Table of Contents:
"Country's HMOs Clawing their way out of a Hole," By Megan Mulholland
"Many Firms Pass Increases To Workers," By Megan Mulholland
"BadgerCare Faces Enrollment Growth, Budget Shortfall," By Megan Mulholland
"Youngster Affinity Health System Begins to Find its Legs," By Arlen Boardman
"ThedaCare was Born in Aftermath of a Revolution," By Arlen Boardman
"Businesses, Touchpoint Say Alliance Is Working," By Arlen Boardman
"Valley HMOs Proud of Prevention Programs," By Arlen Boardman
"Bill Of Health: HMOs Struggle with Economics,Abuses And Regulations--But Above All, a Bad Reputation," By Arlen Boardman
"Two Patients, Two Views of HMOs," By Arlen Boardman
"Disgruntled Affinity Doctors Have Few Options ," By Arlen Boardman
"ThedaCare Doctors Strike Out On Their Own," By Arlen Boardman
"Doctors Seeing Lower Salaries, More Overhead Under HMOs," By Arlen Boardman
"New Concepts Link Pay, Productivity ," By Arlen Boardman
"What Lies Ahead in the Future of Managed Care?" By Megan Mulholland
"Prescription Increases Raise Overall Health Costs," By Megan Mulholland
"Mandates Play Role In Higher Medical Costs ," By Megan Mulholland
"Because the Government Says So: Mandated Benefits in Health Insurance Policies"
"Focus On Affinity Health System Inc."
Health Care Terms and Acronyms
Country's HMOs Clawing their way out of a Hole
Pam Bee felt sick when her health insurance company told her about this year's premiums. By Megan Mulholland
Post-Crescent staff writer
Humana raised the preferred provider organization family plan 52 percent for Bee Forest Products of Mondovi, a year after a 40 percent increase. The company's drug card also increased 280 percent.
That's just the beginning. The small firm faces yet another premium hike.
"We don't have any answers," said Bee, the company's vice president. "We're hoping the state and insurance agencies can find a solution and soon, before businesses are dragged under."
Bee Forest pays 50 percent of the annual premium per employee, which costs $800 a month. It has picked up half the tab for at least 10 years.
"When costs would increase, employees were always aware and would appreciate what we were doing. Now they can't absorb it in their budgets," she said. "Four hundred dollars a month—the 50 percent—is very high."
And if the high premium isn't enough, the plan still requires a copayment.
"It was the only way we could keep it affordable," Bee said. "And it's a PPO, so you can't see the doctor of your choice."
The 15-year-old lumber manufacturer employs 22, yet only eight could afford to stay in the health plan; 16 did last year.
Other companies face insurance hikes, too.
For the second year in a row, U.S. health care costs increased in the double digits, with companies and consumers bearing the brunt of the rate hikes, according to management consulting firm Hewitt Associates. Many employers saw increases near 10 percent this year, on the heels of last year's rate hike of 7.8 percent, the highest since the early 1990s.
How did HMOs get here?
Humana, an indemnity insurance company, is like most others in the industry, raising premiums to offset losses. However, health maintenance organizations took a financial beating in recent years and are trying to get into the black.
Through the 1990s, HMOs had an amazing period of growth, said Jason Brenden, new products manager with Interstudy Publications, which conducted a 10-year study of health plans.
"They've been losing money at a faster rate, although it started to slow in 1999," he said. "At one point, as many as 90 percent of the HMOs were making a profit. That's dropped to 30 percent or less."
"Some are losing, some aren't," said Richard Coorsh, spokesman for the Health Insurance Association of America. "Health plans have to be competitive in the market, provide affordable coverage. And they have to have premiums reflective of the cost of health care, which rises continually."
In Wisconsin, the Office of the Commissioner of Insurance reported health plans lost $58.5 million in 1999, vs. a net income of $6.7 million in 1998. In the Fox Cities, Network Health Plan lost $9 million last year and Touchpoint lost $1.9 million.
"Generally, (HMOs in the state are) in decent shape," said Peter Farrow, chief executive officer of Group Health Cooperative of Eau Claire and former assistant deputy commissioner at OCI.
For years, HMOs kept premiums at a flat rate, while medical and prescription costs rose and the use of medical care increased. As a result, HMO profits fell steadily since 1994.
"As HMOs were trying to meet the demands of business purchasers to keep costs down, the cost of health care was more rapidly moving in the other direction," said Nancy Wenzel, executive director of the Wisconsin Association of Health Plans.
"They backed themselves into a corner," added Dan Malloy, vice president of HCIA-Sachs, a group that rates HMOs. "They were taking increased volume but not raising premiums. It's a distressed industry because they have not kept pace with their growth."
When fee-for-service plans dominated the market in the 1970s, many people had a $250 deductible and paid 20 percent of the costs, Farrow said.
"When HMOs came along, they had a big marketing advantage: no paper work," he said. "You had a $5 or $10 copay. It created the expectation you don't have to pay for anything."
By keeping down costs and trying to expand the physician network, employers lost a systematic control, said Marty Finkler, an Appleton health care consultant and Lawrence University economics professor.
Delivery system HMOs—like the two local ones with an integrated health plan and provider group—face protests from employers who don't like narrow networks.
Medical costs are escalating: 90 cents of every $1 of the premium goes to paying health care costs, Coorsh said.
Prescription drug costs were up 340 percent last year and hospital costs rose 137 percent, Wenzel said.
"Americans have an insatiable appetite for health care," said Pat Schoeni, director of public affairs for the National Coalition on Health Care. "Baby boomers diagnose themselves, go to the HMO and say, 'I want this medicine, not a generic.' Health systems feel the pressure."
All pay for one
Bee Forest's premiums rose dramatically because one employee used the plan extensively after his wife got sick.
"It's rough when it's passed on to the rest of us," Bee said.
When the firm's owners first heard about the premium increases, they searched for other carriers and explored legal options.
Bee also worries the high rate may scare off potential workers.
"They may think it's too high to pay," she said. "Even the fellow who claims he is the 'culprit,' his first reaction was, 'Can I drop out?' But he can't afford to. That's the purpose of health insurance. At this point, it's not serving its purpose." She is at a loss for remedies.
"There's too much regulation as there is," she said. "But something has to be done for the small business."
What's next?
"There are things we can do on the fringes," Group Health's Farrow said. "When you're talking fairly narrow margins, there are many little things you can do. Premium increases will make up for the increased cost. People are using more prescription drugs than they used to. They're going to the doctor more. As long as people want to do this, they have to pay more.
"Any move an insurance company makes now is interpreted as, 'You just want to make more money, you don't want to pay claims.' That creates a strain. We want to put together competitive contracts to help lower costs. We're pressured legislatively and publicly to increase our net worth, to have every provider in the area covered. It's what the market wants; the tradeoff is to pay more."
HMOs are improving in 2000, but they're not wildly successful yet, said Jim Bentley, senior vice president of strategic policy planning for the American Hospital Association.
"The fact consumers want a broader network with more physicians has made it harder to have a small group of physicians practice conservatively," he said. "The plans are trying to learn to live in that environment."
In this first quarter, state HMOs continued their 1999 losing ways, but the second quarter showed hope, at least locally. Touchpoint was nearly $280,000 in the black, while Network Health Plan lost about $1.7 million before breaking even monthly.
HMOs can make dramatic changes, as Oxford Health Plan demonstrated. Norwalk, Conn.-based Oxford trimmed its fourth-quarter loss to $19 million from $285 million by quitting several unprofitable Medicaid markets and raising rates by 10 percent.
In January, the Private Employer Health Coverage Plan, a state-administered pooling plan targeting employers with 50 or fewer workers, takes effect. It allows small employers to come together for purchasing powers, Borgerding said.
In suggesting a remedy, Bentley was diplomatic.
"Find what consumers will accept and like, what physicians will accept and like, and struggle to find that middle ground," he said.
By raising premiums, "you're fixing the wound, not the system," Malloy said. "In the end, they have to change their business models."
"No one knows for sure where to go," Schoeni added. "We're not proposing we go to national health insurance. We've tried everything. We have not heard of any new ideas to replace managed care. We do not want to go to the old ways. We should try to take what we have and make it better, more effective."
Wenzel's remedy: Keep administrative costs among the lowest in the country; identify appropriate utilization; and adjust premiums to reflect the cost of care.
"It certainly isn't going to happen overnight, but in the next year, we'll see HMOs becoming financially viable again," she said.
The future doesn't look too bleak, Malloy agreed.
"Survey after survey shows across the board four out of five with coverage are satisfied or very satisfied with their coverage, regardless of the type of coverage, whether HMO, PPO or indemnity," he said. "Eighty percent at least are satisfied now."
[Sept. 7, 2000 Associated Press financial update]
MANY FIRMS PASS INCREASES TO WORKERS
By Megan Mulholland
Post-Crescent staff writer
Employers planned to cover the majority of this year's health insurance rate hikes, but many passed along at least 25 percent of the increase to employees, according to a survey by Hewitt Associates.
With the average health plan costing $4,853 per employee—up from $4,412 in 1999—most employees will pay $110 more for their health coverage this year, the management consulting firm reported.
"A lot of small and mid-sized employers are seeing rate increases in the high double-digit range," said Eric Borgerding, director of legislative relations for Wisconsin Manufacturers and Commerce.
