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Managed Care: How One Big HMO Capitulated

3 minute read
Dick Thompson/Washington

Ask almost anyone what’s wrong with HMOs these days, and the answer is often the same: precertification. Before ordering tests for colon cancer or even scheduling surgery, many doctors must submit their therapies and plans to company reviewers. Examples of denied care have produced the worst horror stories associated with managed care. The process has left doctors frustrated and patients anxious. It also fueled a revolt in Congress last month in which a band of rebel Republicans rolled over the House leadership to pass a bill giving patients the right to sue their insurance companies for the medical decisions they make.

But last week the HMO world produced a surprising decision that could delay or derail that bill in Congress. United HealthCare, the nation’s second largest managed-care company, pulled the plug on precertification. The company, which is based in Minneapolis, Minn., and covers 14.5 million Americans, is betting the move will improve the quality of care and its bottom line, and maybe even help convince Congress that the HMOs can heal themselves. Nearly everyone applauded the decision, but practicing physicians were cheering loudest. Says cardiologist George Rodgers, in United’s Austin, Texas, pilot program: “It’s just made my work much more enjoyable.”

Precertification has been used extensively in the ’90s by managed-care companies to control costs. It seemed like a good idea at the time. In theory, having doctors justify their decisions would make them sensitive to the costs of care. But in practice the system evolved into an expensive bureaucracy. When United reviewed its precertification program, it found that it cost the company $100 million a year–and still United was approving 99.1% of all decisions.

Opponents of the HMO legislation, whose final passage was always doubtful in view of the Senate’s opposition, argue that United’s move shows the bill is moot. “The market is far ahead of politicians,” says Karen Ignagni, president of the industry trade group, the American Association of Health Plans. But proponents of the bill argue that as long as most HMOs resist going United’s way–and they will until it is clear that the company can manage costs without micromanaging its doctors–patients will need the protection that comes from the threat of a lawsuit. “We need to codify [this] into law,” says Republican Congressman Charles Norwood, a Georgia dentist and co-sponsor of the House bill.

In the meantime, United has developed a new system for staying on top of costs. The company will switch from precertification to a basket of tools including something it calls “profiling” doctors. United will keep tabs on how doctors are caring for their patients and compare those decisions against “best-practice” guidelines. Regular report cards will be sent to doctors so they can see how they stack up and improve their practice. United will also be checking to see who is falling outside the profiles.

That sounds to some critics like precertification by another name. “It can’t be assumed these guys are behaving in the interest [of patients],” says Judith Feder, a health-policy expert at Georgetown University. Maybe not, but last week’s decision demonstrated that even self-interest can start an HMO down the right path.

–By Dick Thompson/Washington

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