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Doctors Close Ranks
But Toro, like other solo practitioners feeling the managed care pinch, has sketched out a road to recovery. In the past year, Toro has buoyed his practice by signing consulting agreements with a number of HMO-affiliated primary care physicians. Once a week he visits their offices to serve as their on-site psychiatrist. To expand his own patient list, he hired a licensed nurse practitioner and other office staff to handle many of the tasks he once performed, freeing him to accept additional referrals. With a higher patient load, his revenues are creeping back up. And if they start to slip, he has a fallback plan: sell his practice, perhaps to an HMO, and go on salary. He would keep his patients, but the HMO would take over his billing and other administrative duties. "Am I happy? Of course not," says Toro. "But if we don't find new ways of running our business we may not have a business to run."
If you haven't noticed, the war between doctors and managed care providers is over. Florida's physicians, facing economic reality, have waved the white flag. Physicians like Toro, who once scoffed at the low fees and numbing bureaucracy of many managed care plans, are now begging to be let in. The surrender has placed the medical profession in a state of flux. Solo practitioners, the long-dominant players of the industry, working independently and with little concern for their financial well-being, increasingly are selling out to hospitals and to physician management firms, which feed them patients and place them on salary. Other physicians are teaming up in groups to leverage contract negotiations with HMOs. Meanwhile, some physician group practices are forming alliances to compete head on with managed care companies. Still others, with hopes of cutting out the managed care middlemen altogether, are even creating their own HMOs.
Unable to beat 'em, Florida's physicians these days are finding every conceivable way to join 'em in a mad scramble for a share of the health care dollar. "More and more physicians are accepting the fact that to survive they must change," says Dr. Richard Bagby, a diagnostic radiologist from Orlando and the president of the 17,000-member Florida Medical Association. "And that can be particularly frightening to the physician who has been in practice for some time and has never had to worry about costs or marketing or bringing in patients." For many physicians, worrying has become a way of life. In 1994 (the most recent year data is available) physician income in this country declined by nearly 4%. Medical specialists are faring even worse, with some reporting declines of more than 10%. The overall income drop - the first on record - came despite a 6% increase in health care spending.
Where's the money going? Most experts point to the growing number of managed care companies, which spend as much as 30% of every health care dollar on administrative costs and shareholder returns. Some point to multimillion dollar salaries and bonuses to key executives.
Nevertheless, HMOs, PPOs and other managed care models offer an attractive product: comprehensive coverage at a low premium. Typically, doctors will negotiate for reduced fees in exchange for a steady stream of patients. Costs are contained through a strictly enforced authorization procedure (commonly called gatekeeping) for most medical services.
Physicians argue that the system encourages savings over good medicine. Health plans can negotiate lower and lower physician fees in exchange for higher patient loads and promises of more vigorous gatekeeping. And there seems to be no shortage of physicians willing to sign on. The FMA estimates that 85% of all Florida physicians has some involvement with managed care plans.
Not surprisingly, managed care is driving solo practitioners the way of the dodo. Nationwide, physicians in solo practice have declined from 43% in 1985 to 28% in 1994. While some are jumping on board with hospitals and managed care companies, the majority are joining group practices and other physician alliances. By grouping, physicians can spread the risk and responsibility of large patient loads, allowing them to accept lower fees for their services.
Solo practitioners have trouble competing with their grouping brethren. Fred McCall-Perez, a Miami consultant who helps set up physician practices, calls it the "industrialization of health care." The figures are telling: By the year 2000, an estimated 75% of all doctors in this country will be part of a group practice, up from 30% in 1995. The estimates for Florida - which suffers from a glut of physicians in many parts of the state - may be even higher. "Everyone is trying to climb up the ladder to get closer to where the dollars are," says McCall-Perez. "A single doctor working alone doesn't have much of a chance."
McCall-Perez says group practices are appealing to managed care companies because they provide a kind of one-stop-shopping for physician services. Rather than negotiate with 50 different providers, the company signs a single agreement that covers dozens of carefully screened physicians. With its own internal monitoring and peer review system in place, group practice offers the company an added level of quality control.
Marketing groups
Dr. Albert Saphier, a gynecologist and infertility specialist in Tampa, says group practices provide "strength in numbers" when negotiating "capitated" plans with managed care companies. (Under capitation, physicians accept a flat monthly fee for every patient they take on, regardless of services provided. Under such plans, physicians, in essence, function like insurance companies, making money on healthy patients, losing it on sick ones.) In addition to running his own small group practice, Saphier is a co-founder and board member of the Tampa Bay Provider Group, a 450-member Independent Practice Association (IPA) that is marketing its members' services to various HMOs. IPAs speak as a single voice, but members maintain their own independence and autonomy. "The more physicians we have involved, the more risk we can accept," says Saphier.
Judith Guthrie, CEO and president of Practice Management Consultants, a Jacksonville firm that advises physicians in private practice, says IPAs are becoming an attractive alternative to medical specialists who find themselves shut out of HMOs' provider lists. In the ideal world of managed care, specialists are few but higher patient loads compensate them for accepting lower fees. "Sometimes the most experienced and most prominent physician in a community cannot get on (provider lists)," explains Guthrie. "That can be awfully frustrating. IPAs can create an additional route to a referral network."