Large employers who have a benefit package put together by federal law have more options and flexibility, he said. They are large enough to fund their own insurance, can undertake the risk assumption and are not subject to state mandates. Those who are fully insured must pay for it themselves.
The state industry's average premium rates rose 7.3 percent while medical and hospital expenses increased more than 10 percent, the state Office of the Commissioner of Insurance reported.
On average, companies participating in Hewitt's survey said costs increased at least 9 percent for health maintenance organizations (HMOs) and preferred provider organizations (PPOs), 8 percent for point-of-service plans (POS), and 10 percent for traditional indemnity plans.
The average cost per person for most major companies increased from $3,947 to $4,341 for HMOs; $4,514 to $4,966 for PPOs; $4,369 to $4,763 for POS plans; and $5,663 to $6,285 for indemnity plans, according to the Hewitt analysis of more than 2,000 health plans in 139 U.S. markets.
"These dramatic cost increases are of significant concern to companies," said Jack Bruner, leader of Hewitt's national health care practice. "Unlike past years, they cannot absorb the increases on their own, so employees will have to pay more out of their paycheck for health care. The worst-case scenarios are for people who work for small companies that may not be able to afford to provide health care coverage if rate increases continue at this pace."
Hewitt's data reveals cities along the East Coast were particularly hard hit in 1999, with rate increases of 11.6 percent in New York, 11.1 percent in Washington, D.C., 10.6 percent in south Florida and 10.1 percent in Boston. Even cities considered on the lower end of the rate hikes experienced significant increases, with costs rising 6.6 percent in Phoenix, 6.1 percent in Chicago and Tampa Bay, and 6 percent in Detroit.
"It's always difficult to have to raise premiums, under any circumstance, because nobody wants to pay more money for anything - and health care is not an exception," said Nancy Wenzel, executive director of the Wisconsin Association of Health Plans. "However, many businesses should appreciate that HMO health insurance is still, even with these premiums, among the more affordable health insurance on the market. It will really take through this year to get a feel whether changes individual health plans did in 2000 will level things out.
"If we continue to see 20 percent annual increases in pharmaceutical costs and significant increases in hospital costs and utilization, premiums will continue to be more responsive to actual costs of health care. We have to move to a point where premiums cover the cost of care."
When the cost of health care, drugs or services rises, premiums have to correspond, said Richard Coorsh, spokesman for the Health Insurance Association of America.
"I wish it weren't that way," Coorsh said. "But it's difficult to have high-cost health care and low-cost health plans. That's why it's important to control health care inflation. More people can get coverage. More than 44 million Americans at any given time lack coverage."
An independent consultant estimated each 1 percent increase in health insurance premiums accounts for 300,000 people losing coverage or not being able to get it, he said.
"That's why, even if you hear reports there's only a 2 percent increase in premiums, that's 600,000 people," he said. "The rate of uninsured is increasing by 1 million a year. It starts to take on rather serious ramifications."
[The following was not included in the published edition:] COPING WITH RISING PREMIUMS How are companies responding to premium increases? In addition to passing along part of the increase to their employees, companies are doing the following, according to Hewitt Associates, a management consulting firm: Adding lower cost health plans "If a company's current health plan isn't willing to budge on its increase, most companies, particularly in larger markets, can shop around and find plans with better deals," said Jack Bruner, leader of Hewitt's national health care practice. "In doing so, they can offer their employees a choice of switching to a new plan with lower costs or staying in the old plan with higher costs."
Leaving the national plan behind "Most large employers have given up contracting with a single national plan in favor of working with local plans in locations with large numbers of employees," Bruner said. "In most cases, they get a better cost deal, as well as a stronger local provider network for their employees."Using the Internet "This year, several companies worked with us to host an Internet auction where for the first time HMOs competed directly on price," Bruner said. "As a result of the auction, most reduced their rates anywhere from 2 percent to 8 percent. More companies will continue to look at ways of using the Internet to help them offer high-quality, affordable health care to their employees."Contracting with plans that offer specialized programs "Companies with employee populations who have a high prevalence of specific health conditions—such as asthma, diabetes or heart problems—are starting to contract with health plans that specialize in those areas," he said. "In doing so, their employees receive more specialized care to help them better manage their conditions, and as a result, their health care costs usually decrease."How are companies responding to premium increases? In addition to passing along part of the increase to their employees, companies are doing the following, according to Hewitt Associates, a management consulting firm:
Adding lower cost health plans "If a company's current health plan isn't willing to budge on its increase, most companies, particularly in larger markets, can shop around and find plans with better deals," said Jack Bruner, leader of Hewitt's national health care practice. "In doing so, they can offer their employees a choice of switching to a new plan with lower costs or staying in the old plan with higher costs."
Reworking prescription drug coverage "Because skyrocketing drug costs are a big part of insurance hikes, a lot of companies are changing their prescription drug coverage," he said. "Many are increasing employee co-payments and some are introducing a three-tier system, where employees pay the least amount of money for a generic drug, more for a brand drug on an approved formulary list and the most for a brand drug that isn't on the list."
BADGERCARE FACES ENROLLMENT GROWTH, BUDGET SHORTFALL
By Megan Mulholland
Enrollment in BadgerCare has exceeded program officials' expectations, even though health maintenance organizations forced revisions in its latest contract to get more money in return. Post-Crescent staff writer
But critics say because of that enrollment growth - caused partly by health plans reacting to high medical and pharmaceutical costs—the program will prove costly and will face a budget shortfall. "We're very pleased with how BadgerCare has gone," said Angie Dombrowicki, director of the Bureau of Managed Health Care Programs in the state Department of Health and Family Services.
"We're pleased with the enrollment. There's a lot of children, not only in BadgerCare, but in Medicaid."
BadgerCare is Wisconsin's year-old program to help lower-income, working families buy health insurance at a reasonable price. It ensures access to health care for uninsured children and parents with income at or below 185 percent of the federal poverty level and is intended to fill gaps between Medicaid and private health insurance without supplanting private insurance.
"It got off to a slow start, in terms of enrollment, but it picked up dramatically," said Linda Hall, a health policy analyst for the Wisconsin Council on Children and Families Inc., a nonprofit child and family advocacy agency.
"Now it's on track, with about 60,000 people on it. If it continues on this pace, it may go beyond what was originally projected."
Funding for BadgerCare's implementation was $97.6 million—$61.7 million in federal, $34.2 million in state, and $1.7 million in premium revenue.
It is budgeted to cover 67,535 uninsured, low-income state residents, including 24,787 children and 42,748 parents. Estimates show the total number could reach 82,000.
In April, enrollment was 60,373, almost exactly what had been predicted for that point in the program, and 98 percent of the projected total for the 1999-2000 fiscal year, which ended June 30.
A larger number of parents than expected enrolled in the program, Hall said. The ratio should have been 1.75 adults to every child, but it's about 2.5, she added.
"Adults cost more than the kids," she said. "Many signing up, especially the adults, have not had access to health care for a while. They have pent-up demands."
BadgerCare could grow if employees and their employers can't afford to pay the higher premiums of private industry, said Eric Borgerding, director of legislative relations for Wisconsin Manufacturers and Commerce.
"Small employers who are facing those premium increases will do things to deal with those costs, like drop coverage or decrease the amount they contribute to premiums," Borgerding said. "Those things could qualify an individual for BadgerCare. It should be a concern for state policy makers because BadgerCare is shaping up to be a costly program."
Nancy Wenzel, executive director of Wisconsin Association of Health Plans, agreed.
"Wisconsin's experience with BadgerCare is similar to the experience many other states have seen with their programs to help the working poor access insurance," Wenzel said. "From the sole perspective of providing access to insurance to the working poor, the program would have to be considered a success. But from a broader perspective of the actual cost of the program, Wisconsin, like many other states, seriously underestimated the health care needs and therefore the actual cost of providing care to that population.
"The biggest question Wisconsin lawmakers will have to face is, how does BadgerCare fit among our priorities and how much state tax money are we willing to dedicate to this program?"
The Legislative Fiscal Bureau estimated the program would face a $13 million shortfall for 2000-2001, if enrollment trends continue.
"At that time, the Legislature would have to act to keep BadgerCare going," Dombrowicki said.
"If it continues to grow, and given the ratio of adults to kids, and the Medicaid-adjusted capitation rates, it will require more money to continue to move forward," Hall said. "If the funds run out, what will happen? That's a tough question. When the Department of Health and Family Services negotiated terms with the federal government, a rollback provision allowed them to roll back eligibility guidelines from 185 percent to something lower."
By lowering the standard to qualify, too few meet the standard, she added.
Department officials said they're not considering the rollback, Hall said. They're seeking more federal funding as an option, she said.
The HMOs get a capitation amount, just like a commercial insurance arrangement. Some HMOs complained about the amount they get for BadgerCare, Hall said.
"They did raise concerns whether rates were adequate," Dombrowicki said. "We signed a contract retroactive on rate increases. We spent months working with them. Now we have some experience with BadgerCare. We had no actual experience with BadgerCare to evaluate what the costs are. We were in a wait-and-see mode to see what the costs really ended up being."
Under the new contract, HMOs are given the option of taking a 12 percent rate increase or an 8 percent increase with the state agreeing to take on a portion of their losses.
Sixteen health maintenance organizations signed contracts to participate in the program starting July 1, up from 10 who originally signed on when the program began last July.
