San Diego in Lead of HMO Revolution : Health care: Most enrollees are happy with plans. But activists, economists and doctors express ambivalence.

To find out where the nation’s health care system may be headed, ask anybody in San Diego.

San Diegans know more than most Americans about managed care, which controls costs by limiting consumer choice. About two-thirds of insured San Diego residents were enrolled in health maintenance organizations last year--one of the highest levels in the country.

“Every other major city and county in the country will be facing within five years the situation we are facing today,” predicts Dr. Robert Ross, the county’s health director.

What is the situation? Consumers, doctors, economists and health policy experts express a deep ambivalence about managed care’s effects on San Diego.

The system apparently pleases the healthy majority of consumers with access to doctors and hospitals at affordable prices. But those with unusual, chronic or serious illnesses often fail to benefit. Many San Diegans can’t switch health plans because their employers offer only one. And consumers find it extremely difficult to fight a system that gives doctors financial incentives to minimize treatment.

More broadly, managed care hasn’t helped San Diego resolve the basic issues that gave rise nationally to President Clinton’s abortive campaign last year for health reform: soaring costs and providing care for people with little or no insurance.

According to Labor Department data, the costs of medical care in San Diego jumped 105% in the 10 years through 1994, compared to a national increase of 98%. Although the pace of medical inflation here slowed markedly in the last year in comparison to the nation, economists consider the recent trend inconclusive. Moreover, as the San Diego economy struggles out of its worst period since the Great Depression, health care workers report rising numbers of uninsured patients seeking care.

Surveys suggest that San Diegans generally are satisfied with their health care. National Research Corp., a Lincoln, Neb., research firm, recently polled 130,000 consumers nationally, including 1,380 San Diegans. Sixty-two percent here expressed overall satisfaction with their health plan, compared to 55.9% nationwide.

San Diegans were especially pleased with the quality of their care and the minimal paperwork involved. Eighty-five percent said they would recommend their doctor to a friend.

Michael Kotsala and his wife Pamela love the cheap rates. Michael, an aircraft machinist at the North Island Naval Aviation Depot, pays Health Net about $105 a month to cover their family of five. In eight years, the Kotsalas say they’ve had to rush their two active older youngsters to the emergency room with broken bones and other sports injuries at least five times and not once have they faced any out-of-pocket charges. One day in mid-July, waiting with their baby Allison for her six-month checkup at UC San Diego’s family medicine clinic in the Hillcrest area, Pamela noted that their co-payment for the appointment was only $5.

“When I was in the hospital having her, I had a C-section and we didn’t have to pay a dime,” she said. “A dime!”

Still, some San Diegans give low ratings to key aspects of their health care specifically associated with managed care and HMOs. In the National Research Corp. study, 43% were less than satisfied with their access to specialists. And the same proportion were dissatisfied with their freedom to choose their own doctor.

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Of course, managed care in San Diego--like elsewhere--isn’t the result of a consumer revolt. It arose because employers threw up their hands at the rising costs of employee health care.

In the late 1970s, an unusually active group of large employers--including defense and aerospace contractors, retailers, banks and local schools--got together to brainstorm ways to rein in double-digit increases in health benefits. The group even launched its own network of hospitals and physicians offering services at rates below traditional insurance plans. So employers couldn’t have been more receptive when HMOs rushed into the market in the early 1980s.

A decade later, San Diego stands as a citadel of managed care. A handful of health plans and providers have come to dominate the scene. Among health plans, Kaiser Permanente, PacifiCare and Health Net together claim nearly two out of three HMO enrollees. And many local hospitals, clinics, physicians and other providers have merged to form or align themselves with four vast systems that deliver managed care: HealthCare System, Scripps Health Corp., UCSD Healthcare and Kaiser.

Experts predict more consolidation. In the last three years, competition among plans has driven HMO premiums down 15% to 20%, San Diego insurance brokers say. With hospitals continuing to slash work forces and seek merger partners, adds the county’s Ross: “In this town, you can’t go more than a week without hearing a rumor about a new consolidation or an announcement about hospital layoffs.”

As San Diego’s economy struggles to shake off recession, pressures from employers seeking to cut benefit costs persist. The county lost 60,000 jobs in the early ‘90s, with defense and related industries hardest hit. General Dynamics Corp.--once San Diego’s largest private employer--has virtually left town.

Many remaining employers are sharpening their pencils. This year, San Diego Gas & Electric, with a work force of about 4,000, is zeroing in on ways to trim costs and improve the quality of its health, dental and vision care plans. Says Bruce Williams, a manager: “We are looking at all our variable costs--every single dollar we spend.”

Though employers fostered managed care’s growth here, HMOs found San Diego attractive for other reasons too.

