Reconciling Needs of Patients With Needs of Practice

When internist Sam Fink was starting his practice, he made an early decision to say no to managed care.

“I rejected a system of medicine in which the physician would never have a real incentive to meet patients,” he said.

A dozen years later, Fink is still steering clear of that system and is doing business at his Tarzana practice in a relatively old-fashioned way.

Unlike most primary care physicians in this area, Fink relies on fee-for-service payment, mainly from Medicare and private insurers’ preferred provider organizations (PPOs). Instead of signing up with a managed care group to treat patients for fixed monthly fees, he gets paid by billing insurers for specific work he has done.

Fink is not the only doctor who has avoided managed care entanglements, but health care experts say he’s in a minority among primary care physicians--such as internists, pediatricians and family practitioners.

Steve Valentine, head of the Camden Group, an El Segundo-based consulting firm, estimates that two-thirds of the primary care doctors in Southern California work under some kind of “capitated” contract, in which they’re paid a monthly fee for each of their patients. Valentine says most specialists still work on a fee-for-service basis, in and out of HMO plans.

Nat Linhardt, an internist in practice with Fink, made his own break with managed care less than a year ago. Linhardt left a Culver City group practice and made a fresh start in the San Fernando Valley, taking just a handful of patients with him.

“What I did, most people aren’t willing to do,” he said.

Linhardt suffered a temporary economic setback. But he has roughly 600 patients now, 10 months into his new practice, with a payment mix consisting of about half Medicare and half PPO. He said his income is back into the “low six figures.”

Linhardt said he went into practice seven years ago and did not start out with managed care work. But as employers switched to HMOs, more employees went that route and Linhardt’s group practice followed them.

“Seeing the writing on the wall, we put our foot in the door and joined an IPA,” he said, referring to an independent practice association, which bargains for managed care contracts on behalf of physicians.

It was downhill from there, Linhardt said. Capitation put doctors like him in the role of gatekeepers “standing in the way of the care you want to get.”

He said the system was tilted against patients who needed the most help.

“When you have a practice of HMOs, inherently people see you for free” or nearly so, he said.

“What happens is that people see you for things they would never go to a doctor for. I’ve had people tell me one of their ribs is higher than another, because it costs just $5 a visit . . . This takes up time and gets in the way of real medicine.”

And when someone’s really sick, he said, “you need to fill out reams and reams of paperwork” to get that patient referred to a specialist.

Eventually, Linhardt’s group practice was sold to a hospital corporation and Linhardt decided it was time to leave.

“I’ve never been happier practicing medicine,” he said. “I have no insurance companies dictating what to do, no doctors on utilization review boards telling me how to practice medicine. I can practice medicine as close as possible to the old-fashioned way without the money getting in the way.”

This independence comes with some costs, apart from the loss of managed care business. Fink and Linhardt say fee-for-service medicine has its share of collection headaches. Instead of getting monthly payments, doctors have to bill payers under complex and regularly changing rules.

“I think my biller spends more time per patient than I do,” Fink said. It may take 20 minutes of staff time, he explained, to bill someone for a 15-minute visit.

Fee-for-service doctors are also subject to some of the same cost-cutting pressures that have squeezed the managed care groups.

In PPOs, doctors agree to accept payments well below what they would get from traditional indemnity insurance, which used to be the dominant form of health coverage. Most doctors accept these lowered fees in return for the access to patients.

Fink said a PPO might pay $40 for an office visit that a doctor could bill at $80 under an indemnity plan. PPO rates also have dropped, he said, taking a “precipitous fall” in the mid-’90s. “With each year, the amount we’ve made has been a little less.”

Leaving a capitated managed care contract can also leave a yawning cash-flow gap when the monthly payments end and the doctor waits 30, 60 or even 120 days for billed payments to come in.

“Capitation becomes the cocaine of doctors,” Valentine said.

Cutting managed care ties can also mean cutting ties with patients, if those patients don’t have a health plan with PPO or other fee-for-service coverage.

For West Valley pediatrician Brian Greenberg, the issue here is moral as well as economic. Greenberg said his practice started to join managed care plans early in the ‘90s, “mostly at the request of patients whose coverage was changing.”

“We had to make a decision at that time whether to participate or tell the patients to go elsewhere,” Greenberg recalled. “My senior partner’s decision was ‘I’m not going to abandon my patients.’ ”

If his practice were to opt out of managed care now, Greenberg said, some 40% of its 15,000 patients would have to go elsewhere. “We’re not about to tell 6,000 children that their insurance isn’t good enough for us,” he said.