Compcare Health Services Insurance Co., which handled claims for 5,785 people enrolled in BadgerCare, dropped out of the program because it said the state's latest contract wouldn't allow the company to break even. Valley Health Plan reduced its coverage area from four counties to one and Dean Health Plan also is reducing the number of people it covers for financial reasons.
Even though the program faced concerns and critics, BadgerCare has made it easier for families to get health care coverage because of uniformity, Dombrowicki said.
BadgerCare benefits are identical to the comprehensive package of benefits and services covered by Medicaid, Hall said.
Although the number of children enrolled in BadgerCare has been less than anticipated, the growth in Medicaid and Healthy Start has been greater than expected. According to DHFS, the number of children in these two programs has climbed by 12,254 since BadgerCare began.
"But there are still a lot of uninsured children," Hall said. More than 50,000 children lost health insurance because of the state Welfare-to-Work (W-2) program.
"W-2 had a tremendously negative effect on kids, and it's not being addressed," she said.
For more information about BadgerCare, contact your local social services office or local W-2 office or call 800-362-3002.ELIGIBILITY To be eligible, enrollees must have children under age 19 living with them; have a family income less than 185 percent of the federal poverty level (FPL); and must not be covered by any other health insurance. Families with income above 150 percent of the FPL pay a monthly premium of no more than 3 percent of family income.
YOUNGSTER AFFINITY HEALTH SYSTEM BEGINS TO FIND ITS LEGS
By Arlen Boardman
As a corporate entity, Affinity Health System is an infant. But at the tender age of 5, it has the monumental task of turning around a health provider group that stumbled badly during the 1990s. Post-Crescent business editor
John Oliverio, president and chief executive officer of Wheaton Franciscan Services Inc., Wheaton, Ill., said Affinity has struggled as any young business, but it is getting its financial house in order. It is structured to be successful in the future.
It has been gut-wrenching. The Wheatons and their partner in Affinity, Ministry Health Care of Milwaukee, have pumped millions into Affinity to maintain its capital base.
Oliverio said that won't have to continue, and must not continue.
"Our plan and our projections are that Affinity will be more successful in the year we're in right now, fiscal 2000 (ending Sept. 30, 2000), as well as fiscal 2001 and beyond," Oliverio said.
He and Affinity's top officer, Kevin Nolan, predict Affinity will have a 2 percent profit in fiscal 2001 and 3 percent in fiscal 2002.
Profits are the lifeblood of an organization. For a non-profit like Affinity, they are money left after expenses for re-investing in equipment, facilities and personnel.
Affinity lost about $12.5 million the past 18 months. The loss is noted in the report of its health maintenance organization, Network Health Plan, to the state.
Despite that loss, Affinity's net worth declined less than $500,000 during 1999, an indication the parent company provided a major cash infusion.
Oliverio said Affinity as an organization has a strong balance sheet, based on investments the Wheatons and Ministry Health have made in infrastructure.
"So basically what we've got is a good capital basis," he said. "We've made some changes in our operations and those changes will produce significant improvement in our operating performance."
The changes began in earnest two years ago when Affinity completed the transfer of ownership of La Salle and Network Health Plan (the HMO) from its reluctant and mistrusting physician owners. La Salle became Affinity Medical Group, the clinic arm of Affinity Health System.
Then, in short order, Affinity Health System hired top administrative talent and embarked on the aggressive $10 million cost-cutting and consolidation program.
The key hire was Nolan as president and chief executive officer of Affinity, recruited in March 1999. Nolan believes the key to Affinity's renaissance is its integrated and cooperative approach.
"There was a vision that there were more efficiencies that could be achieved by bringing all the parts together under one roof, called an integrated delivery network," he said.
Nolan, 54, had restructured and operated two similar systems in other states.
The single-system process began taking shape in 1994 when the Wheatons/Ministry Health partnership, already owners of hospitals and other provider facilities, bought half ownership of La Salle Clinic and its sister operation, Network Health Plan, from the physician owners. They bought the other half two years ago.
The consolidated provider system became formidable. It includes La Salle Clinic (now Affinity Medical Group); St. Elizabeth, Calumet Medical and Mercy Medical hospitals; and 23 clinic locations in 13 communities. In its employ, it has 230 physicians, psychologists and allied health practitioners, and a total of 1,250 employers.
Affinity began operating its fully integrated system in October 1998 and then hired Nolan within six months. He had been senior vice president of Catholic Healthcare Partners in Cincinnati and president and CEO of HM Health Services in Youngstown, Ohio.
Oliverio said Nolan was the right person. He understood what Affinity was trying to do, and that was to get the hospitals, clinic and other provider operations working cooperatively, instead of competitively.
"Basically, the economic incentives between organizations weren't aligned," he said. "What may have been good for the health plan may not have been good for the hospital."
Oliverio said wasted effort was eliminated by bringing everything together, eliminating competition between the clinic and hospital. Duplicated resources, like CT scanners at the hospital and the clinic, were eliminated.
Under Nolan, major consolidating has occurred the past 17 months.
"We have done a lot of work in making facilities more efficient, but there's a lot more work to do," Nolan said. "We're well on the road."
Under Affinity and Nolan, the organization has reduced operating costs, including cutting $10 million in annual expenditures since the spring of 1999. Affinity also has closed clinics, and consolidated clinic and administrative operations.
Under Nolan, it has improved contracts with specialty centers, restructured pharmacy benefits, and cut hospital payments by 5 percent.
The former La Salle was the most public indicator of financial troubles for what is now Affinity operations. The clinic lost well over $20 million during the 1994-98 period.
Amid the red ink, some clinic workers were laid off and others required to fit into new job descriptions. It was an organization panicked by mounting losses.
What caused the problem wasn't one thing, but, clearly, the physician-owned clinic pursued a faulty strategy when it started spending big money to buy physician practices in the Fox Cities and beyond.
Dr. Curtis Baltz, now an independent internal medicine physician who contracts with ThedaCare Inc. and its Touchpoint Health Plan patients, was a La Salle owner/doctor until 1991 when he opted out.
"I didn't agree how things were being run," he said, noting the bureaucracy and the big spending to buy medical practices.
La Salle managers kept saying, "'One more hill, guys, one more hill.'" He said things got much worse after he left.
Dr. Scott Nygaard, Affinity Medical's chief medical officer, said the clinic got caught in a period of rising costs, declining prices, and growth expenditures.
He said the La Salle group wasn't realistic about the financial side and the effect of pre-paid limits that are part of the managed care model.
"I don't think there was a plan to address it back then," he said. "We just hoped it would take care of itself. I don't think we understood the shift in the model."
The clinic was in a significant expansion period in a strategy to build physician ranks and office sites, thereby expanding physician referrals.
Said Oliverio: "When you develop new (clinic) sites and recruit new physicians into the group, you have to make an investment. It's like any business in start-up; usually, you're not profitable right out of the box."
It was a hole so deep that one ex-Affinity physician said in recent testimony in a contract dispute that La Salle was on the verge of financial collapse by the time the Wheatons and their partners, the Ministry Health Services of Milwaukee, took full control.
Oliverio said it was a serious, and part of the problem was the clinic's management, which didn't deal well with its growth from 120 physicians to 185 during the 1994-98 period.
"As the organization grew during that period of time, the management needs increased as the organization became larger and more complex," he said.
"It became clear during that period that there needed to be a change in management because of the growth in the company, the complexity within the organization as a result of that growth."
Nygaard, a practicing physician in the early 1990s, said La Salle was operating without data to guide its decisions.
Through these rough years, though, La Salle's sister operation, Network, showed a profit until 1999 when the system's losses were shifted from the clinic to it. Also, the hospitals now part of Affinity were profitable during the pre-Affinity days.
From 1994 to 1998, Mercy Medical Center of Oshkosh had net income of about $28 million; St. Elizabeth Hospital of Appleton, nearly $18 million; and Calumet Medical Center of Chilton, more than $3 million. The Franciscan Care Center lost about $3.7 million.
Once the Wheatons and Ministry Health Care convinced reluctant doctors to sell all of La Salle, they hired Nolan and he built what he considers to be a strong and talented management team.
"We have been very, very successful in recruiting to this wonderful community some people who have diversified experience throughout the U.S.," he said.
For Nolan, stabilizing Affinity finances and leadership is just the first step.
The next step, already being developed, is to build a corporate culture, i.e., an attitude and an expected employee behavior for all types of situations.
"To have a sustainable quality organization, we need a sustainable quality culture based upon our mission and values," he said.
Nolan is using what he calls guiding coalitions of physicians and Affinity managers to define the Affinity culture and convey it to the employees. Among other things, it will create consistent behavior toward each other and the customer, he said.
"We're deadly serious about physician leadership here and engaging and involving our physicians here," Nolan said.
Oliverio said building a culture isn't done overnight. "You don't create a culture in a short period of time," he said. "It takes concentrated effort; it takes consistent effort; and to create a culture is going to take a multi-year period.
"Everybody in the organization understands the mission, the values of the organization, and the evidence is (you) clearly see them being lived out in the day-to-day work. That's a successful culture integration," Oliverio said.
He expects the new culture to be well in place within three years. He said tremendous change in behavior doesn't come easily.
Nolan is enthused about Affinity's direction and its increased financial and operating stability.
"We've made a tremendous amount of progress over the last 12 months," he said. "I think people were very, very satisfied with the progress."
Oliverio feels the same way. "We think we're positioned well for the future as turbulent as it is (expected to be in the health care industry)," he said.
