Are HMOs dead? (National Managed Health Care Conference)
■ Cost control and improved quality of care were the promises HMOs couldn't deliver. Now, experts say, the end is nigh.
By Robert Kazel — Posted April 18, 2005
Before he became an insurance executive in the early 1990s, Robert S. London, MD, was a practicing obstetrician-gynecologist. But at this year's National Managed Health Care Congress, as he looked down from his lectern upon a room of health plan managers and strategists, he sounded like a coroner delivering a pathology report.
Dr. London appeared at the conference, held in March in Washington, D.C., to join a panel whose title would have been unthinkable a few years ago: "Is Selling HMO Product Dead?" Dr. London, a former vice president of health care management with Anthem, who had held managerial jobs with Kaiser Permanente and UnitedHealth Group, said HMOs had left a legacy of "broken promises."
"The HMO promised us it would reduce the cost of care and improve the quality of care," he said. On both fronts, he said, it had failed. "The consumers," he said, "don't like it."
The result? The nation is witnessing "the demise of the HMO," he said. If this is not wholly apparent in the statistics -- tens of millions of patients are still enrolled in plans that are structured, or at least legally licensed, as HMOs -- numerous speakers at the conference agreed that the industry is seeing a general abandonment of the principles on which the HMO model was built.
Gene Huang, MD, a vice president of Health Net and another member of the NMHCC panel, likened HMOs to photographic film (steadily being replaced by digital cameras) and dial-up modems (gradually being supplanted by broadband, high-speed Web connections). What's more, he said, those HMOs still being marketed typically "look like PPOs," with open access to physician panels.
Don't look back
This year's managed care conference, which attracted about 5,000 attendees from health plans, government programs and vendors, seemed remarkable for what wasn't being debated: No one talked about gatekeeping, prior authorizations (except for special cases, such as advanced imaging) or any coercive technique used commonly in past years.
"Those are strategies most of us have supplanted with strategies to use information to drive member care," Sam Nussbaum, MD, executive vice president and chief medical officer of WellPoint, the nation's largest private health plan, told AMNews.
The obsession with information technology was everywhere at this year's NMHCC. If previous conferences seemed like blatant tutorials in penny-pinching, this one centered on number-crunching as a means of ferreting out, through computing, the weakest links in the health care delivery system.
Advanced quality measurement, disease management, and pay-for-performance programs were this year's attractions. Incentive pay programs were generally spoken of as not-quite-ready-for-prime-time but capable of being rolled out widely within a few years.
Consumer-directed plans, typically featuring catastrophic coverage and a tie-in to a health savings account, were talked about both in seminars and on the vendor floor, not as a panacea for the problems facing the industry -- certainly not as "the new HMO" -- but as a product everyone would have to offer to keep up with the competition. No one was certain, however, just how well received the new-style plans would be among patients and employers.
"All experiments are still going on, and we haven't managed to find the right strategy and the right structure yet," said Janice Young, vice president of Stamford, Conn.-based Gartner, a IT research and consulting firm.
Physicians still managed
In the heyday of HMOs, Dr. London said at the conference, managed care had applied a "mother-may-I" mentality to regulating how doctors could practice medicine -- a strategy that he said slowed down medical care unnecessarily and made physicians understandably irritated.
Those days, to an extent, are past -- but everything old is new again, at least in another form. To help fill the vacuum as HMOs decline, health plans at the convention appeared dedicated to stepping up the monitoring of physician performance and finding outliers who aren't supplying what they view as satisfactory or cost-conscious care.
Ray Herschman, a principal for Mercer Human Resource Consulting, told attendees that health plans already are engaged in a "major re-engineering of process design" that's moving away from HMO-style limits on patients' use of the health care system and toward analysis of how physicians do their jobs.
Patients will need much more information on which they can base their selection of doctors, he said, because they "don't have a clue about provider quality." This has tentatively begun, he said, and five to six years from now, plans would be able to "look at every little aspect of" physician performance to try to persuade doctors to change their methods. Herschman advocated increased use of pay-for-performance programs, but said these programs must have a stick as well as a carrot to work effectively.
The AMA in March unveiled its own set of principles physicians can use to determine whether such plans are fair and ethical. The AMA's guidelines state that plans should not be punitive, nor should physicians be required to participate in them.
Herschman predicted that tiered network designs that designate some physicians as exceptional based on quality and efficiency, and reward patients for selecting them, would become much more common quickly. He acknowledged, though, that plans' ability to implement such networks would vary from market to market if physicians opposed them by doubting the data on which they are based. (This happened in St. Louis, where such a plan by UnitedHealth Group is being beaten back by physician opposition to its methodology.) That, he said, is why the programs need to be highly refined before implementation.
"It's only fair to the provider side that if they're going to be measured that it will be objective ... and can be defended," he said.