Health plans rushed to sign up the county’s younger-than-average--and presumably healthier--population. (Fifty-nine percent of San Diego residents are under 35, compared to the national average of 53%.) In the late 1980s, especially, the elderly market looked enticing too, because government reimbursements for Medicare were favorable. HMOs see new opportunity as the county prepares to shift more of its Medi-Cal recipients into managed-care plans next year.

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For all its experience with managed care, San Diego has yet to understand--let alone digest--the surprising changes under way.

Consider managed care’s effects on the county’s emerging biotechnology industry.

A source of community pride and hoped-for job growth, San Diego’s fledgling biotech firms--like their peers elsewhere--face hurdles in the marketplace that many in the business attribute to the health care revolution. It’s no longer enough for them to prove, as the government requires, that their experimental drugs, therapies and tests are safe and effective before they can be sold. Now, HMOs increasingly won’t approve use of their products unless the companies do extra research that shows their products save money too.

Last year, Molecular Biosystems Inc., a publicly traded San Diego firm, got federal approval to market Albunex, a protein-based liquid used in ultrasound heart exams. Kenneth J. Widder, Molecular Biosystems’ chairman, says the product can save cardiologists costly additional tests and even surgeries for coronary artery disease.

But Albunex costs about $80 to $150 per exam. Widder estimates the company will spend $2 million to $10 million on research to prove that doctors using Albunex can save money. The company is talking with its marketing partner, Mallinckrodt Medical Inc. of St. Louis, about how to pay for the research.

Such marketing delays, combined with other factors, forced Molecular Biosystems to divert some of its research staff and halt development of another product aimed at earlier and better detection of liver cancer, Widder says. Earlier this year, the company cut its San Diego work force 25%, to 150 employees.

Other local casualties of managed care are far more obvious.

Two years ago, UC San Diego opened Thornton Hospital, a $87-million, state-of-the-art hospital in affluent La Jolla. With sprawling gardens, an atrium studded with palm trees and the ambience of an upscale hotel, Thornton was intended to attract privately paying patients. But local health care sources say much of its expected clientele has been absorbed instead by managed care. In a region where one of every two hospital beds is empty, Thornton stands nearly deserted, with less than one-fifth of its beds occupied on the average day.

Here as elsewhere, managed care has created an excess of specialist physicians. Many are fleeing San Diego for places still unpenetrated by HMOs. One day late in June, with a moving van parked outside his office, Dr. Steven Kotner fought back tears as he told how HMOs had lured away his patients with cheap insurance prices.

“The majority would have stayed with me if they could,” he says.

His wife Andy, who managed his practice, defiantly lifts her chin to add, “They want us in Tennessee!”

Meanwhile, primary physicians, the workhorses of managed care, shoulder the patient burden. Dr. Laura Nathanson, a family practitioner in Encinitas, says it’s tough to keep track of the terms of her patients’ 18 different health plans. Her practice employs two staffers to keep up with the plans’ ever-changing lists of approved providers, so patients won’t get charged for services that aren’t covered. When she’s on call at night, Nathanson keeps three separate lists of approved test centers, hospitals and emergency rooms so she can direct patients to the right place.

“I routinely tell patients, ‘Don’t go anywhere--even to Nordstrom’s--unless you’ve had your visit authorized,” she jokes.

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If most San Diegans are satisfied with their health care, it’s often patients with unusual ailments who lose out.

Even Bonnie Hough, a former family physician, slipped between managed care’s cracks.

Hough, severely injured in a light plane crash in 1979, lacks feeling in the lower half of her body and uses a wheelchair. In 1989, she says, while retraining for a specialty in psychiatry at UC San Diego’s medical school, Hough made a routine visit to see her primary care physician through the university’s Health Net health plan.

Hough requested a referral to a specialist in rehabilitation medicine, figuring an expert would ensure she received the special preventive care that paraplegics require, she says. She knew, for instance, that she should have a kidney test, because paraplegics who use a catheter for urination run the risk of deadly infections.

But her physician, she says, denied her request for a referral.

About a month later, Hough says, she became ill and developed a pressure sore on her buttocks that opened and drained pus. “It’s something that the rehab doctor would have checked for and taken care of and would have prevented,” she says.

Still, her primary doctor refused to refer her to a rehab specialist, she says. The sore grew, and eventually she needed surgery to have a portion of her buttocks removed. Afterward, she spent three months in a nursing home and was on round-the-clock nursing care for months after that.

“I was on my back for an entire year, with two surgeries, out of work, with massive costs to this health care system, because it denied me preventive care,” she says. Related medical complications left her “weak and downhearted,” prompting her, Hough says, to drop out of school. She hasn’t worked since.