It is a Menasha-based nonprofit integrated health care services organization formed in 1995. Its facilities include three hospitals, an outpatient care facility, plus a clinic division, a health benefits organization and other services. FOCUS ON AFFINITY HEALTH SYSTEM INC.
OWNERS/SPONSORS Wheaton Franciscan Sisters: The Wheatons, 50 percent owner of Affinity and founders of St. Elizabeth Hospital in 1899, sponsor more than 100 health and shelter organizations. Wheaton Franciscan Services Inc. is the health care corporation to operate health care services in carrying out the Sisters' health care ministry. The Sisters govern through participation in the WFSI Board and local boards of directors.Ministry Health Care: MHC, sponsored by the Sisters of the Sorrowful Mother, is a regional health care system and 50 percent owner of Affinity, as well as a founder of Mercy Medical Center in Oshkosh in 1891. This Milwaukee-based Catholic group owns health care systems that also include St. Joseph's Hospital in Marshfield and St. Michael's Hospital in Stevens Point.
It is a regional health benefits organization based in Menasha, providing health care coverage to more than 90,000 members from more than 1,000 employer groups in eastern Wisconsin since 1982. Its health care services are delivered through a network of more than 1,300 local and regional health care providers. NETWORK HEALTH PLAN DIVISION
Its products and services include a health maintenance organization, point of service, preferred provider organization, third-party administration, Network SeniorPlus, and a Medicare supplemental program. It employs 160.
MEDICAL DIVISION (OUTPATIENT) Affinity Medical Group (formerly La Salle Clinic): It provides family practice, pediatrics, OB/GYN and internal medicine services. It or its predecessor clinics have been operating since 1938, and now has 23 locations in 13 communities.Staff includes 230 affiliated physicians, psychologists and allied health practitioners (nurse practitioners, physician assistants, audiologists, optometrists, midwives) in Appleton, Berlin, Chilton, Clintonville, Kaukauna, Kiel, Little Chute, Menasha, Neenah, New London, Winneconne, Oshkosh, Ripon and Waupaca.
It has three Immediate Care facilities in Appleton, Oshkosh and Neenah, four pharmacies in those cities, an outpatient surgery facility, UW children's speciality clinic and a heart/lung center.
Affinity Medical Group staff consists 160 to 170 doctors (not including the Oshkosh contracted physicians) and 1,250 people in total. The physicians include:
Family practice 33 (adding 5 by fall)
Internal medicine 22 (adding 4 more by fall)
Hospitalists 4 (1 more by fall)
Occupational health 3
Pediatrician 19
Rehabilitation 2
Physiatry 1
Franciscan Care & Rehabilitation Center offers long-term care, transitional rehabilitation, hospice services and therapy programs. This Appleton facility is a 215-bed comprehensive care center specializing in the elderly and temporarily disabled. HOSPITAL AND LONG-TERM CARE DIVISION
Mercy Medical Center is a 175-bed Oshkosh acute care hospital that provides emergency, obstetrics, cardiac and intensive care services. Its new building opened this year.
Mercy Oakwood Medical Center is an Oshkosh outpatient care facility that provides a one-stop approach to care. It houses physician and medical specialist offices, occupational health clinic and other outpatient services.
St. Elizabeth Hospital is a 150-bed Appleton acute care hospital providing general medical and surgical services, as well as specialized services (emergency, obstetrics, oncology, cardiac and intensive care), with a special mission to the elderly and the medically underserved.
Calumet Medical Center is in Chilton and is the sole provider of acute hospital care, paramedic ambulance and emergency room care in its service area. The 53-bed hospital employs 185 and also operates a multi-specialty outpatient clinic with 40 available physicians in 22 specialities.
Other services include NurseDirect, a 24-hour health information call-in service, and Occupational Health Systems of Wisconsin Inc.
THEDACARE WAS BORN IN AFTERMATH OF A REVOLUTION
By Arlen Boardman
Post-Crescent business editor
Dr. John Toussaint was fresh out of his internal medicine residency in the mid-1980s when he came to the Fox Cities.
He practiced as a family physician, but he was almost immediately involved in the revolution that would ultimately create the organization he heads today—ThedaCare Inc., a physician-led integrated health delivery system.
Its roots go back 1980s, but it was 1994 when what is now ThedaCare officially was formed, with the merger of the physician-owned Touchpoint Health Plan and Novus Health Group, then-owner of Theda Clark and Appleton medical centers, and other health care operations.
At the merger, Touchpoint was called United Health of Wisconsin Inc., and ThedaCare was called Novus and then United Health.
It was also in 1994 when a group of six Fox Valley companies gave the ThedaCare entities the nod over what is now Affinity Health System of Menasha. That meant a six-company exclusive provider contract that boosted Touchpoint's health maintenance organization membership.
Toussaint said Novus and the HMO weren't one yet when they worked together to win the contract, an indication to those involved they were similar in corporate cultures. He describes the culture as collaborative decision-making, not top-down management style, with high expectations and decision-making responsibilities for all workers.
Toussaint thinks the whole process before and after the merger was more deliberate and less intense than a revolution.
"It's been more of an evolution," he said. "That's the way things work. You work with people for a while and people decide maybe there's a structure that you can be more efficient at, and you change the structure."
He said the merger was almost more a formalizing of the informal working relationship Novus and United Health had for years.
The merger was a critical juncture for the two organizations. Toussaint said he and the doctors who owned and operated United Health of Wisconsin saw the benefit.
"We felt that from the HMO side, we were going to require a larger capital partner because our growth was so dramatic at that time," he said. "We were just a little mom-and-pop shop run by a bunch of physicians and we had a contract with a management company from Iowa."
The physicians had taken matters into their own hands in the mid-1980s when they saw a trend they didn't like. A for-profit HMO from California had contracted with the group, but the doctors saw all the profits funneled out of the state, instead of into service improvement.
"We were with Maxicare and we had a horrible experience with Maxicare," Toussaint said. "That's really what caused us to get together and create our own plan."
Dr. Dean Gruner, Touchpoint chief medical officer, was with Toussaint on the first board of then-United Health's holding company, called Fox Valley Medical Enterprises.
When the 1994 merger took place, James Raney, Novus' chief executive officer, took the reins of ThedaCare until he retired this year and was replaced by Toussaint.
ThedaCare builds its philosophy around its cultural compatibility, so it has expanded, adding family physician practices and other medical services, but only when that compatibility is evident, Toussaint said.
Raney said that like all of today's health care provider organizations, ThedaCare has constant conflict with its physician ranks. Organizations are strapped for revenue, and physicians aren't particularly happy about their reimbursements being trimmed.
Toussaint agreed. He said ThedaCare/Touchpoint has "culturally compatible folks" running it, but it also has its troubles. It has struggled to balance finances and health care services, while trying to keep its medical staff happy.
Its biggest challenge occurred the last two years and came to light in 1999 when Touchpoint lost $1.7 million, followed by another $86,000 in the first quarter of 2000.
The losses weren't a surprise because its financial fortunes had declined because of the same factors that plagued other HMOs - stiff competition and small premium increases, rising drug and technology costs, and a squeeze on its Medicare reimbursements, based on the Balanced Budget Act of 1997.
However, that makes the losses no less troubling.
Toussaint said decisions to deal with this situation will be made locally because all leaders are local. The only non-local involvement is in Touchpont, in which Aurora Health Care of Milwaukee owns the 25 percent share it bought in 1995. The other owners are Fox Valley doctors and ThedaCare.
ThedaCare is a non-profit corporation, which also owns part of the for-profit Touchpoint.
ThedaCare and a Fox Cities group of doctors own 60 percent of Touchpoint and a Green Bay group of doctors own 15 percent.
Jay Fulkerson, president of Touchpoint, said the "for-profit" is a misnomer because none of the owners are looking for a dividend.
At the same time, the owners don't feel comfortable with losses like Touchpoint experienced in 1999.
Raney said ThedaCare, a non-profit organization, wants its revenues and expenses to be better balanced.
"Our goal is not to make an incredible amount of money every year," he said. "What we want to do is make enough money to pay for reasonable wages and benefits."
As he left the organization, Raney wasn't worried about it.
"I'm optimistic that managed care will continue to be popular in the Fox Cities," he said. "We have a team effort here to make it a success that will ultimately assure its long-term viability."
ThedaCare is a non-profit, physician-led, community health system consisting of three hospitals and a variety of other services and facilities. It is the second largest area employer with more than 4,500 employees. A CLOSER LOOK AT THEDACARE
HOSPITALS/CLINICS Appleton Medical Center is a 160-bed acute care hospital which opened in 1958. It provides general medical and surgical care, plus is home to the Appleton Heart Institute. Other specialized services include emergency, pediatrics, birthing, cancer, sleep disorders, sports medicine, wellness and rehabilitation. An outpatient surgical center opened in October 1999.Theda Clark Medical Center in Neenah is a 250-bed acute care hospital founded in 1909. It provides general medical and surgical care, plus specialized services including birthing, pediatrics, neonatal intensive care, trauma, medical helicopter, neuroscience, inpatient rehabilitation, eye and outpatient surgery. n New London Family Medical Center is a 52-bed hospital with 17 staff physicians, more than 50 subspecialty physician consultants and 250 employees.
ThedaCare Physicians includes 115 employed physicians at 21 locations. They include specialists in family medicine, internal medicine, pediatrics and general surgery.
