Making a Killing
HMOs and the Threat to Your Health

Contents | 1 | 2 | 3 | 4 | 5 | 6 | Apdx 1 | Apdx 2 | Apdx 3 | Notes

Making a Killing

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Chapter 1

The End of Health Care

Who Plays God in a System Bent on Profit?

"In the spring of 1987, as a physician, I caused the death of a man," testified Dr. Linda Peeno, to Congress. "Although this was known to many people," she continued, "I have not been taken before any court of law or called to account for this in any professional or public forum. In fact, just the opposite occurred: I was 'rewarded' for this. It bought me an improved reputation in my job, and contributed to my advancement afterwards. Not only did I demonstrate I could indeed do what was expected of me, I exemplified the 'good' company doctor: I saved a half million dollars."1

"The decision about the California patient [in need of a heart transplant] was made from the 23rd floor of a marble building in Louisville, Kentucky," added Peeno, herself a Louisville resident, a medical reviewer for Humana and medical director at Blue Cross/Blue Shield Health Plans. Peeno had no license to practice medicine in California, but to her employer, this was irrelevant. "The patient was a piece of computer paper, less than half full. The 'clinical goal' was to figure out a way to avoid payment. The 'diagnosis' was to 'DENY.' Once I stamped 'DENY' across his authorization form, his life's end was as certain as if I had pulled the plug on a ventilator."2

Linda Peeno
Dr. Linda Peeno
Peeno summed up her work in a chilling message: "Whether it was non-profit or for-profit, whether it was a health plan or hospital, I had a common task: using my medical expertise for the financial benefit of the organization, often at great harm and potentially death to some patients."3

Welcome to "utilization review" (or U.R. as it is called) a system whereby the bureaucratic review of HMOs second-guesses the calls of practicing physicians while the health of seriously-ill patients dwindles against an ever-expiring clock.

Peeno is a hero for her honesty in bringing industry practices to light.

Fortunately, other doctors are swinging into action too. Signed by 2,300 Massachusetts physicians, this "Call To Action" appeared in the December 3, 1997 issue of the Journal of the American Medical Association.

"The time we are allowed to spend with the sick shrinks under the pressure to increase throughput, as though we were dealing with industrial commodities rather than human beings…Doctors and nurses are being prodded by threats and bribes to abdicate allegiance to patients, and to shun the sickest, who may be unprofitable. Some of us risk being fired or 'delisted' for giving, or even discussing, expensive services, and many are offered bonuses for minimizing care."
A Stockton, California gynecologist recently made an even stronger statement. He quit his practice over these concerns.

In a letter to all his 2,651 patients, Dr. Daniel Fisher wrote: "As of 7/1/98 I am quitting the practice of medicine. The system of HMOs, managed care, restricted hospitals and denial of needed medications has become so corrupt, so rotten, that I cannot stomach it any longer."

"My dad told me I had to like the guy I saw in the mirror when I was shaving," the 61 year-old physician said. "And I was getting where I didn't like that guy any more…[The system is controlled by] for-profit HMOs with dividend-hungry shareholders and high-salaried administrators…The prime concern became profit. And they make that profit by exacting the highest possible premium from employers and paying out as small a benefit as possible to patients."

Fisher recounted how he requested a hysterectomy for a woman whose menstrual pain was so severe she was unable to live normally for one-third of the month, but Fisher was denied by a staff nurse who relied on a book of HMO criteria. "I had fifteen years of postgraduate training, but my medical judgment counts for nothing," Dr. Fisher said. He also felt the pressure from HMO economic profiles that track doctors' prescribing patterns and pressure doctors to write less prescriptions to cut costs. "I was beginning to feel the pressure and change my prescription habits from the best medicine I knew to the one that would look best on my profile; and I was hating myself for it."4

Incompetent physicians were once the principal perpetrators of medical negligence by violating the standard of care or treatment. But today, managed care corporations are the new threat to quality health care. The malpractice is both blatant and fiscally shrewd.

While HMO bureaucrats overrule the best medical judgment of professionals on the scene, managed care companies have also recently designed a more insidious system that can pit doctors against their patients. Where once doctors were paid based on the treatment they dispensed, under this scheme physicians are paid a fixed budget for every patient under their charge, regardless of how much treatment is warranted. The less doctors do for patients, the more of that budget they get to keep. Ultimately, this calculated profit formula will decimate medical ethics, leaving the patient without an advocate in a foreign medical wilderness.

The main question we must ask about both the role of bureaucrats and the capitation system of paying doctors is, are HMOs responsible for their patients? Despite their advertising, which claims they are dedicated to the best medicine, HMOs consistently argue that they are not responsible, that they are simply the down-sizers. In fact, they argue that those making the backroom decisions that override the doctors are not practicing medicine. As Dr. Peeno's stunning testimony at the beginning of this chapter shows, they do not want to be responsible for the consequences of their downsizing.

The Rise of the Bean Counters over the Physicians:
"Quantity, Not Quality"

Doctors and nurses would hardly downsize themselves and their patients' care voluntarily. HMO bureaucrats now control much of the medical system from top to bottom. They replicate the ethic of bureaucrats at Ford and General Motors. Rather than disclose or fix safety defects in the Pinto and Corvair, they turned the safety experts' warnings about the loss of human life into budgetary line items, the cost of doing business.

The HMO bureaucrats may have MBA, MD, Ph.D. or some combination next to their names — but their role dictated by management becomes that of accountants. For example, the Director of Utilization Management Cheryl Tannigawa, of Long Beach-based Harriman Jones Medical Group and later of PacifiCare, was clear to a California ophthalmologist when she was trying to curb the number of cataracts operations he performed. In a memo, she put it bluntly. "I have thought about our discussion yesterday and I would like to make one issue clear," wrote Tannigawa. "My intent was not to find fault with your professional integrity. I feel that you are an excellent surgeon and physician. My focus is on quantity and not quality. I apologize if you felt that I was questioning your skills."5 [emphasis in original] As with Peeno, this focus is rewarded: Tannigawa later went on to become a medical director at PacifiCare. The ophthalmologist, criticized for performing more cataract surgeries than other doctors, had a population of patients who were older. In subsequent patient satisfaction surveys conducted by the medical group, the ophthalmologist's ratings were among the highest.

Today, Tannigawa claims her written remarks have been "misconstrued" and that, "Cataract surgery is the most common surgery performed in the United States. I'd like to believe all of those were warranted but history and past research suggest otherwise."

HMOs hire "medical directors" like Tannigawa to approve or deny physician decisions not only about operations like cataracts but also on such life and death issues as cancer care. These directors, while MDs, typically do not examine the patient and often are not specialists in the treating doctor's area of expertise. Many times they are not based in the same state, and not licensed to practice medicine in that state. But they are often stock-sharing employees with a stake in keeping medical costs to a minimum. The fact that they do not examine patients when making decisions which can have a devastating impact on the patient, actually works to the companies' advantage: no examination generally means they cannot be held liable for medical negligence resulting from their decisions.

Recognizing the problem, numerous state medical boards have launched efforts to regulate medical directors who override other doctors' decisions without an examination. The California Medical Board recently passed a resolution that says the "making of a decision regarding the medical necessity…of any treatment constitutes the practice of medicine," and anyone making such a decision without a medical license is violating California law. Board spokesperson Candis Cohen said, "This resolution is another way the board is expressing its commitment to the sanctity of the physician-patient relationship."6 Despite documented abuses, there have been no traceable cases where a medical director has actually been sanctioned.

Overriding the Doctor-Patient Relationship

While the California Medical Board has taken a stand against the unauthorized practice of medicine, utilization review is still widespread. It can be deadly when bureaucrats disregard the recommendations of expert physicians.