Dr. Geoffrey MacPherson, Health Net’s local medical director, acknowledges that routine managed care “doesn’t adequately meet the needs of the special patient.” Health Net, he says, is taking steps to remedy the problem. In recent months, its San Diego office has hired three nurses as case managers for patients with special needs--people with spinal cord injuries or dependent on ventilators or the frail elderly or AIDS patients. Among other duties, the nurses expedite referrals to specialists, he says.

“We haven’t hit all the Bonnie Houghs, but our aim is to do that,” MacPherson says.

Most San Diegans know less than Hough about their own health care. Consumer advocates say people here generally understand little about what they’re buying when they join an HMO. Jeanne Ertle, executive director of San Diego Neighbor to Neighbor, a local activist group, says consumers don’t carefully compare benefits, co-payments or deductibles. “Ultimately, it’s the bottom line,” says Ertle. “Which one can they afford?”

Patient advocates report rising numbers of HMO enrollees who don’t understand how their health plans differ from traditional insurance. Joy Parker, a lawyer for a state-funded agency that advises senior citizens on health insurance, says seniors in Medicare HMOs frequently complain when their plans refuse to cover visits to out-of-plan doctors. Others get dunned unexpectedly for unauthorized emergency room visits. And some do not understand why they can’t insist on referrals to specialists.

Nearly every day, says Maria Dela Cruz, she counsels Latino Medi-Cal patients at UCSD Medical Center who don’t even realize they’ve joined an HMO. Often, she says, their care is delayed as they get bounced from one provider to another. In other California cities, HMOs have been accused of misleading marketing practices.

“There is no one in the system to give patients the complete array of information for them to make an informed choice,” says San Diego lawyer Louis B. Rubin.

That’s a key issue for Rubin’s clients--18-year-old Robert Fausett, his parents and guardian--in a lawsuit involving TakeCare Health Plan’s denial of surgery to correct Fausett’s cleft palate. FHP International bought TakeCare last year.

The Fausetts charge that when they enrolled in TakeCare three years ago, they did not know the plan’s contract with a physicians’ group, Family Practice Associates, gave the doctors “substantial financial incentive for the denial of care from outside medical specialists.” The physicians group is not a defendant in the lawsuit.

The suit, in U.S. District Court in San Diego, alleges that an affiliated company, FPA Medical Management Inc., profited by rationing medical care and that its review of medical services was “tainted.”

The defendants, FHP and FPA Medical Management, deny the allegations, which cut to the heart of the debate over the financial incentives that drive managed care. Traditional health insurance paid doctors for services rendered; critics note that under most managed-care plans, doctors earn less as they provide additional care.

A spokeswoman for Fountain Valley-based FHP says the state Department of Corporations, which regulates HMOs, told TakeCare a year ago the surgery should not have been denied and requested it review the case. FHP agreed that the surgery should be done, she said, and tried to contact Robert Fausett to tell him the procedure had been approved. But the family had left the plan that month, she said. Rubin says Fausett received his surgery through another plan last fall.

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So HMOs and managed care get mixed reviews from today’s San Diegans. As the nation continues to wrestle with health care reform, the ambiguities will only deepen.

Managed care, for instance, has yet to tackle the problem of San Diego’s growing population of uninsured residents.

With the Mexican border at the county’s southern boundary, many of the uninsured pouring into its emergency rooms are undocumented Latin American immigrants.

The Urbina family’s situation is telling.

On July 18, 4-year-old David Urbina ran smack into the metal corner of a folding table at a San Diego Laundromat. His mother, Lady Urbina, a Venezuelan who says she has no car and no health insurance, had no idea where to take him for treatment. A helpful bystander suggested UC San Diego’s emergency room three miles away and drove the woman, David and his 8-year-old brother Gabriel there. David’s cut was immediately dressed.

But his mother’s deep worries about her sons’ health care persist. Gabriel was born deaf. David, partially deaf, uses a hearing aid, and his mother worries that he could lose the rest of his hearing. She earns $200 a month selling handmade crafts, an income supplemented by up to $500 a month from money her husband sends from Venezuela. So she can’t afford a hearing specialist.

Many of the uninsured are legal residents. Layoffs in the recent recession have swelled the ranks of the self-employed, a group for whom insurance is often too costly or even unavailable.

Five years ago, Celia Martinez, who cares for a paralyzed invalid, says she applied for insurance through Kaiser’s plan for individuals. The 63-year-old woman, who stands 5 foot 4 and weighs 200 pounds, says Kaiser refused to allow her to join because she weighs too much.

Earlier this summer, Martinez broke her arm, couldn’t work for six weeks--and found herself having to arrange a payment plan for the care she received through UCSD Medical Center.

“When it comes to California, they don’t help you,” she says. “You don’t get no help. Everything is pay, pay, pay.”

Times staff writer Chris Kraul in San Diego contributed to this story.