ThedaCare Behavioral Health is a behavioral medicine service, providing inpatient and outpatient mental health, employee assistance and alcohol and drug treatment. OTHER FACILITIES:
Home Care and Senior Services includes visiting nurse and home medical equipment through ThedaCare at Home, Peabody Manor nursing home, Heritage Woods assisted living and The Heritage retirement living community.
ThedaCare On Call (formerly HealthAccess) is a 24-hour health information and referral service and answers more than 100,000 calls annually. It is staffed by registered nurses.
ThedaCare Laboratories is a medical laboratory group at Appleton and Theda Clark medical centers.
ThedaCare At Work provides occupational health services to area business.
Emergency Room 4 EMPLOYEE/PHYSICIANS OF THEDACARE INC.
Family Practice 75
General Surgery 4
Hospitalist 6
Internal Medicine 8
Occupational Health 1
Pediatrics 8
Physiatrists 3
Psychiatry 4
Psychology 1
Rheumatology 1
The 21 ThedaCare Physicians locations and specialties are in the Fox Cities, Black Creek, Manawa, New London, Clintonville, Iola, Gillett, Tigerton, Waupaca and Shawano, plus emergency room physicians at Riverside Medical Center in Waupaca.
Touchpoint health maintenance organization's physician panel consists of the ThedaCare-employed physicians, plus 800 to 900 others who contract to be providers for Touchpoint's 17-county service area. It offers commercial and Medicaid HMO products, as well as point of service and preferred provider organization products. It has more than 140,000 members of Touchpoint's commercial HMO and POS plans, more than 12,000 members of Touchpoint's Medicaid & BadgerCare HMOs, and nearly 150,000 people covered by PPO products. TOUCHPOINT HEALTH PLAN
BUSINESSES, TOUCHPOINT SAY ALLIANCE IS WORKING
By Arlen Boardman
Jay Fulkerson and Marty Myse used to have some lively arguments about health care costs in the 1980s. Post-Crescent business editor
Fulkerson is president of a health maintenance organization (then United Health of Wisconsin and now called Touchpoint Health Plan). Myse is assistant vice president-corporate benefits for Aid Association for Lutherans.
"I used to argue with him every year," Fulkerson said. That is, every year when he talked with Myse about AAL signing up for another year of United coverage for whichever AAL employees decided to choose United.
The issue was always the same: Myse felt the HMO was charging too much for the medical services, and Fulkerson said AAL was getting quality medicine and the best one-year contract it could afford to offer.
Myse was skeptical about the price, especially when premium rates were growing by double-digits.
Now Myse and Fulkerson still meet every year—in fact several times a year—but they have a less impassioned relationship.
Myse is still acting for AAL, but he's also representing five other companies, all six of which contract as a group with Touchpoint.
The six are members of a unique coalition called the Business Health Care Alliance. It was formed in 1993 when it went shopping for HMO coverage and chose United Health over its Menasha-based competitor Network Health Plan.
The six companies are AAL and Fox Valley Corp., both of Appleton; Banta Corp. of Menasha; Plexus Corp. of Neenah; and Curwood Inc. and Integrated Material Handling, both of Oshkosh.
It's not special that BHCA was formed—many such alliances have formed—but it is special it has survived intact for seven years and is going strong.
"It's a great experiment and it's working," Myse said. "We've just got to hope and pray it continues as well as it has, and if we work hard on it, I think it will."
The BHCA/Touchpoint relationship isn't built so much on a financial formula as it is on trust and communication—and a relationship that is aging well. "I truly believe they have our interests at heart and that might not have been the case in 1993," Myse said. "I might have thought they had their interests at heart."
In the process, the BHCA businesses have gotten the best rates that Touchpoint has to offer, and in exchange, Touchpoint has an exclusive and long-term customer, and an assured chunk of premium dollars coming in each year.
An HMO most often is just one insuring choice at a company. Usually, only some employees pick it, with other employees picking an indemnity or traditional insurer, or a preferred provider organization, which creates strong incentives to use certain doctors. And then the next year, the company may switch to another HMO because of premium increases.
Fulkerson conveyed that reality to Myse. He said, yes, United could do better on rates if a company or a coalition of companies agree to use United exclusively over a longer period.
"Marty had had an expectation for a price when I had only some of his employees," Fulkerson said. "I used to argue with him, 'Give me all of your employees,'" i.e., exclusive provider to AAL.
United got not only AAL's work force, but that of the five other BHCA members. In 1993 BHCA brought 15,000 employees and their family members to United, increasing the HMO's membership by 40 percent. Today BHCA provides 20,000 members, or about 15 percent of Touchpoint's membership.
The original BHCA/United contract was for five years, and now it's a rolling five-year contract with annual rights for Alliance companies or Touchpoint to opt out or to negotiate adjustments.
The Alliance looks at the numbers each year and does the calculations, but it has done more. It has built a special relationship between Touchpoint and the six companies.
"I clearly value the relationship, and I would say that from the experience I've had in health care and negotiating health care contracts, but also from the point of view of the value they give to our employees and employer in low-cost health care," Myse said.
The Alliance wants more than a good price; it wants good service, too.
"If my phone was ringing off the wall hook from (AAL) employees who were dissatisfied with the service, then I guess I would be concerned," Myse said.
Myse and Fulkerson and their cohorts understand each other better now. And Touchpoint's books are open for Alliance's scrutiny.
"It's an outstanding way to create awareness of the difficulties on both sides of the table," Fulkerson said.
"There are days when it's a challenge, the Alliance," Fulkerson said. "The challenge is that we've made a commitment to teach each other to improve the health of the people in the Alliance."
One of the lessons is recognizing good medical service vs. excessive and too costly service. Myse said reasonableness must prevail, like when diagnostic tests are warranted.
"We could do a lot of tests and get a good result for you; we can do fewer tests and get a good result at less cost," he said.
With the closer relationship, Myse isn't caught by surprise now. He knows, for example, Touchpoint has suffered more than a year's worth of red ink. He also knows he needs a viable provider, not one stressed by money problems.
"We're aware of them; we want to be part of the solution. We recognize the value of Touchpoint," he said. "If (a premium increase is) fair, we want to do what's fair."
The Alliance works with Touchpoint to set certain criteria for performance in terms of quality," Myse said. "There's always things that have to be worked on in process improvement."
Ultimately, though, money brings Fulkerson and Myse and their cohorts to the table.
"...We want to pay them a fair price for what they provide to our employees, but like anything else you don't want to pay more for it than you need to," Myse said.
VALLEY HMOs PROUD OF PREVENTION PROGRAMS
By Arlen Boardman
Post-Crescent business editor
The Fox Cities' two health maintenance organizations are proud of what they call their National Committee for Quality Assurance-endorsed improvement programs, efforts to catch conditions early and monitor them closely.
The programs range from diabetes eye testing to mammograms for breast cancer detection to asthma condition management.
"Our patients are getting better care under this system," said Jay Fulkerson, president of Touchpoint Health Plan of Appleton.
Mike Wolf, president of Network Health Plan of Menasha, feels the same way.
Touchpoint and Network used their individual databases and electronic patient information-gathering capabilities to inform physicians and patients when the next examination should take place, and much more.
For example, Fulkerson said, Touchpoint has an eye-testing program for diabetics, started five years ago because one of every two diabetics in the United States eventually suffers blindness. Nearly a quarter of Fox Cities diabetics suffered the same fate, so Touchpoint sought to diagnose any eye problems early.
"So, we put a process in place to test eyes annually," he said. "Over time, we have improved that so that we are the national benchmark for diabetic eye exams."
Now 80 percent of Touchpoint's clients are in the program.
Among its other preventive efforts are for immunizations, asthma and mammography.
Network has embarked on many of the same programs, plus it has projects on referral authorizations and plan access. The latter two deal with service access procedures patient members must deal with.
The asthma program, for example, showed an increase in patient use of inhalers to control symptoms, plus a decline in hospitalizations, an indication self-medication was effective, according to a Network report.
Wolf said health care systems have no control over the aging of the population and increased medical needs or even the soaring costs of technology and new drug treatments.
BILL OF HEALTH: HMOs STRUGGLE WITH ECONOMICS, ABUSES AND REGULATIONS--BUT ABOVE ALL, A BAD REPUTATION
By Arlen Boardman
Post-Crescent business editor
Many have their favorite horror story about dealing with their health maintenance organization, but the Fox Cities' two HMOs face more than perception problems or paperwork snafus these days.After bleeding badly in 1999 and early 2000, they are struggling to re-establish a sound economic foundation, while faced with unhappy physicians; national stories of abuses; and the twin thorns of growing government stinginess and threat of still more regulation.
It's the complaining public, though, that threatens to compromise their reputations. The two local HMOs and their provider network get painted—unfairly they say—with the broad brush reserved for all in the industry, but they do draw some of their own fire.
Last year Linda Heiting of Heiting Machine said her husband, Ken, was suffering pain and weakness in his legs. She feared the worst.
The Heitings, who own their own business, fought for a year to get Network Health Plan, their HMO, to OK a referral so insurance would cover the costs for tests, she said.
"It was just fight and fight and fight," Linda said.
The tests showed nothing and Ken still has pain, but Linda feels better now. Serious illness was ruled out.
Network's Fox Cities neighbor, Touchpoint Health Plan, isn't immune to criticism either.
Last November a patient advocate from Community Health Network of Berlin complained to the state Office of the Commissioner of Insurance about bad service from insurers.