Judith Packevicz would have had her cancer treated sooner if not for this process. The New York woman suffered from a rare form of metastatic cancer of the liver and, through 1998, was delayed and denied potentially life-saving treatment by her HMO. According to the family's lawsuit, her HMO — Mohawk Valley Medical Plan (MVP) — refused to pay for a liver transplant recommended by her oncologist with the support of all her treating physicians, causing the woman to live out a death sentence. Without the transplant, she faced certain death. Her quality of life, according to the lawsuit filed May 27, 1998 in Federal Court, Northern District of New York, was "indescribably miserable both physically and mentally." Her son, Thomas Dwyer was "ready, willing and able" to donate part of his liver to save his mother's life. Fourteen friends of the family also volunteered to donate a part of their livers. According to the family, the treatment was available close at hand at Mt. Sinai Hospital in New York City, but at a six figure cost. But on the grounds that it "does not meet the medical community standard of care for this diagnosis," the HMO's medical director said no, without a physical examination. On this life and death decision, there was no explanation of why the procedure failed to meet the standard.7

The mother of four children, Mrs. Packevicz was the stepmother of three and a grandmother of nine. A well-known figure in Saratoga Springs, she was an active and successful singer in a Sweet Adeline quartet until her illness forced her to stop. Packevicz's physicians predicted a very high probability of survival with significantly improved quality of life if the transplant was performed in a timely manner, and therefore recommended it. That was not enough. Mrs. Packevicz was forced to sue the HMO and, only then, did the company relent.8 Packevicz died during the transplant procedure because, according to her family, she had become so weak from the delay that her veins were paper thin.

For its part, MVP claims Packevicz's death was solely the result of complications from surgery, not any delay caused by its denials. MVP also says that it sent Mrs. Packevicz's file to two external review organizations (see Chapter Six regarding review companies) who, though not examining her, said the procedure was not warranted.

According to the HMO, the Packevicz lawsuit did not spark its sudden about-face in approving the transplant, but that the company simply lacked sufficient information from Mt. Sinai. This claim rings hollow given the fact that before MVP's denial, the company received a letter from Packevicz's oncologist, Dr. Brian Izzo. Izzo stated: "Judy lives perpetually on the edge of hepatic failure…14 individuals have stepped forward to volunteer the left lobe of their liver for transplant…Judy saw Dr. Max Sung, a medical oncologist at the Mt. Sinai Medical Center regarding a second opinion for what type of treatment should be offered next…He feels strongly that liver transplant is recommended at this juncture and that the procedure should be done sooner rather than later…Regarding the issue of out-of-plan coverage, I don't believe there is another medical center available that could or would attempt this particular procedure, thus making the choice of Mt. Sinai unarbitrary." MVP did not mention any lack of information or any treatment alternatives in its letters denying the procedure. The bureaucracy defied Packevicz's doctors and put the burden on the family to fight back.

Renee Berman, a resident of West Los Angeles, is another example of how HMOs deploy this cost-cutting tactic at the expense of human life. Five doctors examined her after a cancerous tumor appeared on her liver. All five recommended immediate surgery. But a sixth doctor, who never examined Mrs. Berman but did know of the other recommendations, denied her operation. This physician was the head of the utilization review committee. Renee's husband, Peter, blames this doctor and the HMO system for Renee's death in the summer of 1997. He believes that their HMO, Health Net, could have stopped his wife's cancer with the procedure but refused to do so in order to save money.

No system, profit or nonprofit, private or government funded, can afford to spend large sums of money on an infinite number of experimental treatments. According to the Berman family's legal complaint, however, Renee's "treatment options were neither experimental nor investigational and were even covered under the Health Net plan which provided benefits to her. Those treatment options, however, were not within the expertise or skill of the Health Net medical providers and required Health Net, under its plan, to permit Renee Berman to obtain the treatment necessary to treat her medical condition 'out-of-network'."9 Renee Berman stayed alive because she sought those treatments against Health Net's advice. But, according to Peter, delays in getting her the surgical procedure she needed ultimately cost her her life.

If these were isolated cases, cases where borderline judgment was involved, cases grouped in one hospital, or even one HMO, these anecdotes, painful though they are, could be excused as aberrations. But they are not. The most frequently cited cases demonstrating the pernicious behavior of medical directors come from Health Net, now called Foundation Health Systems after a 1997 merger. Health Net became a national example for the worst of managed care. While company officials testified the problems had been corrected, Renee Berman's ordeal post-dated the more high-profile nightmares that sprung from the same practice of medicine without a physical exam.

Christine deMeurers, a mother of two, was one of a string of women denied life-saving bone marrow transplants by the HMO's medical directors, even though practicing physicians recommended them and the transplant was listed as a covered benefit. In fact, once she received her bone marrow transplant — delayed because she had to wrangle with the HMO and then paid for by university doctors themselves — her cancer went into remission. She received treatment on September 23, 1993 and had almost two years with her family, dying on March 10, 1995, including at least four completely disease-free months. Her family will never know the impact of the delay and anxiety caused by being forced into the streets to fundraise in a campaign for her life. Her children told her husband that they often went to bed with this on their mind.

In the deMeurers's case, the arbitration panel that heard the facts issued a stinging $1 million rebuke of Health Net and condemned the interference in the doctor-patient relationship by Health Net medical directors as "extreme and outrageous behavior exceeding all bounds usually tolerated in a civilized society."

Did Health Net get the message of this infamous case — the subject of a Time magazine cover story? Responding to deMeurers's death and the arbitration judgment, Dr. Sam Ho, then a Health Net Medical Director and now a PacifiCare Medical Director, put it this way: "I'm sorry the panel didn't see that Health Net was doing what was best for the patient, which was to deny the treatment as investigational, and which in the end was proven the right decision."10 Meaning, because she died, Health Net was redeemed for its lack of payment.

The case was not an isolated incident.

This managed care philosophy is not just aimed at consumers; cost-cutting can be focused on one's own employees. Janice Bosworth was a top performing employee for Health Net, but Health Net initially refused to pay for her cancer treatment. Bosworth's oncologist recommended a bone marrow transplant with high-dose chemotherapy. However, a Health Net medical director called City of Hope Medical Center, where Bosworth was being examined in preparation for the transplant, and explained that Health Net would not pay for the treatment. The medical director, according to Bosworth's husband Steve, also stated that the City of Hope physician should not say anything about the protocol, but instead should say that nothing could be done and send the Bosworths home. According to Steve Bosworth, Health Net went so far as to threaten City of Hope with cancellation of their contract with Health Net if the medical center performed the transplant. City of Hope's contract was cancelled, but has since been reinstated.

Ultimately, Janice Bosworth received the transplant from City of Hope free of charge. The Bosworths threatened to sue the HMO, forcing Health Net to pay for the procedure. Janice Bosworth's boss at Health Net also intervened on behalf of the company employee. Janice lived with her son and husband for another two years.

But Steve Bosworth believes the story might have had a happier ending if Janice had received a mammogram five months earlier, at her routine examination. It could have caught her breast cancer early enough and the chances are that she would be alive today. Why was none performed? Unknown to Janice at the time, according to Steve, the doctor at Health Net received a financial incentive to prevent his wife from receiving a mammogram. Bosworth says, "I blame my wife's death 20% on cancer, and 80% on managed care."

Health Net's practices are legendary. The woman whose case first shined the spotlight on the company was Temecula, California resident Nelene Fox. Her brother, Mark Hiepler, then a young lawyer, tried the case.

