By Jeffrey Barg

Published December 1998

• React to this article in the Discussion Forum.

PND: What’s wrong with managed care?

LP: It’s not managing care; it’s managing cost. The processes that are involved in managing costs are harming patients.

PND: What’s the difference between managing care and managing costs?

LP: Managing costs is just managing the economics of the care, trying to get the cheapest price, trying to get discounts, trying to put people in less expensive settings, choosing to keep people out of the hospital. And when those things are done based on costs, which are very short cycled—monthly, quarterly report, annual report—then one is disconnected from the long cycle of patient care. For example, it might cost more to put somebody in the hospital who has a diabetic coma, get them past their coma, and keep them there longer to introduce intensive diabetic education. In the long term, you’re going to save more money, but we don’t think about the whole continuum of care. Managing costs ends up being a model based on limitation and denial. Real managing care, I think, sometimes actually would involve increasing access. Seeking out people, spending money as opposed to trying not to spend money.

PND: How did your experience as a managed care medical director shape your current view of managed care?

LP: It began just with the simple pressure as a physician to make decisions that were calculated to have economic benefit to the plan and not medical benefit to the patient. It was those decisions in which I was pressured and I think we clearly harmed patients for our economic gain that led me to quit. As I changed companies and changed plans I kept thinking that what I was experiencing was unique to the particular plan that I was in and then I started going to medical director meetings and sort of immersed myself in this whole culture. And at that point I got very concerned about the fact that we were creating this management system that was very dehumanizing and very distanced from the actual bedside. And I began to experience some of the consequences of that. So I realized I couldn’t change things from the inside and that I finally had to confront a patient harm that I feel I was responsible for.

PND: Is it your view that the problems that you’ve seen in managed care are endemic or are there significant differences across plans?

LP: I think there are differences in the way plans do things and put their operations together, the skill and professionalism of the people they hire. But the thing I had focused my attention on is trying to find what is systemic to this phenomenon called managed care, whether it’s done in a PPO, an HMO, managed indemnity. What I’ve concluded and what I continue to see is that it’s based on limitation and denial. It came in like a huge dam and put up this block to cost, controlling what physicians could and could not do and what patients could and could not get. The rationale behind that was that we had all this "unnecessary service" coming out of the fee-for-service era. And therefore, almost by default, any decision that a managed care plan would make in terms of limitation or denial was appropriate because they could claim they were denying unnecessary care. I think what’s endemic to it is this limitation and denial and then all processes that are used to do that, whether it’s influencing the way physicians make decisions, influencing their financial arrangements, influencing their network. And then there is no systemic process to evaluate the consequences of this. We don’t know, for example, when we crossed the line from denying unnecessary care to denying necessary care. It’s the big unknown. The big missing piece in outcome analysis is what happens to those people who are denied services. Are we using appropriate guidelines? Are we providing appropriate alternatives? Are we increasing costs down the road for someone else?

PND: Do you disagree that during the fee-for-service era there was over-utilization of services?

LP: There was inappropriate utilization, maybe over-utilization and mis-utilization. I think that for a lot of reasons, not just simply because of greed and the fact you had huge resources available. I think some of it had to do with not knowing what to do and patients not getting enough information. All those problems are still present. It amazes me that in the managed care industry those reprobate physicians who in the fee-for-service era couldn’t be trusted with over-utilization now become angelic in an capitated environment and are trustworthy when it comes to making decisions that might lead to under-utilization. As long as physicians are reimbursed in ways that are tied to quantity we’re going to have problems. So no matter what health care system we have, we’re going to have to address that particular issue. And I think the same thing is true in regard to knowing how to distribute resources and knowing what the best decisions are for particular patients under particular conditions. For the rest of our lives we’re going to have to wrestle with how to pay physicians, how to educate patients, how to assume responsibility to the degree that they can, how to provide resources equitably. How to come up with the best guidelines for care. And I think the fact that managed care has prompted us to address those issues and acknowledge them is one of the good things that probably happened in the last decade in medicine.

PND: What do you think is the most promising way of insuring that there is not under-utilization of services?

LP: First of all, we are going to have to decide whether we want a system in which the incentives are to do less. I’m not sure that’s the appropriate model with something like substance abuse, for example, when you have conditions in which the very thing that you ought to do is to seek people and to nudge them into care and not erect barriers. So that to me is an example of a case in which a model with an incentive to do less will break down and communities and families will pay a heavier price. So I think what we’re going to have to struggle with is how to find a system in which the incentives are to do what’s appropriate and in which the incentives are longer cycled. And the only way I could see that we do that is that we have to have universal health coverage. We’ve got to somehow rid ourselves of these fragmented and proprietary organizations that right now are simply profiting from shifting people around, taking the cream of the crop, avoiding and delaying care that ultimately patients will need. And all this is going to come crashing in on us when the baby boomers are at the age when we really start needing resources. Short of this, managed care companies need to be held legally accountable for the results of their policies and decisions. This is an essential part of any meaningful patient bill of rights.