She said billing insurers was challenging because of improper denials, lost claims and incorrectly paid claims, and Touchpoint was the worst among them, an accusation the HMO disputed.
Local HMO managers, in fact, believe most people are happy with their HMOs, although they know complaints are part of the life of HMOs and other health insurers. Most of the 80-plus formal complaints filed last year with OCI were about clerical mistakes or were items remedied almost immediately.
An example is a patient whose medical claim was repeatedly "denied" by United Health of Wisconsin (now Touchpoint). It was discovered the hospital was at fault by sending the invoice to the wrong health plan, United Healthcare of Minneapolis.
OCI can intercede often on complainants' behalf, but it has no jurisdiction to deal with premiums, and that's where trouble is on the horizon. Rising insurance costs may reach levels not seen since the 1980s.
Those buying health insurance in the Fox Valley got a reprieve with modest premium cost hikes during most of the 1990s, after being battered in the 1980s. But HMOs and the medical providers say they can't live with the small increases any more.
Spokesmen for Touchpoint and Network say they need double-digit annual premium increases, after treading water with 3 percent to 5 percent much of the 1990s. By double-digit they mean 10 percent to 15 percent or even 20 percent; some employers have already seen even bigger increases.
"HMOs did a very good job of extracting cost out of the health care system, but then you reach a bottom," said Kevin Nolan, chief executive officer of Affinity Health System Inc., the Menasha-based integrated health operations that includes Network.
Dr. Douglas Grant, a family doctor employed by Affinity, echoed what Touchpoint and Affinity leaders feel: "We're cheap medicine and you're getting great quality with cheap medicine. People have no idea what a bargain they're getting."
Maybe too much of a bargain. Affinity, and ThedaCare Inc., close affiliate and part-owner of Touchpoint, have touted their hospitals as being among the low-cost providers in Wisconsin, especially ThedaCare. However, that now gives them little wiggle room to accommodate rising costs.
Jay Fulkerson, president of Touchpoint, said his firm has run a tight ship.
"We're not a cash cow; we're in a very competitive market with very low premiums, the lowest in Wisconsin," he said.
Some HMO leaders warn the increases needed the next few years will be second only to those of the 1980s, when enormous insurance premium increases spawned managed care's prepaid health care and corporate paring of benefits. HMO red ink
Most U.S. HMOs aren't profitable, and lately the Fox Cities' pair have been in that majority. Network lost $9 million last year and $3.4 million in the January-to-June 2000, while Touchpoint lost $1.9 million in 1999 and earned about $280,000 in the second quarter of 2000 to offset an $86,000 first-quarter loss.
Network had net income in the range of $1.2 million to $3.4 million the previous five years, but that is offset by big losses by its sister corporation, La Salle Clinic (now Affinity Medical Group). La Salle lost millions for many years, including roughly $5 million in 1996, $7 million in 1997 and $9.4 million in 1998.
After earning $2.7 million in 1996, Touchpoint had net income of just over $1 million for 1997 and 1998 combined before slipping into the red in 1999. The last four years it has sought to balance its books by withholding payment of $43 million in salary to physicians and fees to its hospitals. Contracts allow the withhold to not released in part based on the financial performance.
Doctors see the withholds as fees promised but not delivered, an irritant that may have led to the smaller withhold in 1999, forcing Touchpoint into the red for the first time. Touchpoint didn't pay out $19 million of withhold in 1998 and $12.8 million in 1999, as it struggled with too little premium revenue for too many payments.
Dr. Dean Gruner, Touchpoint's chief medical officer, said cost pressure led Touchpoint to an unprecedented move for 2000—it cut its physician fee schedule by 10 percent, and its hospital fee schedule 15 percent.
"That's the first time, and I would say the only time, that we would do that," Gruner said.
But he added, "Sometimes when you have some dramatic situation, you need dramatic solutions."
A physician said the cut included the promise the schedule would be increased 5 percent in 2001 and 5 percent in 2002, recouping the 10 percent.
Network/La Salle doctors paid the price, too, especially in recent years.
Mike Wolf, president of Network, said his physicians have been tightening their salary belts for the past 17 years. Some doctors say Affinity physicians aren't as well paid as Touchpoint doctors.
Network is trying to change that, but for 2000 it reduced its payment schedule to its three hospitals by 5 percent, he said.
Skyrocketing costs
Health care providers say they're caught in a squeeze play. On the top pushing revenues down is employers' reluctance to pay higher premiums, plus the tighter capped Medicare reimbursements. Pushing costs up are escalating drug prices and technology costs.
At the same time, HMOs feel pressure from employers who balk at high premiums and providers who see their salaries and service feels flattened. Providers say the other unrelenting factor pushing up costs is the aging population; as Fox Cities residents get older and live longer, their medical needs increase.
Couple that with what health care providers say is patients' growing expectations for cadillac health care at little or no cost to themselves, and the die is cast.
"My premiums are going up," Touchpoint's Fulkerson said, noting the average premium might go up 10 percent to 15 percent in 2001. "(In recent years) our revenue fell behind the demand for services."
John Toussaint, the new president and chief executive officer of ThedaCare Inc., the integrated medical corporation that is part-owner of Touchpoint, said the fiscal pressure is always on.
"It seems like every year there's some new significant (medical) process, whether it's pharmacy or some clinical issue or reimbursement," he said. Numerous medical devices have come into use the last 10 to 15 years, improving providers' ability to diagnose and treat illness and injury - but also increasing the cost of care. The MRI, barely a decade old, is a good example.
"People take MRIs for granted in the Fox Valley," Gruner said. "They didn't even exist 12 years ago."
Said Dr. Curtis Baltz of Neenah: "Now everyone who has a headache wants an MRI."
Add to that the five-year federal Balanced Budget Act of 1997, a congressional move to help assure Medicare's long-term viability. The act holds down Medicare payments on medical procedures. For some patients and some diseases, the per-procedure fee is cut.
Some hospital reimbursements are being hit hard during the 1998-2002 period, Nolan said.
Network expects the act to cut its revenue over five years by about $5.5 million, while Touchpoint also expects to lose millions, including $3 million alone in 2000.
Toussaint said the cuts are about 1 percent of Touchpoint's budget, but he added: "You've got to remember we're a low-(profit)-margin business. So, that 1 percent is a big loss."
Nolan said the Medicare cuts make it more difficult for Affinity as it works toward becoming a self-sustaining operation.
Rising drug prices continue to hassle HMOs. They see the latest—and sometimes not best—drugs increasing annual pharmaceutical costs four times as fast as HMO premiums are going up.
Network's 1999 $9 million loss was aggravated by a 28 percent increase it incurred in drug costs. Wolf said, on average, drug costs rose 21 percent nationally, but Network felt the increases more because it's a low-cost provider, i.e., the drug cost increase represented a higher percentage of a lower total provider organization budget.
He said the effect is insidious. "We are gradually making less money," he said.
New drugs can do wonders, but when they cost $1,000 a dose, the impact on an HMO's budget is significant, providers say.
Touchpoint's Gruner said another element in rising medical costs is the consumerism that's sweeping the health care industry. "People are much more informed about what their options are," he said.
Touchpoint's Fulkerson said having informed patients is good because they take more responsibility for their own health, but it also has a down side.
That comes, for example, when a patient demands Claritin, an allergy medication, because former television morning host Joan Lunden says it's good.
"If I tell you you can't have Claritin (because something else is just as good and less expensive), then I'm the big bad HMO," Fulkerson said.
The shakeout
Medical providers are worried about another uncontrolled spiral in medical costs, but so are employers who pay the premiums. "The cost pressures are tremendous on the employers," Toussaint said.
He and other providers say another surge in premiums could trigger a reassessment of benefits the employers provide to workers.
As one employer said, the rise in premiums has forced her to reconsider her company's policy every year. She changes policies every three or four years as existing ones become too expensive for her small company.
Marty Myse, assistant vice president for corporate benefits at the Aid Association for Lutherans, said premium increases are always a concern, but they shouldn't be outright rejected by businesses. The HMOs need to show the need, he said.
Affinity and Touchpoint also must contend with other provider competition besides each other. Aurora Health System of Milwaukee —ironically, a minority shareholder of Touchpoint—competes with Touchpoint-contracted services in Green Bay and with Affinity in Oshkosh. Aurora opened up a new walk-in clinic adjacent to the new Mercy Medical Center. this year.
Still the great experiment
James Raney, retired CEO of ThedaCare, said managed care organizations like ThedaCare/ Touchpoint are young by corporate standards, only about 15 years old, and have a long way to go and a lot to learn.
"Our goal is to be a quality organization (by practicing good medicine at a fair price)," he said. "We're just in our infancy; we're just learning how to go about it."
Fulkerson said health care services also are still in transition because despite the talk of tight-fisted HMOs, 70 percent of patients in the Fox Cities are still under the old fee-for-service system. That system, which triggered the 1980s health care cost crisis, is still used by Medicare, which strictly limits payments per procedure, and non-HMO insurers, i.e., regular health insurance companies.
Fulkerson said managed care is growing because of limited funds for health care, but it is not the dominant factor publicity would suggest.
Providers say they don't know if managed care will survive as it's structured today, but they believe their organizations are positioned well for the unforeseen future.
The Touchpoint/ThedaCare system expects to be profitable this year, i.e., have re-investment revenue left after expenses. And the 5-year-old Affinity system expects to be the same by fiscal 2001, a 12-month period ending Sept. 30 of next year.