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Model City

With one of the highest levels of HMO enrollment of any city in America, San Diego provides a blueprint for the future of U.S. medicine. Here’s a look at San Diego’s health care system and the health of San Diegans.

MANAGED CARE

Fewer than two in 10 San Diegans with commercial health insurance are covered by traditional fee-for-service plans, while a large majority belong to health maintenance organizations.

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% in % in Preferred City HMOs Provider Organizations Sacramento 77.2% 9.6% Vallejo-Fairfield, Calif. 76.4% 10.5% Rochester, NY 72.2% 1.5% Tucson, Ariz. 71.9% 11.7% Worcester, Mass. 68.4% 5.4% Riverside 67.0% 13.1% Albuquerque, N.M. 66.8% 8.6% San Diego 66.1% 17.6% San Francisco 65.7% 14.0% San Jose 65.7% 18.6% Buffalo, N.Y. 65.5% 2.0% Los Angeles-Long Beach 64.2% 14.2%

% in Traditional City Insurance Sacramento 13.2% Vallejo-Fairfield, Calif. 13.1% Rochester, NY 26.4% Tucson, Ariz. 16.4% Worcester, Mass. 26.2% Riverside 20.0% Albuquerque, N.M. 24.6% San Diego 16.2% San Francisco 20.3% San Jose 15.7% Buffalo, N.Y. 32.5% Los Angeles-Long Beach 21.5%

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Sources: National Research Corp., Group Health Assn. of America

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THE HMOs

Four big health maintenance organizations dominate the HMO field in San Diego, with a number of other plans also providing care to a significant population.

Plan: Enrollees in San Diego

Kaiser: 365,000

Aetna*: 143,000

PacifiCare: 131,000

Health Net: 128,000

FHP/TakeCare: 65,000

Blue Cross California Care: 60,000

Cigna: 51,000

* Combines commercial plan and Champus plan for military dependents

Source: Medical Data International Inc.

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THE NETWORKS

Overlapping San Diego’s HMOs is a highly consolidated system of health networks that dominate hospital care, both for HMO members and other residents.

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Health System Admissions Market Share by Hospital Admissions Scripps Health Corp. 58,125 21% Sharp HealthCare System 57,197 20% UCSD Healthcare Network 51,970 18% HealthFirst 30,140 11% Kaiser 22,288 8% Unaffiliated hospitals 63,193 22%

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Source: Medical Data International Inc.

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HEALTH FACTS

Hospitals: 44

Live Births: 44,054

Emergency Room Visits: 623,828

Inpatient Operations: 73,593

Outpatient Operations: 71,569

General Hospital Occupancy Rate: 49.1%

Total Hospital Discharges: 248,199

Total Patient Days, General Hospitals: 2,102,415

Total Hospital Charges, 1992: $3,173,490,533

Cost, Average Hospital Stay, 1992: $11,875

Cost per Hospital Day, 1992: $2,285

Note: Data is for San Diego County. All figures are for 1993, unless otherwise noted.

Source: California Office of Statewide Health Planning and Development

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HEALTH MEASURES

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San Diegans vs. All Californians San Diegans Californians Deaths Due to Cancer, per 100,000 persons: 123.1 123.2 Deaths Due to Coronary Heart Disease, per 100,000 persons: 98.2 111.0 Drug-Related Deaths, per 100,000 persons: 7.7 6.8 Infant Mortality, 1989-’91, deaths per 1,000 live births: 7.5 8.0 Incidence of AIDS, per 100,000 persons: 33.0 33.3 Incidence of Measles, per 100,000 persons: 13.6 16.0 Incidence of Tuberculosis, per 100,000 persons: 14.6 16.9 Low Birth-Weight Infants (less than 2500 grams): 5.6% 5.8% Births with Late* or No Prenatal Care: 28.2% 26.6%

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* “Late” defined as care beginning after first trimester of pregnancy.

Note: Data is for San Diego County. Figures are three-year averages for 1990-’92, unless otherwise noted.

Source: California Dept. of Health Services

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CONSUMER SATISFACTION

San Diegans generally are more satisfied with their health care than the average American. At comparison of satisfaction levels in a number of key categories.

% Completely or Very Satisfied

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Benchmark San Diego National Overall Satisfaction 62% 55.9% Overall Quality of Care 74% 70.4% Ease of Seeing a Doctor of Your Choice 57% 61.3% Access to Specialists 57% 59.9% Time Spent Waiting Past Scheduled Appt. 50% 44.4% Time Spent Filling out Paperwork 70% 61.2% Out-of-Pocket Costs 59% 42.0% Days Between Making Appointment and Seeing Dr. 62% 58.3% Distance to Dr.’s Office 61% 57.8% Would Recommend Doctor 85% 86.6%

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Source: National Research Corp. surveys