In December of 1993, a California jury found that Nelene was denied a bone marrow transplant, despite being a prime candidate for the procedure. The jury, outraged that Health Net employees themselves received bone marrow transplants, awarded $89.1 million to Fox's family for Health Net's conduct. Later, Health Net paid a much smaller out-of-court settlement, because of the family's desire for closure. Ironically, a critical witness in the case was Janice Bosworth, who claimed, "They hadn't learned anything by going through it with me."11

As the Bermans' case concerning denial of surgery shows, the conduct goes far beyond bone marrow transplants. The delays that the families believe took the mothers from the Bermans, Foxes, deMeurers and Bosworths have a common thread — bureaucracy dictating to medical doctors who have based a recommendation on a physical examination. A physical exam must be done by those making the medical decisions. This is a necessary element of any responsible medical decision-making process. Because HMOs consistently undermine practicing physicians, the powerful HMO industry lobby has vociferously resisted any legislation preventing an HMO medical director from denying a seriously-ill patient treatment unless a qualified doctor has physically examined the patient.

HMO bureaucrats who never examine patients should not overrule qualified doctors and make life and death decisions. HMOs claim this never happens. But if this were so, HMOs would not object to reforms like California Assembly Bill 794 in 1997 and Assembly Bill 332 in 1998, which both passed the California legislature and were vetoed, at the behest of the industry, by Governor Pete Wilson. The bills simply required that if a doctor recommended treatment for a very ill patient, an HMO could not deny it without providing an equally qualified physician who performs a physical exam.

Unfortunately, it is not just at large HMOs like Health Net where doctors' treatment decisions are being overridden by corporate honchos.

Blasting "what can only be viewed as 'unmanaged care'" in July of 1997, for instance, an arbitrator required a small Pomona, California-based HMO to pay $1.1 million, including punitive damages, to a Medicare patient who suffered from kidney failure. The HMO's medical director prevented the 69 year-old woman, Joyce Ramey, from receiving a renal biopsy, which was recommended by her doctor.

The arbitrator, retired Appeals Court Judge John Trotter, found that Inter Valley Health Plan breached the covenant of good faith and fair dealing because the HMO's corporate medical director denied doctor-recommended treatment and "whatever chance plaintiff may have had for her condition to be diagnosed and treated at an earlier stage was lost by defendants' conduct."

"The actions of the defendants are not capable of any rational explanation," Judge Trotter stated in his decision. "The refusal of authorizations, the delays, the lack of timely notice to plaintiff are unconscionable…The facts present a compelling picture of the problems and pitfalls of what has come to be called 'managed care'."12

Judges across the nation have echoed this condemnation for similar practices (when patients have been lucky enough to get before judges). Regulators have also taken HMOs to task for bureaucratizing medicine, even though most states have weak regulatory structures.

Clerks Override Doctors

It's one thing to have a doctor in a corporate office in another state vetoing the decisions of a patient's doctor. But some of these bureaucrats are little more than clerks with no medical license. The interference of such clerks in the doctor/patient relationship is tantamount to the practice of medicine without a license, and legislation sponsored by state medical boards to confront the problem is proliferating across the nation.

At some plans, these so-called "utilization reviewers" are clerks and/or nurses empowered to override treating doctors' decisions in emergency cases. In turn, many doctors have dubbed these over-the-phone authorizers as "1-800 nurses from hell."

Kaiser, for instance, was recently warned by government regulators because investigators found that, "Clinical Financial Review nurses have the authority to overrule physician decisions." This astonishing process led the regulator's audit to conclude that medical decisions at Kaiser could not be "independent of fiscal and administrative considerations." Kaiser money was dictating what medicine could be practiced by emergency doctors.13 Emergency room physicians, working in hospitals outside the Kaiser network, would treat Kaiser patients who could not get to a Kaiser approved hospital in time. The physicians would call up Kaiser phone clerks seeking the right to provide treatment. But clinical financial review nurses on the other end of the line could and often would deny the physician's requests. How endemic is this problem? The California auditors found that Kaiser, using this process, denied 25% of all emergency room treatment claims for its members outside of the HMO's network. The state required the company to "substantiate" that this was "reasonable."14

The problem wasn't just in California. In Georgia, a jury awarded $45 million to a 6 month-old boy who was forced to have all his arms and legs amputated because Kaiser's emergency phone line representative, a nurse, sent the family to a hospital forty-two miles from their home where Kaiser received a discount, rather than to closer hospitals where Kaiser did not. James Adams had a 104-degree fever and was limp when his mother called the HMO hot line. By the time he arrived at the hospital, he had gone into cardiac arrest. James was revived, but the blood flow to his extremities had stopped and amputation was necessary because gangrene had set in. Even after the verdict, Kaiser medical director Richard Rodriquez contended that the delay made no difference and, "Our issue is quality. Quality pediatric care was most available at [the hospital with discounted rates for Kaiser] Scottish Rite."15

Mrs. Adams responded, "No one can tell you that a child going into cardiac arrest did not make matters worse."

In 1998, Texas regulators fined Kaiser $1 million for complaints investigated by the state attorney general which involved delays and denials of payment for emergency room care and Kaiser's failure to deal with quality of care issues.16

How does Kaiser's retrenchment in paying for out-of-network services play out for patients? Unlike cancer treatment and transplant operations where there may be enough time to fight with the HMO for approval, these emergency situations cannot be remedied through an appeal. The difference between life and death can come down to how fast care is given.

On May 6, 1993, Dawnelle Barris called the paramedics because her 19 month old daughter, Mychelle Williams, had gone into respiratory distress and had a 106.6-degree fever. In the next crucial hours, Dawnelle came up against a system where cost-cutting and "managed" care created delayed responses and fatal miscommunication. The paramedics transported Mychelle to the local hospital trauma center, and hospital staff called Kaiser for permission to treat her beyond basic breathing treatments. Nearly four hours of delay followed.

A Kaiser administrative doctor, who had never seen Mychelle, advised the local hospital not to do any treatments beyond breathing therapy, and to have Dawnelle transport her severely ill daughter in her own car to the Kaiser hospital. Dawnelle, frightened by her daughter's condition, refused to simply put her daughter in her car. She struggled desperately with the Kaiser representatives over the telephone, trying to order an ambulance. But Kaiser wouldn't budge. When Dawnelle returned to her daughter's bedside, the girl was having seizures, and Dawnelle had to search for a doctor to treat her. It took this increase in the severity of Mychelle's condition to convince Kaiser to authorize an ambulance, but the HMO still declined to authorize initial blood work and antibiotics. By the time Mychelle finally reached the Kaiser hospital across town, it was too late. She went into full cardiac arrest, and died. An autopsy later revealed that had she been given routine anti-biotics in the County emergency room, she would be alive today. Kaiser lost this case before a jury too.17

"My baby daughter was in the trauma center and Kaiser wouldn't authorize the treatment she needed," said Dawnelle. "I kept trying to talk to my HMO doctor but they couldn't locate him. They wouldn't let her be treated and she died. No one should suffer the way that my family and I suffered. I don't feel safe with HMOs anymore."

Kaiser, of course, is not alone in creating bureaucratic systems that are unresponsive to the urgent medical indications of patients.

In October 1998, Humana faced a $13.1 million verdict in Louisville, Kentucky in the case of Karen Johnson, a young wife and mother of two children who had cancer of the cervix and whose gynecologist recommended a hysterectomy.18 Without it, she would have to undergo repeated surgical procedures, which would leave her at a significant risk that the cancer would become invasive. But Johnson was denied approval.

"The evidence presented to the jury in this case revealed a systematic scheme to deny one out of four requested hysterectomies that would save Humana between $13 million and $25 million over a three year period," said Dr. Peeno, an expert witness in the case against Humana. "The jury heard that Humana paid $1.7 million over the same period of time to a California company to review what Humana considered costly medical procedures. The physicians who worked for the California company never reviewed the patients' medical charts, never examined the patients, nor did they know the patients' medical history prior to denying the hysterectomies, and other medical procedures."