PND: I understand you just finished testifying in a lawsuit against Humana. How did you come to do this?

LP: The first call about a managed care case actually came about three or four years ago from a lawyer who said that she had a case that involved a problem with a premature discharge for a baby. I said I don’t understand what I can do. She said what I need is somebody to explain to the jury how managed care in this situation really worked. You know this distance between what is claimed on paper and what really happened. So that was kind of the beginning and it’s led to a few other cases. The one you just mentioned is the case in which a woman sued Humana for breech of contract because she had cancer and they had denied a hysterectomy. Their rationale was grounded in their use of a definition of medical necessity they purchased through an external guideline company. It did not coincide with the medical necessity definition that she had purchased that was in her certificate of coverage. That was the initial reason for the lawsuit. As it unfolded there were lots of things that had to be analyzed and looked at. Reports about savings, how these decisions were made, how the company came up with these guidelines, who did them, the appeal process. So that’s what I did as a managed care expert. Essentially, I was able to teach the jury how the system works.

PND: What was the resolution of that case?

LP: The jury awarded her $14,000 for the hysterectomy that they should have paid for. Her parents had loaned her the money so she had gone on and had it and paid out of pocket for it. They awarded her $100,000 for pain and suffering and $13 million in punitive damages for this kind of conduct in the system.

PND: Do you view this as a landmark case?

LP: Yes. The woman’s husband was a government employee so he fell into one of those ERISA exempt groups who could sue the plan. So, unlike 125 million other Americans, they were able to sue and that was fortunate for them. But I really believe it is a landmark suit because it is a pure managed care case. There have been other significant cases: a couple of cases in California that had to do with denials in which two women died; a case in Atlanta that had to do with a little boy who lost his hands and feet because of a decision to send him to a hospital too far away in which there were huge jury awards in multiple millions. But these cases had devastating injuries or death and they were malpractice cases as much as HMO cases. I don’t know what the legal claims for those three cases were. This was a pure managed care case. The doctor who was Karen’s treating physician was the one who was advocating for her right to choose a hysterectomy as the appropriate and definitive treatment for this particular condition. He fought for her. He went through several appeals with the doctors, supported her all the way through it. So it was just a pure bad faith claim against the company and I think in that way it was an opportunity to dissect exactly how the process works. I’m not pro-litigation. But I think it’s going to take several of these legal cases that actually get to a jury so the public and press can see the kind of stuff I’ve seen, the kind of stuff that keeps me awake at night, which I feel a lot of other people haven’t had the privilege of understanding.

PND: Can you describe that in some detail?

LP: Karen found out that her insurance company had subcontracted with a for-profit company whose business was to create medical guidelines and to hire its own doctors to make medical necessity determinations. It actually sold this product to its clients by advertising its ability to achieve big savings from denials to its corporate clients. And so she found out that, when her doctor said the magic word hysterectomy, it was one of the things on this list of things purchased. She got shoved into this system that was really acting like a denial machine. Talking to her after the trial, she described the extremely dehumanizing experience and the process of trying to talk to these people. And then she had to go through it again sitting in the trial, actually listening to people who referred to her as a covered life, referred to not paying for her hysterectomy as a saving, referred to 1800 other women in the same sort of fashion. So I think it’s a very tough system and it works in different ways depending upon different plans and different particular needs. These are the kinds of things that occur within the corporations that they had no incentive to ever make public.

PND: What can practicing physicians do to try to change the system?

LP: I have a lot of colleagues who are giving up their clinical practices. Doing other things like golfing all the time. I guess that’s one alternative, but I hate that because you loose your opportunity to influence what’s happening in medicine. I think it varies for different physicians in different communities because it depends on what kind of structure or penetration the plans have. Take the recent example of groups of physicians refusing to sign contracts or opting out of plans collectively. I think that’s a real positive step where, again, physicians collectively are saying we’re just not going to do this because it’s very hard for any one physician to act alone without risking a lot of economic, personal and professional consequences, although I think physicians have to do that.

One of the things that bothers me is seeing so many physicians sort of slipping into the system, accepting managed care as it is, becoming good HMO doctors. They’re not thinking carefully about some of these issues. And suddenly they’re actually the handmaidens for the system. That really amazes me because it tells me that physicians don’t completely understand that the person who is legally accountable and liable for patient harm presently, as long as plans are shielded by ERISA, is the physician. So I see more and more physicians becoming compliant physicians for the plans, doing what the plans want them to do and then when harm occurs they’re the ones hurt when the blade of the guillotine drops. Suddenly they’re all alone handling all the liability.

I guess part of this is just continuing to educate ourselves as physicians in terms of what’s happening. Keeping the ethical questions in the forefront and not just caving in to the business and market analysis of everything. And as physicians we have to continue to work for real health reform—the kind that protects and cares for our patients, not hurts them further.