Both organizations feel ready to weather the internal and external changes that continue to jolt the health care system.
Said Wolf of Network: "The real issue over the next seven years will be what will the health care trend be.
"We're positioning ourselves to provide all the advantages of developing an integrated system," he said.
TWO PATIENTS, TWO VIEWS OF HMOs
By Arlen Boardman
Post-Crescent business editor
Darlene Kuschel and Michelle Faust each had a breast problem, but they got vastly different responses on their problem from the same health maintenance organization.Their stories exemplify how HMOs make friends and enemies as they try to take care of patients and balance the books at the same time.
The two women's HMO is Touchpoint Health Plan, partly owned by ThedaCare Inc. of Appleton. Faust of Pine River was seeking a single breast reduction because one was 14 ounces larger than the other, something that troubled her through many of her 28 years.
As a young woman, she became even more troubled by it. "You look like a freak," she said.
Faust, an employee of Plexus Corp. of Neenah, said Touchpoint declined to cover the surgery cost, saying it was cosmetic and not medically necessary and so not covered under her company's insurance.
She took the denial through two appeals boards, including a committee of physicians, staff and a Touchpoint member. She lost both.
This summer, a year later, she was still angry because she considered the appeals board members unsympathetic.
"I was pretty much just another number; I saw no compassion," she said. "They really couldn't have cared less."
Faust has since had the surgery and paid the $4,000 herself. She said she also must pay hundreds of dollars for a biopsy, a state requirement for any kind of breast surgery.
Kuschel, 64, of Mountain has a much different view of Touchpoint. In fact, she called its office several weeks ago after her surgery and thanked the HMO for her life.
Her story began in February when she received a letter from Touchpoint, advising her she had gone past two years since her last mammogram.
"It was the middle of tax season, so I put the letter aside or probably threw it away because I can't find it," she said. Kuschel is a retired banker, who uses her accounting skills during tax season.
When she didn't respond to the letter, Touchpoint made a follow-up telephone call, and she agreed to an appointment after April 15.
At that appointment, she got worried because the technicians took additional x-rays of her right breast. She knew her family had a history of harmless cysts, but her doctors were concerned and performed biopsy surgery May 15.
"On Tuesday, May 16, Dr. Davis called and said, 'You've got cancer.'" Shaken, she conferred with family, others who had had the problem, and the doctors before she decided on a radical mastectomy, a full breast removal. Among other things, she wanted to avoid having to travel 70 miles for radiation treatments.
Kuschel knew after the surgery there was one thing she wanted to do. She got on the phone to Touchpoint.
"I called the 800 number (and said) 'I just want to thank you guys because if you hadn't written the letter and followed up with the call, it could have spread further,'" she said.
For Valerie Bales of Appleton, the story is of the area's two HMOs—Touchpoint and Network Health Plan—putting their heads together.
Last August Bales at age 47 had a double-bypass heart surgery, paid for by her insurer, Network HMO, and performed at St. Elizabeth Hospital in Appleton. She was doing fine until about three months ago when she went to the emergency ward with chest pain.
A vein in the first surgery had collapsed, perhaps the result of a hereditary condition, and she needed a second, specialized bypass—with no delay, her doctors said.
The Network surgeon who could handle that type of bypass was out of the city for several days, so Network and Touchpoint agreed Dr. Louis Suarez, a surgeon under contract to Touchpoint, would do the surgery. He examined his patient within a couple of hours and performed successful surgery the next day.
Bales wasn't aware of the Network/Touchpoint consultations, but she was happy with the results.
Executives of both HMOs say their goal always is to do what both like to call "the right thing" medically, and Bales believes she benefited from that philosophy.
That doesn't keep the HMO patient complaints from rolling in, though. Dozens of patients and their advocates complained in 1999 about Network and Touchpoint. Almost all of them were about delays, denials, and various clerical missteps.
Traci Morrison, a patient advocate for CHN Lifeskills of Berlin, echoed what many have said about HMOs when she wrote on behalf of a patient at Berlin Memorial Hospital.
She said Touchpoint was the worst among HMOs for improper denials, lost claims and incorrectly paid claims, and she said it denied benefits to a patient in violation of its rules.
"Despite these specific rules, we are constantly getting our claims denied," she wrote to the state Office of the Commissioner of Insurance. "It takes two months to get a response to our claims, and usually 25 percent of them are denied or 'pended.'"
She said rebilling brings more delays and denials, so CHN then contacts Touchpoint by telephone.
"At this point, we wait another two months and some of those (bills) in question get paid but not all, and another call has to be made," Morrison wrote.
A Touchpoint spokesman said the complaint by Morrison was overstated. He said that of 28 CHN acceptable claims paid late, the total interest on those late payments was $1.28.
Jennifer Tracy, CHN community relations manager, declined comment in June except to say the CHN/Touchpoint relationship was positive now. She said Morrison initiated the complaint on her own.
Larry Peterson, owner of APLE Consulting Inc., Appleton, complained last year to the OCI that United Health of Wisconsin, now Touchpoint, wrongly denied payment for his daughter's wisdom teeth removal. It was blamed on a mix-up caused by a change in the policy rules, but Peterson said an eventual partial payment satisfied him.
Network has had its share of complaints. Linda Heiting of Heiting Tool & Die of Appleton didn't file formally with OCI, but she said she fought with the firm for a year to get a leg pain test for her husband, a struggle that has colored her view of Network.
In another case, Dr. Robert L. Peterson, a Waupaca physician, complained to OCI that a particular patient would be penalized financially when his insurance was shifted to Network because he wanted to keep Peterson as his physician. The patient was pressured to switch doctors because Network didn't invite Peterson to be in its HMO.
Despite more than 80 complaints against them in 1999, the Fox Cities' two HMOs say that's small when considering the hundreds of thousands of HMO members. And they say most HMO members like their HMO.
Norbert Johnson of Menasha, an Affinity patient since January, is a fan. He takes several prescription drugs for depression. He likes the way Network has treated him medically and personally.
"I enjoy them very much; they're good people," he said of his three visits. "The doctors are great; the staff is great; the nurses are great. I've never dealt with this friendly a people."
DISGRUNTLED AFFINITY DOCTORS HAVE FEW OPTIONS
By Arlen Boardman
The recent community outrage over Affinity Health System forcing three New London doctors to temporarily leave town is the tip of the iceberg for a organization trying to protect its flanks. Post-Crescent business editor
So say independent physicians, who also say Affinity has had brouhahas over its doctor compensation program and physician discontent fostered by its no-compete contract.
Affinity officials think they have the worst behind them. After a stampede in 1999, the physician exit rate this year is down, and the mistrust and disruption of changing ownership and restructuring is subsiding, they say.
For Affinity, an integrated health care system that employs most of its doctors, instead of contracting with them, the problem hasn't gone away, though.
Most departing are specialists, a blow because they had been the strength of Affinity and its predecessor physician group, La Salle Clinic. Dr. Scott Nygaard, Affinity chief medical officer, said the industry trend is toward contracting with specialists rather than employing them.
"I think we have to" face that possibility, he said.
The New London case involved primary care physicians, but it was just one more reminder of the tenuous relationship of independent-minded doctors and health provider corporations.
Unlike Affinity's Fox Cities neighbor, ThedaCare Inc., Affinity has a no-compete clause. It requires doctors who leave Affinity, like the three in New London earlier this summer, to be exiled outside their practice area for 18 months.
Dr. Paul Myers, a neonatologist who specializes in treating premature babies, was among the specialists who left Affinity's employ. He left a couple of years ago because he disgreed with its reimbursement system. But with his specialty, he was able to negotiate out of his no-compete clause without being exiled.
Myers, now an independent contracting with Affinity's Network Health Plan and ThedaCare's Touchpoint Health Plan, said the disgruntlement of doctors isn't restricted to Affinity. Many doctors have quit or retired early because they're fed up with government rules, as well as managed care bureaucracy, he said.
He said the physician drain is a danger to the Fox Cities, although he considers it to still have many top-notch doctors. He sees a troubling trend, though, especially at Affinity.
"When physicians' situations are not optimal for them, the star physicians will look for something better and the mediocre will stay because they have no alternative," he said.
ThedaCare and Affinity and their HMOs struggle with unhappy doctors who feel underpaid and over-managed. While Affinity employs most of its physicians, ThedaCare uses almost all contracted, not employed, specialists. It employs most of its primary care doctors, but it has no no-compete clause, requiring only a 180-day notice of departure.
Independent physicians say the difference in cultures is reflected in Affinity's greater loss of physicians, especially the key specialists. They say the list of specialists who have left Affinity in the 1990s includes neurologists, cardiologists, gastroenterologists and neonatologists, plus general surgeons.
Affinity's Nygaard said last year was a rough year. One of 10 Affinity doctors left, he said.
He said the 1998 Affinity purchase of the clinic and its health plan, and their merger with the hospitals and other services, bothered some doctors. That and operating procedure changes led to much of the exodus, he said.
Dr. David Brooks, an independent physician and an infectious disease specialist, said Affinity's oncology department has suffered as much as any at Affinity. It has been understaffed regularly because most of the cancer specialists it recruits don't stay long.
Brooks works closely with cancer specialists because treatments tend to weaken immune systems so cancer patients end up with infectious diseases.
Brooks said Affinity often uses temporary oncologists, a situation Nygaard acknowledged.