Humana's own reviewers had incentives too. "The jury also heard evidence that Humana paid its in-house medical reviewers a $5,000 bonus for limiting hospital admissions and another $5,000 bonus for shortening hospital stays," said Peeno.

Humana has appealed the verdict, saying that it stands by its denial of Johnson's hysterectomy because three board-certified gynecologists had recommended against it.19

Stonewalled to Death?

Sometimes medical negligence amounts to preventing patients from seeing the right doctor, the one who could save their life. In the case of Glenn Nealy that physician was his cardiologist. If not for the rule of the bureaucrats, Nealy would likely be alive today, according to a court case filed by his family.

According to the family's lawsuit, in March 1992, Glenn Nealy, 35 years old and the father of two young boys, was notified by his employer that there would be a change in his health care coverage and that he could elect coverage under one of three plans. Glenn chose an HMO after receiving assurances from its agents that the plan would enable him to continue treatment of his unstable angina and would allow him to see his cardiologist. The doctor was treating Glenn with a complete drug regimen including nitrates, calcium blockers, and beta blockers.

On April 2, 1992, at the direction of the managed care company, U.S. Healthcare, Glenn went to the office of a participating primary care physician for the purpose of obtaining a "referral" for follow-up treatment by his cardiologist. However, the U.S. Healthcare doctor refused to see Glenn until he had a valid company card. On April 3, Glenn returned to the primary care doctor's office with a copy of his enrollment form, which the company advised would be accepted by its primary-care provider. But again the primary-care doctor refused to see Glenn. Between April 2 and April 21, Glenn contacted representatives of U.S. Healthcare to obtain a valid card, but he was issued two incorrect and invalid cards. These kinds of bureaucratic mishaps can happen in any organization. The question is, at what point do they cross the line into deliberate delay and at what cost?

On April 9, 1992, the primary care doctor finally met with Glenn and drew blood, but did not make a referral to the cardiologist, even though he acknowledged the seriousness of the condition. The doctor renewed Glenn's angina medications, but Glenn was unable to fill the prescriptions because U.S. Healthcare provided incorrect and invalid information to Glenn's pharmacy. Between April 9 and May 18, Glenn repeatedly tried to get the insurer to authorize follow-up care by his cardiologist. On April 29, U.S. Healthcare, allegedly in violation of its previous assurances, formally denied in writing Glenn's request for follow-up visits with his cardiologist, because it had "a participating provider in the area." On May 15, after being repeatedly denied authorization to see his cardiologist, Glenn obtained a referral from his new doctor to see a cardiologist "participating" with the managed care company on May 19. It was one day too late. On May 18, Glenn died from a massive heart attack, leaving behind his wife Susan, and his two sons.20

Delay and stonewalling, unfortunately, are at the heart of our managed care system. The cold calculations of this system are unbefitting both our nation and a modern medical system fully capable of curing.

There may be no instance where HMOs and managed care companies play as fast and loose with patients' health as finding the right doctor in a timely manner.

"Take Two Aspirin, Go Home and Die"
versus the Army of the Faithful

In January 1993, nine year old Carley Christie was diagnosed with a rare and malignant kidney cancer, Wilms tumor. Survival is possible, if swift action is taken. In dealing with the crisis, her parents were running against the clock. Harry Christie and his wife had twelve hours to make the right choice to save their daughter's life. The terms of the HMO they had joined, TakeCare, instructed the Christies to use a surgeon within the HMO. But the federal advisory guidelines on Wilms insisted they use a pediatric specialist. TakeCare's list contained no such specialist, nor did it have a surgeon who had done a single operation on a child with a tumor of this type.

The question faced by the parents: Should they entrust the delicate, life-threatening operation to someone without prior experience in the field, or should they find an expert with a proven track record? Luckily for Carley, they chose the latter, and she had a successful surgery, recovery, and subsequent cure. "You only get one chance at removing a tumor correctly to insure the highest probability of survival," said Harry Christie of Woodside California. "What we discovered about our HMO and our rights in the aftermath of Carley's operation produced an infuriating and frightening struggle against our HMO," whose response could not have come at a more inappropriate time. "The HMO called us while our daughter was still in intensive care and informed us that they refused to pay any of the hospital bill." So much for "taking care" of Carley.

"The HMO decision was medically indefensible," said Harry, "but we learned that when we signed the HMO application in California, we gave up our seventh amendment right to trial by jury or any other legal remedies and had agreed to binding arbitration. Binding arbitration is part of the HMO grievance process in California — and one that favors the HMO."

Carley is well today, but had Harry listened to TakeCare and not found the most qualified surgeon himself, she might well have died. If Bill Beaver had listened to his HMO, Kaiser, he would unquestionably have had far fewer years with his family. "When I needed hope, my HMO gave me denial," says the Pollock Pines, California resident.

Bill Beaver
Bill Beaver
One morning in 1993 Beaver was running and began to have problems with one of his legs. He went to Kaiser to have it checked out, but was told it was nothing serious. Still, his leg problems persisted. He began to have trouble walking and could no longer run. Five months later, Kaiser concluded that Beaver must have had a stroke on the morning when he first noticed his leg problem.

"In my mind though, I just didn't fit the profile of a stroke victim," said Beaver. "My problems with my legs and nerves worsened over the next two years and my HMO wasn't able to develop any remedy."

After more extensive testing, doctors finally discovered that Bill's problems were due to a deadly brain tumor that had been misdiagnosed two years earlier.

"I had difficulty understanding this new diagnosis and why it had taken so long to come to light," Beaver recalled. "They told me the tumor was inoperable and predicted that I would live two years at best. They told me normally they would perform a biopsy of the tumor to confirm the diagnosis and order treatment, but in my case the procedure was much too risky and would most likely leave me paralyzed, comatose or dead, and regardless of the findings there were no known treatments that could prove beneficial."

What did Kaiser do for Beaver? "Essentially they were saying take two aspirin, go home, and die," Beaver recounts. "What was taken from me that day was hope. In a very few minutes I was cast from the herd, of no more use to the well being and future of my peers. I felt like a sickly gazelle left as prey outside the protective circle because it is not economically feasible to do otherwise."

Beaver could not believe there was not anything that could be done. Having spent many years teaching positive outcomes from negative circumstances, he could not give up. Bill and his wife drafted a list of family and friends to find some answers, "our army of faithful I called them."

One afternoon Bill received a telephone call from his sister-in-law. While sitting in a waiting room, she read an article about a young man who had the same condition and was treated successfully at John Hopkins Hospital. "The article went on to reveal the compassion and competence exhibited by John Hopkins and how they have earned the distinction of being the leader in health care and wellness," said Beaver. "I used all of my savings and began traveling to this prestigious teaching hospital. They contradicted the opinion of my HMO doctors by performing a biopsy and recommending radiation therapy for treatment, and then the doctors at John Hopkins convinced my HMO to administer the radiation treatment.

"Four years have passed since I was given a death sentence from my HMO and I am grateful for the fortunes during this time," said Beaver in May 1999, just before his death. "While I am not well, I do not know what the situation would be if I had had the best possible care from the onset. I do know that my HMO still refuses to pay for my life-saving treatment at John Hopkins."

For Charla Cooper, it was not her life, but her fertility that was jeopardized by HMO delays. Charla Cooper was alone and in the dark as her health care options expired. Kaiser did not provide $70,000 in out-of-network specialist care she required for a cancerous cervical condition and ovarian complications. HMOs like Kaiser do not like to provide such out-of-network care, because it is more costly, even when no specialists exist in the HMO's network. Cooper recalls, "Kaiser did not return my phone calls, scheduled procedures three months after they were needed and returned test results up to two months after the tests were performed." While Cooper's chances of becoming a mother faded every day, it was to Kaiser's benefit to stall. She has still not been able to conceive, although Kaiser, only after bad publicity and the threat of a lawsuit, relented and approved fertility treatment at a university medical center outside of the HMO's network. "I was treated with total lack of concern by Kaiser," said Charla. "While I am still hopeful that, God willing, I can be a mother, I think were it not for Kaiser I would be today. If I become a mother it will be in spite of Kaiser, not because of them."