'Doctor-friendly' plans
Some physicians are going a step further and setting up their own HMOs. Doctors Health Plan, a statewide, physician-owned and operated HMO being organized jointly by the FMA and the Florida Osteopathic Medical Association, expects to be up and running by late 1997. Nine-month-old Vantage Health Care of Jacksonville and Primus Health Care Corp., a Dade company awaiting its operating license, are among a handful of physician-directed companies serving regional markets. These "doctor-friendly" managed care plans promise to address physicians' most common complaints - declining income, lost autonomy and endless paper work. Among the features: a traditional fee-for-service physician compensation structure, lower administrative costs and a streamlined authorization process for patient treatment. For example, backers promise an end to long delays while physicians request treatment approvals from HMO administrators. They also will do away with the so-called "gag rule" clause - now common in HMO contracts - which prevents physicians from discussing treatment options with their patients. Instead, a board of physicians will. "HMOs are obviously doing a good job on the financing side," explains Dr. Charles P. Hayes a Jacksonville nephrologist and chairman of the board of Doctors Health Plan. "Where there is room for improvement is on the delivery side. That's where physician-directed plans will do things better."
A similar pledge is made by John Audette, president and CEO of Primus Health Care Corporation. Primus is the brainchild of a group of South Florida physicians who argue that managed care belongs back in the hands of M.D.s, not MBAs. "Health care is becoming an entrepreneurial free-for-all, which is why HMOs require so much regulation," suggests Audette. "Our goal is to build a managed care prototype for others to learn from."
Altruism, to be sure, is not the primary goal of physician-directed HMOs. Hayes, of Doctors Health Plan, says physician-investors will be given preference when the company names its list of participating "providers." Nowadays, physicians hope to sign on with as many managed care provider lists as possible, thereby expanding their potential patient pool. Thus, says Hayes, an investment in an HMO is like "buying a place at the table."
Dr. Juan Wester, a Hollywood general surgeon and Doctors Heath Plan investor, freely admits his motivation: to recapture what other HMOs have taken away. Wester says he frequently loses patients who join HMOs that don't accept his services. And the ones that do have slashed his fees.
Keeping control
Many HMOs, for example, now pay him about $600 for a gallbladder operation - down from about $1,600 a few years ago. He estimates that over the past five years his income has dropped by nearly 50%. "I may never see a return on my investment (with Doctors Health Plan)," says Wester. "But if I can keep some control over my patients - patients who are being taken away left and right - it will be worth it."
The jury is out on whether they will succeed. Skeptics argue that the very things physicians pledge to change - strict cost control, limited provider lists and stingy physician fee scales - are what make HMOs work. Dan Schuh, managing partner of Deer Creek Associates, an HMO consulting firm in University Park, Illinois, says physician-directed HMOs are a good idea as long as nostalgia is not a motivating factor. "Physicians are unhappy with the changes that managed care has brought, and they're looking for ways to turn the clock back 10 or 15 years," says Schuh, who has advised a number of physician-directed HMOs. "But the fact is, managed care has done a lot to remove the inefficiencies of health care delivery." His advice to physicians joining the managed care fray: "Understand you'll be running an insurance company. And be prepared to work very hard."
Of course many physicians don't know a balance sheet from a balance scale, and are glad to admit it. Run their own HMO? Some would rather have a root canal without Novocain. That aversion to back-room detail has spawned an industry of so-called "physician practice management" companies which scour the medical landscape in search of business-weary practitioners. Their offer is simple: The company will "purchase" the medical practice and place the physician on salary. Professional managers take over all administrative duties and market the physicians' services. Records of physician-practice buyouts are not kept, but FMA officials describe a frenzy of activity in recent years. Dr. Rohit Dandiya, a general internist from Palm Beach Gardens, sold out two years ago after weighing seven offers. He says his agreement, with West Palm Beach's PhyMatrix Corp., allows him to practice medicine without losing sleep over today's managed care nightmares: paper work, patient referrals and provider lists. "Everything was changing so fast," he says. "The government was choking us, managed care was choking us, we were working harder for less money. This offered us a way out."
George M. McCleary Jr., executive vice president and CFO of InPhyNet Medical Management Inc. of Fort Lauderdale, says physician practice management reflects the natural evolution of health care delivery: Physicians handle the patients, managers handle the money. "The basic premise is that physicians should be practicing medicine, and the more they do, the more efficient they will be."
An entrepreneurial approach
But if this vision of physician responsibility sounds somewhat Orwellian, you're not alone. Many physicians believe the managed care system, by nature, places quantity of patients over quality of treatment. These higher patient loads (to offset lower fees) reduce the amount of time physicians can spend with each patient. Indeed, some physicians say they would rather retire (or change professions) than turn their practice over to bean-counters who view patients as commodities and illnesses as opportunities. Against strong odds, these entrepreneurial-minded physicians are thumbing their noses at managed care, intent on carving out a niche where no rules apply but their own.
Dr. Robert A. Oesterle, an endocrinologist from Miami, is one such maverick. After completing his medical training, Oesterle searched the state for areas with a shortage of endocrinologists. He settled on St. Augustine, where he is the only specialist of his kind for miles. He generates business for his solo practice by lecturing to citizens groups and handing out business cards to local physicians. He's thinking of opening a Web site offering information on glandular illness. Most importantly, his monopoly on patients allows him to dictate the terms of patient treatment and reimbursement, not the managed care companies. "In Miami or Jacksonville, I'd be competing with everybody else for patients," says Oesterle. "But here, I'm in the driver's seat. Not the HMOs. The bottom line is I'm practicing medicine the way I want to."
Has Oesterle found Xanadu? Probably not. What works today may not work tomorrow. Says InPhyNet's McCleary: "The only thing I'm absolutely certain of is that nothing about our health care industry will stay the same for very long. Five years from now, we might recognize very little. All we can do is keep our eyes open and be ready for the changes."
