Dr. Marxen? Is he under investigation? Did he do something wrong?’ ”
Times staff writer Barbara Marsh in Orange County contributed to this story.
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About This Series:
SUNDAY: Medical care is being rationed in California. That’s one of the keys to “managed care.”
By imposing restrictive policies and erecting bureaucratic obstacles, health maintenance organizations have accumulated the power to override doctors’ decisions and act determine the nature and extent of the care 17 million Californians receive.
HMOs fall short on some preventive care measures.
HMOs say they are more oriented toward preventive care than traditional fee-for-service medicine, noting that the healthier they keep their members, the more money they’ll save. In fact, the fee structure of many HMOs has the effect of discouraging such basic preventive programs as child immunization. Moreover, many California HMOs score consistently low on measures of preventive care.
MONDAY: The state’s HMOs are regulated by a toothless watchdog.
Although HMOs function as insurance companies and as health care providers, their primary regulator isn’t the Department of Insurance or the Department of Health Services. Instead, they are overseen by the Department of Corporations, a notoriously weak agency whose other duties include regulating escrow companies and mortgage lenders. In 20 years, it has levied just one fine against an HMO.
TODAY: Key decisions about your medical care have been taken out of your doctors’ hands.
Doctors across California feel they’ve been deprived of their role as patient advocates. That, compounded by a clamp-down on fees that has sharply reduced their income, has some doctors fleeing the state or the profession.
WEDNESDAY: If something goes terribly wrong, you may not be able to sue.
Many HMOs require patients to pursue medical claims thorugh arbitration processes rather than the courts.
HMO cost-cutting transfers millions of dollars from medical care to corporate coffers.
The “upstreaming” of medical dollars to HMO shareholders has become an issue with the employers and governments that pay the medical bills.
Your HMO may not pay for your trip to the emergency room.
Emergency room physicians say HMOs impose obstacles to patients getting urgently needed care--and then resist paying for the care that’s provided.
THURSDAY: The system can be improved.
Patient-care advocates and some HMO executives agree that much can be done to improve members’ access to care and information. Among the proposals are creation of a statewide HMO ombudsman, improvement of patient surveys and increasing resources for state regulators.
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First Signs of Retreat
The total number of doctors licensed to practice in California has begun to fall as physicians retire, leave medicine or flee the state for locales where HMO enrollment is scant.
Note: Figures are for fiscal years beginning July 1, except latest, which are as of May.
Source: California Medical Board
Researched by JENNIFER OLDHAM / Los Angeles Times
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Ounce of Prevention
Q. How would you rate your health plan on providing preventive medical care?
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HMO Other* Traditional** Excellent 39% 32% 30% Good 45% 42% 48% Not so good 6% 12% 7% Poor 3% 6% 5% Don’t know 7% 8% 10%
*--*
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On Hold
Q. How would you rate your health plan on the time it takes to get an appointment to see a doctor for a check-up or minor medical problem?
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HMO Other* Traditional** Excellent 36% 37% 46% Good 44% 42% 35% Not so good 12% 12% 8% Poor 6% 4% 2% Don’t know 2% 5% 9%
*--*
* Other Managed Care
** Traditional insurance
Source: Los Angeles Times telephone poll of 3,297 adult Californians, June 17-25. May not add to 100% because of “not sure” and declined responses.
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“There are definite problems with HMO care, but we have few other choices at this point. Medicine has become inefficient and can’t continue as is. We can’t go back to the “good old days” as much as some of us would like.”
Dr. Gil Solomon, Greater Valley Medical Group in West Hills
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“Your physician might be at financial risk if he tries to provide you with the best quality health care. This is what managed care is about. This information has to be given out to the public.”
Dr. Michael E. Klein, a Glendale gastroenterologist
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“My experiences in dealing with FHP have been positive. They give their physicians and patients support and backup not only when they are ill but also in preventive medicine with special programs.”
Dr. Nagwa Azer, a La Puente general practitioner
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“My experience with managed care and HMOs has been as a safety net for the large cracks created by managed care. My practice is full of patients who go outside their physician networks, despite the financial penalty, to receive care from me.”
Dr. Nanette E. Wuchenich, a Redlands obstetrician-gynecologist