Beaver and Cooper both had to accept the risks of their own treatment. Such a breach of the doctor-patient ethic is all too common. What HMOs do not tell you is that more and more of the risk is being passed on to patients — who, because they are sick, are often least able to accept it.

What are HMOs paid premiums for if not to accept risk? What are doctors trained to do if not treat illnesses? What are cures for if not to be used? What is the denial of those cures if not medical negligence?

Fifty-three year old grammar school nurse Betty Hale had been continuously covered by Blue Shield health plan programs for over thirty years, according to a legal complaint she filed against the company. But when she found she had breast cancer, she was denied benefits for treatment with high-dose chemotherapy ("HDCT") and autologous bone marrow transplant ("ABMT"), according to court documents.21 Knowing this was her only chance for cure, Betty, like other breast cancer survivors, was forced to make public appeals to raise the money for treatment — taking on the risk to pay for her own treatment.

In a counseling session, Betty was advised to get her "ducks in a row." That is just what she did. Betty made small wooden ducks, decorated them with ribbons and pearls and sold them for $1.00 each. Students, faculty and friends held fashion shows and other fundraisers aimed at helping Betty reach the goal of $50,000 needed by the hospital to start treatment. The outpouring of donations soon reached $30,000 and, because of the urgency of her condition, the hospital agreed to provide treatment despite the shortfall. Betty Hale is alive and cancer-free today, but, after the operation, still owed the hospital $184,000. The health plan denied Betty's claim on the grounds that "HDCT" and "ABMT" were experimental and investigational, according to the family's complaint. Thirty years of paid up premiums were not enough customer loyalty to justify such an operation.

Ultimately, Hale entered into a confidential settlement with Blue Shield, under which the company denied liability.

"A decent country doesn't let the survival of mothers depend on money raised at car washes," stated a local newspaper editorial, reacting to a similar story of a cancer victim forced to hold car washes to fundraise for cancer treatment, and faxed so frequently among patient advocates that its masthead is now unidentifiable.

In our medical system today, decency and the longstanding medical dictate of "do no harm" have been sacrificed to greed. A haphazard collection of policies and decisions by bureaucrats did not create this horrifying picture. The system has been designed to control medical costs and show financial gains. It takes risks with patients' lives, plays the margins, removes power and discretion from the physicians and their patients. Who are the designers?

The Accountants' Design Takes Over

The daily micro-management of care for HMOs, hospitals and managed care companies across the nation is designed and maintained by the Seattle-based accounting firm of Milliman & Robertson. This is the actuarial company that sets the health care standards for the nation.22

Milliman & Robertson's business is to engineer health care rationing protocols which standardize and downsize medical procedures, such as births, mastectomies and cataracts. The company issues generic guidelines which tell health plans which services to authorize and which to deny. Such "cookbook medicine" has become the new rule in authorization of medical care.

Milliman & Robertson's protocols have stated that patients:
  • cannot stay overnight for a mastectomy;
  • cannot stay more than one day for a vaginal delivery;
  • cannot have cataracts removed in more than one eye unless they are young and need both eyes to work;
  • cannot see a neurologist for new onset seizures; or stay more than three days in a hospital for a stroke — even if a patient can't walk.23
These penny-pinching protocols have become virtually the law of the land — determining discharge times for stroke victims, hospital admission guidelines for heart attack patients, and neonatal intensive care unit stays for preterm newborns. Milliman's recipe is too often used to overrule medical providers' best judgment and has poisoned the doctor-patient relationship.

Civil society has battled back against some of the more shocking profitability recipes. The conservative, Republican-controlled Congress in 1996 finally prohibited premature discharge of newborns following birth, so called "drive-thru" deliveries. Still, Milliman & Robertson keeps pushing back — recently promoting the out-patient mastectomy, despite the counseling needs of women who undergo the procedure.

Now, the bean counters have taken aim at children. A new 400-page Milliman & Robertson book of guidelines downsizes the average 5.3 days children are hospitalized each year for various problems. The guidelines dictate that children with bone infections should have a two-day hospital stay; kids with asthma attacks so intense that they need bedside oxygen should be discharged after two days; tykes with heart-valve infections rate only a three-day stay.24

Have we really come so far as to accept these type of guidelines to usurp the practice of medicine across America?

Milliman & Robertson sold more than 20,000 copies of its guidelines through the end of 1997, affecting the treatment of 50 million Americans. The company's West Coast offices have expanded to 120 health care experts from just four in 1991, and its partners charge upwards of $450 per hour for their services.25 In 1995, Milliman had $150 million in revenue.26

Hard-pressed to justify the use of such benchmarks in their denials of treatment, HMOs claim that the guidelines are simply advisory. How does a Milliman & Robertson protocol really play out?

Dr. John Vogt is a Kaiser executive who gave an infamous speech about putting the bottom line first and drafting cost-cutting guidelines over whiskies, a speech posted on the Milliman website until it resulted in a successful lawsuit against the HMO (See Chapter 2). Vogt put it this way about the Texas goals: "We needed to get from 300 [hospital days per 1,000 patients] to 180 days in less than two years…we're basically on-line to getting to 180 days by 1996. We also have to cut our costs by 30%, not only within hospitals, but within the rest of the cost structure…So, as you well know, any time you have to balance the budget, how do you do it? You cut utilization. Drop referral rate, drop your hospital utilization. The budget balances…Do you know what 'CEM' is? It's a career-ending move. A CEM would have occurred had we said, 'No, you can't do it'[emphasis added]."27

Was it just executives or physicians affected? Again, Vogt clarifies how Milliman & Robertson trained doctors to limit treatment: "we really need to hit not just the chiefs, not only the managers, but you had to hit the frontline, because those are the ones who are really doing the work. They came in (Milliman & Robertson did) to train our chiefs and our UM [utilization management] people. And then they came back again and they trained our frontline people [emphasis added]."

What does all the accountants' fidgeting with numbers mean for the life and health of a real patient?

Consider Lake Elsinore, California resident Barbara Roberts. The 61 year-old mother died from an untreated, massive pulmonary embolism after waiting six and one half hours in Kaiser's emergency room for treatment she never received.

"She would have lived had I taken her to a County emergency room or a Veteran's hospital, rather than to the HMO to which she paid premiums," said Linda Ross, Barbara's daughter.

"In November 1991, the HMO misdiagnosed and failed to treat blood clots that formed in my mother's leg after she suffered a minor fracture — ultimately forming the fatal pulmonary embolism," said Ross. "A Kaiser doctor declined to conduct tests recommended by an independent orthopedist, even though my mother exhibited physical signs of blood clots. When this doctor and another HMO doctor finally saw my mother in the emergency room the night she died, after my mother waited four and one half hours, they failed to give her an expensive blood thinner that could have saved her life. Had the thinner been administered in a timely manner, my mother would have had approximately a 97% rate of survival. My mother was refused admission as well as the life-saving drug she needed."

Milliman & Robertson guidelines help to determine whether patients like Barbara Roberts are admitted to the hospital and how they are treated at every step along the way.

Did Kaiser protocols affect whether or not Barbara Roberts was admitted?

Ross, who won a unanimous arbitration judgment against Kaiser, may never know, but she does suspect. "When my mother and I arrived at the HMO's emergency room, a nurse told us, 'I'll put her in line to see a doctor,'" said Ross. "The nurse left without doing any kind of exam or evaluation and without starting any kind of monitoring of my mother. We began to wait. I had no idea that we would wait for the rest of my mother's life.

"Even though the doctor could have begun treating my mother with blood-thinning agents, he chose not to. This doctor later admitted that he knew this was a life-threatening condition, that it was common practice to administer preventative treatment for blood clots given the indications of previous trauma and that he had done so with other patients in the past. There was nothing to stop him from taking this cautious action, except, perhaps money."

The death of caution is an idea patients should not stand for and more and more good doctors cannot stomach, but it is a pivotal reality of the managed care system.

Dr. Thomas W. Self
Dr. Thomas W. Self

Pitting Doctors Against Each Other:
Finances on the Front Lines

San Diego pediatric specialist Thomas Self has emerged as one of the heroes in the landscape of for-profit managed care. A San Diego jury found in April 1998 that Self was unreasonably fired by a medical corporation for allegedly spending too much time with his patients and ordering too many tests.28 The company, afraid of a larger punitive damage award, quickly settled the case.

The San Diego jury concluded that Self was retaliated against for simply practicing good medicine. His case was one of the first where a physician successfully beat a medical corporation that black-balled him simply for standing up for his patients. The verdict heralds physicians today who refuse to sacrifice their patients and stand up to for-profit managed care corporations interloping in the doctor-patient relationship.

But while an HMO-inspired, cost-cutting mentality victimized Self, it was not an HMO that harassed and fired him. It was other doctors at the seventy-five-doctor Children's Associated Medical Group, where Self worked. If Dr. Self is the hero in his case, the villain is Dr. Irving Kaufman, head of the Group. The jury awarded $650,000 against Kaufman personally for trying to whip Self into line with today's managed care values by saying that Self, a Yale-trained pediatric gastroenterologist, ordered too many tests, was dysfunctional, and lacked clinical confidence.

What could create this sort of climate, where physicians turn on one another? Healers, like Dr. Self, are too often faced with the Hobson's choice of being drummed out of the business or becoming money managers in a setting driven by profits. The edicts of capitation force doctors into an inevitable conflict between financial gain and additional treatment. In such a setup, doctors are blackballed and harassed not just by HMO bureaucrats, but by other doctors — the heads of medical groups, who are the new "managers" of care.

How have things gotten so out of control? Capitation is at the root of this question, and at the core of managed care. Where once traditional fee-for-service medicine paid doctors and hospitals a fee for every service they provided, the current health care system of capitation pays a fixed budget for every patient under a provider's care, regardless of how much treatment is needed. The doctor or hospital which receives the HMO payment pockets whatever they do not spend on patients. This system of lump sum payments — or per head, "capitated" rates, paid for every "covered life" — is a structurally built-in financial incentive to withhold care. The fewer services the doctor or hospital or HMO provides, the more money they make.

Capitation at the physician level insidiously aligns the doctor with the corporation and against the patient. A test which makes good medical sense, an exhibition of caution, is suddenly a financial liability to the doctor or his medical group. In the new HMO-induced system, the driving principle has become "less is more." This is far different from the Hippocratic oath of doing no harm. Physicians like Self who stand up for their patients and try to do more, a.k.a. practice quality medicine, face retaliation. Those who succumb set an unsettling standard for other physicians.

Dr. Linda Peeno, the former HMO medical director who turned whistle-blower, recently explained to the United States House of Representatives Commerce Committee the financial pressures imposed on physicians by HMOs:

If a plan designs its physician contracts and payment strategies effectively, they can essentially make each physician a 'medical director' of the plan — i.e. someone who holds the plan's interest pre-eminent over the needs of the patient before him or her. This can be done negatively (e.g. penalty clauses), positively (e.g. bonuses), or through some combination of both (e.g. withholds). As a result of this, we are approaching something akin to "economic totalitarianism" in which physicians are willing agents of health plans in exchange for a patient base and continued revenue. Few can afford the distinction of being a difficult player. Even worse, no savvy physician can afford the label: "unsuited for managed care." Managed care's stronghold in many communities ensures that even necessary care is being denied, not just by medical directors protecting the plan, but now by the practicing physicians themselves who have many reasons themselves to protect the plan over the patient. Economics reigns over ethics.29
The number of American doctors with capitation contracts has nearly doubled between 1994 and 1997. Other physicians who did not receive their payments on a capitated basis are being forced to rely on capitation. In 1997, one-third of the 483,000 physicians in the United States had capitation contracts, according to the American Medical Association. A government-financed study recently found that patients rated doctors paid on a capitated basis lower than non-capitated physicians. The 2,748 Massachusetts state employees surveyed found capitated doctors exhibited less concern and familiarity with patient problems and did not provide adequate answers to questions, according to researchers at the Boston-based New England Medical Center.30

It is the system, not the venality of doctors, which creates these results. If we paid our mechanics a fixed budget for every automobile, $6 per month per car, how well would they run? Mechanics would focus on quantity, not quality, and this is precisely the system corporations have chosen to maintain our health — a system that forces doctors to see twenty-five patients before lunch, perform fewer tests, prescribe cheaper drugs. In fact, Dr. Self says he rejected a capitated contract that offered pennies per child per month to take care of all their gastrointestinal needs.

Does capitation mean the doctors get our premiums? No — some primary care doctors, for instance, are literally paid $6 per month per patient for the gammet of that patient's primary health needs; meanwhile, premiums are hundreds of dollars per month.31 Premium dollars are paid to HMOs and managed care insurers who keep, right off the top, 20–30% for their own profit, overhead and marketing campaigns. (By way of contrast, the "overhead" for government-administered Medicare is two cents of every dollar.32) HMOs then pay a lump sum, capitated payment to medical groups, who can keep another 20–30% for their overhead and profit.

Another expense from the same premium dollar is "stop loss" insurance — paid as premiums by medical groups, sometimes back to the same HMO that pays them the capitated rate — in order to indemnify the medical group against catastrophic care like AIDS treatment. By the time the average patient sees a part of the premium dollar to treat him, it has been nearly downsized out of value.

Dr. Self frowned on capitated rates for the majority of his years as a physician, but Children's Associated Medical Group accepted them from HMOs. Self, like many other physicians today, became entangled in managed care's primary operating system despite his wishes. The resisters are too often forced into capitation.

"Most physicians do not want to get into these arrangements," said Dr. Martin Edelstine, president of the New York-based North Shore Physicians Association. "The insurance companies tell us, 'This is what the future is.' We figure you've got to prepare for this eventuality."33

Why are more physicians not speaking out? Following the Self verdict, a physician writing to Consumers For Quality Care spelled it out in chilling terms: "What astounds me is that we are not seeing more of these items and issues in the press. Many physicians are afraid to speak out and thus they abrogate their responsibility regarding being an advocate for the patient. The best description of what is going on is the so-called Stockholm Syndrome. This occurred with many of the intellectuals and bureaucrats in Germany in WWII…Afraid to speak out, many simply went along with the flow. So it is with many of my colleagues."34

Even some of the managed care industry's biggest boosters admit that full-risk capitation for small medical groups — five physicians or less — should be banned. Sole practitioners could be bankrupted by a string of particularly ill patients. An HMO industry-dominated California task force led by Kaiser consultant Alain Enthoven recommended just this in order to keep the rest of the HMOs' large medical group franchises off of the hot seat.

At the larger medical groups, physicians obviously face the same pressures concerning their patients' interests. To keep within the budget, and armed with HMO-prepared data about utilization, doctors at the top of such medical groups pressure practicing physicians like Self to curb expensive referrals, tests, procedures, and to see more patients. Doctors who prescribe too many drugs or perform too many procedures risk their jobs, even if they are practicing the best medicine.

Medical groups routinely "profile" doctors for their use of high-cost drugs and procedures in order to curb costs. The financial logic of capitation makes medical group doctors function like the HMOs they once despised.

Orange County, California-based Greater Newport Physicians, for instance, used charts prepared by the California HMO PacifiCare to profile the amount each doctor in the medical group spent on prescriptions and rank the physicians from the thriftiest to the costliest. The comparative profile helped determine bonuses paid by the medical group. "Pharmacy utilization and performance will be part of the 1997 physician rating formula for potential surplus distribution," the medical group's medical director stated in a cover memo. Even though some doctors have older patients who need more expensive and regular prescriptions, the physicians were compared in the written profile without regard for the distinctiveness of their patient populations — based only on dollars. The medical group denies the profiles alone determine physician compensation.35

But the Orange County Register reported, "The group also says if doctors don't think differently, they will feel it in their wallets. Doctors who routinely run up high drug bills that they can't justify might find themselves out of Greater Newport. 'It's not only probable, it's very likely,' said [Dr. Donald] Drake [the medical director who wrote the memo]. 'There will be consequences.' "36

Alta Bates Medical Group in the San Francisco Bay Area similarly prepared an economic profile of a doctor stating that the physician's drug utilization practices cost him a "total potential profit/loss per month" of $965.18 and cost the medical group "potential losses for the month" of $295,651.98. The profile also recommends downgrading from effective remedies to cheaper, less effective ones — such as switching from a non-sedating antihistamine for allergies to an over-the-counter sedating product.37

Health Net profiles its physicians too. One Health Net profile tracks use of high-cost drugs such as the anti-psychotic drug Prozac and recommends cheaper alternatives, telling the doctor that his utilization is above the Health Net target.38

HMOs argue that it is not just cost, but quality, that dictates such targets. But physicians like Dr. Self are increasingly criticized for practicing good medicine, not rewarded for it. In one memo presented in Self's case, an administrator wrote the chair of Self's utilization review committee to criticize Self for recommending tests for a child with gastric esophageal reflux. The memo criticized Self for wanting to rule out potentially serious problems and because the mother "was then told that because of her insurance, that he could not order these tests…It distresses me that [Self] still doesn't understand how managed care works." While HMOs and medical groups support armies of quantitative utilization reviewers, they do not have "quality control specialists."

But is a doctor really more likely to be less cautious and deny treatment simply because his group is capitated? The case of Simi Valley, California resident Joyce Ching illuminates this issue. Ching died of colon cancer at the age of 34, leaving her three year-old son and husband, David, behind. Her husband said she had complained of constant and excruciating pain, as well as rectal bleeding, to her HMO's primary care physician on three visits. But the physician, the "gate keeper" at MetLife, refused to send Joyce Ching to a specialist for x-rays or tests, despite the Chings' repeated requests for specialist care. That gatekeeper physician was paid a monthly "capitated" fee for providing medical care to Joyce Ching. Any referral he made came out of his own pocket.

In a Simi Valley lawsuit, David Ching claimed that financial incentives prevented Joyce's primary care provider from referring her to a specialist, who could have detected her cancer and treated her. David Ching had to demand care for his wife from the physician, who finally ordered a $261 barium enema x-ray exam and sent her to a gastroenterologist — but not until her colon cancer had advanced too far. In November 1995, the Ching family won in a court. A jury awarded $3 million for negligence, which was reduced by a two decade-old California cap on damages to $700,000. The judge, however, did not let the jury consider the charge that the physician's financial incentives caused the tragedy.

Still, Mark Hiepler, the Chings' attorney and brother of cancer victim Nelene Fox, said, after the verdict, "This sends a clear message that when you mix incentives and money with medicine it equals death."39

Following the death of Joyce, Mr. Ching put it this way. "I said to myself, 'Here's God, whatever problem she has, the doctor will take care of it'…There's that kind of fear they put in you with an HMO that you can't go anywhere unless your doctor tells you to. He's the law. He's God. He tells you where to go, what to do and when to do it."40

The narrow margin for critically ill patients often depends on whether or not they receive a timely test, or go outside of their HMO network for a second opinion. But patients do not know instinctively to be skeptical of their HMO doctors' advice. Patients do not understand capitation. Consumers will be less likely to do so in a context where they are bombarded with HMO advertising that spews out assurances on these very issues.

The Blame Game

Another technique of cost control arises when patients are injured because their doctor did not do the right thing. Increasingly, HMOs place the blame on patients for not advocating hard enough for themselves. This is the tell-tale omen of a system built on profit, not service.

For eighteen months Cypress, California resident Mary Schriever repeatedly asked her PacifiCare physician for a referral to a specialist for her 16 year-old son Bill because he talked about committing suicide, burned and carved his arms, was failing in school and had various run-ins with the police. PacifiCare covers "crisis intervention," but Schriever was told by PacifiCare that "my plan didn't cover mental health."

"To this day, I am unable to determine what my HMO deems to be a crisis," Schriever says. "The doctor told me that my HMO would only approve a referral in the event of a suicide attempt. Assuming at least some suicide attempts are successful, this probably does tend to save my HMO money. He stated that he had as a patient a teenage girl who was raped and requested a mental health referral and the HMO would not approve care for her, so they would not approve care for my son."

Like most PacifiCare doctors, Schriever's was paid on a capitated basis.

The physician also refused her request to put her son on Prozac, and instead prescribed a cheaper alternative, Luvox, which was on the list of PacifiCare's approved drugs. Bill told his mother it had no effect.

"We were left on our own with nowhere to turn and my son's condition deteriorated rapidly," recounts Mary Schriever. "In one of his final incidents, he became very agitated and he called the police. My son told me he was going to have them come over and shoot him. He made a lot of statements about having the police kill him. When the police finally took control of the situation and took him into custody, they were very adamant about Bill needing mental help. Bill and I agreed, but told them that I had been unsuccessful in getting him any through my HMO."

Bill Schriever was jailed and, during this process, a doctor prescribed Prozac for him. He was seen by a court-ordered psychiatrist. When Mary visited Bill at the detention center, she felt he was doing better, possibly because of the Prozac. Tragically, another inmate stabbed Bill, and he died many hours later without receiving medical care.

"I saw him the day before he died for two hours and he looked good. He was joking and asking about the dog. I personally don't think my son would have ended up dead if he could have had the proper medication and counseling much sooner in the process."

After a local newspaper revealed Bill's story, PacifiCare called Schriever back.

"They said my son's case dropped through the cracks and I should've been pushier," Schriever remembers. "How many times do they think you can get a 16 year-old boy to see the doctor, asking for a mental health referral? I don't know that they could've saved him. I don't know about the path not taken. But I certainly can say they didn't try."

PacifiCare spokesperson Ben Singer commented, "It's a classic example of what can go wrong when there's a lack of communication between the member, the plan and the physician. The doctor was dead wrong."41 Later, he added, "I just wish we had all done a better job communicating with one another."

Is it really Mary Schriever's job to be pushier? Do we want a health care system where the doctors are silenced, financially turned against the patients, then blamed when something goes wrong, because they played by the HMO's rules? Is this the HMOs' fault? Is it the doctors'? In either case, it is the patients who pay the price and managed care corporations who set up and profit by the system.

The Death of Caution and Passing Of Risk:
Hippocrates versus the Oath of the HMO

Fee-for-service medicine was not cheap and was prone to over-utilization because there was nothing to discourage doctors and hospitals from prescribing extraneous tests and procedures. Insurance companies are also prone to price gouging or over-charging for their product. Every dollar they take in as a premium is invested at a very generous rate of return, so insurers want to charge as much as possible.

What have we lost in moving to a system of managed care and HMOs? The nation's foremost medical malpractice scholar, Dr. Troyen Brennan of Harvard, spelled out to Congress what it all boils down to: "At the hospital level, the major risk factor associated with negligent injury is the total amount of resources expended in the care of patients."42 In other words, in the hospital, less medical dollars means more danger.

In other venues the same is almost always true — for cancer patients, those with infectious diseases, chronically ill patients consigned to a skilled nursing facility. Unless an incompetent physician proceeds with an unnecessary operation, quality, as noted earlier, is often a function of dollars directed toward your care. That is why those who are sick do not do well in HMOs and managed care plans. The statistics comparing HMOs to traditional fee-for-service medicine tell the story:
  • HMO patients are 59% more likely to have difficulty getting treatment.43
  • HMO patients over 65 are 93% more likely to have some decline in physical health than fee-for-service patients.44
  • 48% of Americans report that they or someone they know have experienced problems with their HMO including difficulty getting permission to see a specialist, problems getting a plan to pay an emergency room bill, and being unable to file an appeal to an independent agency for a denied claim.45
Insurance once was a business in which insurers assumed risk in exchange for a premium. Through the capitated rate, however,

risks are passed back to the doctors and, because the capitated rate is frequently too low to be financially viable for the medical groups, ultimately the risk is passed to the unaware patients.

Always anxious to scapegoat the legal system for their own price-gouging, traditional insurance companies blamed "defensive medicine" — the use of medical tests and procedures allegedly for the purpose of protecting doctors and hospitals against malpractice suits. "Defensive medicine," however, was, in large part, careful, protective medicine, "ordered to minimize the risks of being wrong when the medical consequences of being wrong are severe," as a 1994 Congressional Office of Technological Assessment (OTA) report concluded.46

Prophetically, the OTA warned of managed care's "new incentives to do less rather than more," and that to "remove incentives to practice defensively…could also remove a deterrent to providing too little care at the very time such mechanisms are most needed." In fact, those old safeguards have now evaporated just when they are most needed.

Managed care's prime directive that "less is more" — the fewer dollars spent on health care, the more the doctor and the company make, the more job security they have, the more the company's stock is worth — is a threat to good health. Patients expect and deserve as much treatment as is warranted, regardless of cost. This is why they pay for health insurance.

Unfortunately, medical malpractice is now often caused by the gap between a patient's reasonable expectation of high quality health care and an HMO's financial dictates. A missed referral, postponed test or untimely response to a patient's hospital call button can be the margin between health and injury, life and death. In medical terms, less is rarely more. Wellness and preventive medicine does not mean ignoring danger signs. Patients understand this, but efforts are made to keep these relationships obscure.

In every state in the nation, physicians are bound by an oath to practice proper medicine. HMOs take no such oath and are bound by no such laws, which is why, too often, they commit medical negligence — violate the standard of care — with impunity.

Why aren't more physicians speaking out if there is an epidemic of HMO-driven medical malpractice? Gag orders, confidentiality clauses that prevent doctors and nurses from disclosing information about their treatment decisions and pay to patients, are the final insult of managed care — binding and tongue-tying doctors and nurses.

Companies have gone to great lengths to demand loyalty from caregivers at the expense of patients.

Sharp is one of California's largest hospital chains and a partner of Columbia/HCA, the nation's largest for-profit hospital chain. Nurses and other medical personnel in Sharp HealthCare were told to place the best interests of the corporation ahead of those of patients, according to the Sharp Employee Handbook.

In a section titled, "Conflict of Interest," the handbook instructs: "All employees have the responsibility to place the interest of Sharp HealthCare above their own and those of…a patient."47

"Provisions like this compromise the most fundamental relationship in the health care process — the trust between a patient and their nurse or doctor," said Kit Costello, RN, President of the California Nurses Association (CNA), which publicly released the handbook with Consumers For Quality Care.

The nurse, who turned over the Sharp clause to the CNA but wished to remain anonymous for fear of violating the clause, said, "It's clear that we can be terminated for any reason. The message is we have to perform to their budgetary expectation, not the expectation of patients and their families. Our managers give lip service to patient care and quality. Never once do we hear about safety. We always feel we are trying to give nursing care with one hand tied behind our back and not giving the care we were educated to give. I am being stopped from what I am trained to do."

"Nurses must be free to raise concerns about a patient's readiness to be transferred from intensive care or sent home from the hospital without fear of losing their livelihood if these decisions cost the hospital or HMO more money," said Costello. She also noted, "The nurse who gave a copy of this handbook to the CNA had it rolled up inside a newspaper and was afraid to talk about it."

Sharp spokesperson Stephanie Casenza responded in the San Jose Mercury News that, "The problem is the way this was written into the employee handbook. It will definitely be changed when we update the handbook. The intent is to tell employees to put Sharp's mission first and that mission is quality patient care."48

How restricted are HMO doctors from informing patients of their medical condition and best treatment options — even if the HMO does not pay for them — or how the HMO system works? Health Net's agreement with doctors provides a clear answer. "Neither PMG [physician management group] nor HEALTH NET shall disclose the reimbursement or payment provisions of this Agreement." This provision prevents the public from knowing that physicians are given financial incentives to deny or delay care. The contract also reminds physicians to whom they ultimately answer (not the patient, but the corporation): "If Group determines that Provider's utilization of Outside Providers is excessive then Group may terminate this Agreement…effective ten days." Of course, the agreement itself is "confidential…not to be disseminated…"49

Medical corporations also do all they can to restrict public scrutiny of health care environments where standards of care may be deteriorating. Patient advocates say they are silenced by contractual provisions such as that written in the Oakland, California-based Alta Bates Medical Center Employee Handbook. It reads, "Do not give any information to newspaper, TV or radio reporters or press photographers in person, writing, or by phone."50 Under this clause, nurses were disciplined for talking to the press about a controversial child-birth technique, according to the California Nurses Association. Alta Bates claims the clause simply protects patients' privacy.

U.S. Healthcare's anti-disparagement clause in its physician contracts is sweeping. "Physician shall agree not to take any action or make any communication which undermines or could undermine the confidence of enrollees, potential enrollees, their employers, their unions, or the public in U.S. Healthcare or the quality of U.S. Healthcare coverage," according to a physician agreement with the HMO, which merged in 1996 with Aetna to become the nation's largest managed care company.51 Such a disparagement clause prevents a physician from alerting a patient or the public to any unsafe medical practices. The HMO oath also states, "Physicians shall keep the Proprietary Information [payment rates, utilization review procedures, etc.] and this Agreement strictly confidential."

Foundation Health's contract follows suit: "Provider shall keep strictly confidential all compensation agreements set forth in this Agreement and its addenda."52

What kind of "compensation agreements" would so concern the public? Consider the one from MetLife, "Surplus Sharing. In the event that there is a surplus in the Hospital Fund…fifty percent (50%) of the surplus shall be paid by METLIFE to IPA [Independent Practice Association, of doctors]. Deficit Sharing. In the event there is a deficit in the Hospital Fund…fifty percent (50%) of the deficit shall be payable to METLIFE by IPA from the surplus in the IPA Withhold Fund…up to an amount equal to five percent (5%) of the hospital fund."53 In other words, the HMO and doctor split monies not spent on the patient.

Doctors and nurses are certainly aware of the system's impact on patient care. In a July 1999 survey of over 1000 doctors and 700 nurses by the Kaiser Family Foundation, the medical profession spoke clearly:
  • 87% of the doctors said their patients had experienced some denial of coverage for a needed health service during the past two years including (79%) a drug they wanted to prescribe; (69%) a hospital stay; (52%) a referral to a specialist.
  • Almost half of the nurses reported that they had seen a decision by a health plan result in a serious decline in a patient's health.
  • 95% of the doctors said managed care had increased paper work, while 72% said it decreased the quality of care for people who are sick.
Medical ethics themselves are being downsized. In the environment HMOs have created, medical carelessness is more acceptable than financial expense.

Are HMOs up-front about this? Do the promises made by HMOs measure up to reality? Are HMOs committing fraud?

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