"It's almost like they find a body without consideration for credentials or quality," Brooks said. "They're basically filling spots with warm bodies over there."
Kevin Nolan, chief executive officer of Affinity, said his system has had turnover problems, but it's no different than anyone else in the health care industry. He said Affinity's 10 percent isn't high vs. a national average of 12 percent to 14 percent.
"Doctors today are very mobile," he said. "The notion that people come, hang their shingle in one place for 30 years is a fading occurrence."
Nygaard said this year things are still challenging. In 1999 Affinity lost well over 20 doctors, while as of the this month, 18 have or are scheduled to leave in 2000. Some are retirements. It wants to cut its departure rate to 6 percent.
Some doctors who have left Affinity or clinic predecessor La Salle, say Affinity has the bigger relationship problem, especially with doctors. They say the no-compete clause makes doctors feel trapped.
Affinity defends the clause as commonplace and says it's not an unreasonable expectation of physicians working for it.
That clause, which requires ex-Affinity doctors to practice at least 25 miles from their community for 18 months, has created publicity. Most departures are unreported by the media, but not all. The three New London doctors, who joined ThedaCare, were publicly fighting the contract clause in court this summer, while moving their practices temporarily to Oshkosh.
Two independent physicians who earlier felt the sting of the Affinity/La Salle Clinic clause say it contributes to an uncomfortable atmosphere.
Dr. Mark Scherer, fired in March 1999 as an Affinity plastic surgeon, said the no-compete clause is intimidating.
"There's a lot of people within the (Affinity) system that are angry, but I think they're scared to death to speak because then maybe if they do, they're going to be put out to pasture," he said.
He was one of the early Affinity casualties. He was a La Salle/Affinity plastic surgeon for eight years before he was fired for certification and productivity reasons.
He recently set up an independent practice in Appleton. When Affinity took him to court, it lost because he had been fired and not quit, plus Affinity hasn't replaced him, Scherer said.
Another physician, Dr. Curtis Baltz, an internal medicine doctor who in 1991 left La Salle Clinic (now Affinity Medical Group), wasn't so fortunate. He paid a large assessment for violating the clause, but felt it was worth it to not uproot his Fox Cities practice.
Nygaard defends the no-compete clause as a competitive necessity. He said most health care organizations have one.
"It's our intent that we will bring doctors to our group and they will practice with Affinity indefinitely," he said.
Dr. Jack Meyer, an Affinity family practice doctor at Little Chute, agreed with Nygaard.
"I don't have a lot of sympathy for physicians who complain about it because they signed a contract knowing it was there," he said.
The no-compete clause issue is in part a study in the different way of operating and the corporate culture of Affinity and ThedaCare.
The harshest comparison from one former Affinity system physician, now independent, was that Affinity was like East Germany with the Berlin Wall and ThedaCare, West Germany, where one is free to leave.
Nygaard rejects emotional comparisons. He said the two systems are just different.
"I don't think that one way's right and one way's wrong," he said.
As a business, Affinity has to protect its interests, Nygaard said. It would be irresponsible to do otherwise, like in the case of these three New London doctors.
"(Without the contract), they can move to the competition and basically they will take those patients" and revenue and referrals away from Affinity, he said.
Affinity is simply responding to the competitive environment it has to operate in, he said.
Affinity has brought three different Affinity physicians to take over the New London practices. The patients of the three departed doctors are affected, though; they forced to change physician or drive to Oshkosh to see their doctor.
Dr. Robert Johnson, an independent physician at Waupaca, said he can relate to the disruptions today's patients experience. When Affinity established its clinic in that area, some of Johnson's patients were forced by HMO restrictions to leave him or pay more.
Despite the cost, he said, "a lot of them decided to stay, (but) a lot of them came in with tears in their eyes, saying 'I don't want to leave but I can't afford to take the insurance option.'"
Dr. John Toussaint, chief executive officer of ThedaCare, said few physicians have exercised ThedaCare's 180-day notice to end their employment with ThedaCare since 1994 when ThedaCare was established.
Eight from a north-side Appleton practice are getting out Sept. 2, but have already contracted to provide services for Touchpoint as independent doctors. Their spokesman, however, was critical of the corporate medicine atmosphere they lived under with ThedaCare.
Toussaint said giving physicians an option for free agency is a philosophy that ThedaCare embraces, and always has.
"The reason is that what I want to do is create an environment in which the onus is really on us as a health care organization to create an excellent professional environment for physicians to work in," he said. "We're sort of on the hook to make sure that our physicians and the ThedaCare Physicians (employees) are satisfied."
He said nurses, technicians and others are viewed the same way. If Affinity has some disgruntled doctors—as does ThedaCare - Dr. Douglas Grant isn't one of them. Grant, a family doctor in Appleton, said doctors must recognize today's managed care environment has created a large-corporate environment. It demands uniformity and has certain rules. Meyer of Affinity's Little Chute clinic said he has been a private practice doctor and an Affinity employee during his 15 years of practice. Is there a difference? "I can't tell," he said, in the important area of practicing good medicine.
THEDACARE DOCTORS STRIKE OUT ON THEIR OWN
By Arlen Boardman
Dr. David Ebben and seven of his partners have spent five frustrating, unhappy years working as employees of a health provider corporation. Post-Crescent business editor
That all ends Sept. 2 when their employee contracts with ThedaCare Inc. are over, but then they face new difficulties in uncharted waters.
These eight veteran family doctors, some in practice for three decades, will be starting from ground zero with nothing but a new office they've managed to lease.
Until they open their new office, they won't know if they have any patients. They expect to have to rebuild their patient lists, and Dr. David Ebben, speaking for the group, predicted it will cost them hundreds of thousands in lost income over the next few years.
"It's a heavy financial burden to do this because we're starting a practice from nothing," Ebben said. "We have no equipment, no office support staff.
Because of their employee contracts with ThedaCare, Ebben and his seven departing partners also can't solicit any of their roughly 40,000 patients to stay with them in their new, independent practice. Their patients must solicit their services, something their old employer, ThedaCare, won't encourage.
ThedaCare, the integrated health care provider company based in Appleton, has no such restriction on soliciting their former employees' patients. ThedaCare has one new doctor coming on board and expects other ThedaCare physicians to help with the patient load.
Dr. Gregory Long, a ThedaCare family doctor in Kimberly and physician director of the Physician Services Division of ThedaCare, said ThedaCare will want the patients to hook up with a ThedaCare doctor.
"We would certainly want people, if they choose, to stay with us," he said, but he expects most of the patients to follow the departing physicians to their new practice.
The physicians leaving ThedaCare include Dr. Jon Derksen, who has been practicing in the Fox Cities for 25 years and has been a doctor about 30 years. The others are doctors Dan Heyerdahl, Charles McKee, Robert Makeever, Jonathan Hagen and Amy Servais.
They will open their own independent practice Sept. 5 at 620 E. Longview Drive, Appleton, where they have rented facilities. Their new practice is called Primary Care Associates of Appleton Ltd.
Ebben said they are quitting ThedaCare because they dislike the corporate medicine environment, filled with talk of "market share" and "managing populations," vs. managing individual patients, and "bottom line." He said the inflexibility doctors face because of corporate guidelines, protocol and standards is too restrictive.
"We practice day-to-day medicine, dealing with individual people," he said. "Corporate medicine deals with 'populations.'"
Ebben makes a distinction between corporate medicine and managed-care medicine under a health maintenance organization like Touchpoint Health Plan. The eight doctors signed contracts this summer to continue serving Touchpoint patients, as well as patients with other insurance, but they'll do it as independent physicians.
Touchpoint sets a fixed dollar figure for compensation, but it doesn't tell doctors how to practice medicine, Ebben said.
"We're not stepping out of managed care; we're just stepping into a world where we're managing our own business," he said.
The departing doctors are part of the Family Doctors practice which joined ThedaCare five years ago.
"The physician has lost control; they have lost the control to manage their own practice," Ebben said.
He said the eight are paying a price beyond patient loss and income; They have angered and upset some of their fellow doctors. "It was an emotional separation," Ebben said.
Long said the separation is probably good for both sides because the doctors leaving don't think in the same way as do younger doctors who have only known corporate medicine. The physicians leaving tended to resist changes other physicians of ThedaCare wanted, he said.
"When you've been entrenched in those (old) ways, it might be more desirable not to change," Long said.
The corporate way, or the integrated health care system, as Long puts it, has major advantages, he said, like the system-wide programs for disease management. He noted the diabetic eye care program and said ThedaCare "gave us the tools to track patients with a computer database."
Long said doctors can't escape the business aspects even if they go into private practice. "Medicine is still a business, whether somebody else is helping you run your practice or you're running it alone," he said.
Ebben said the departing eight had wanted to begin a promotional campaign for their private practice, but ThedaCare said it would be a violation of their personal services contract. He said the group will begin its promotional advertising on Sept. 3, the first day after the doctors' contracts end.
He accepts the contractual restriction, but looks forward to when he won't be under that. Mixing big business and the patient/doctor relationship just doesn't feel right to Ebben.
"One size doesn't fit all," he said.
DOCTORS SEEING LOWER SALARIES, MORE OVERHEAD UNDER HMOs
By Arlen Boardman
Post-Crescent business editor
If Dr. Curtis Baltz is lucky, he will be making the same salary in 2002 that he was in 1997.Baltz, a Neenah-based internal medicine doctor, contracts with Touchpoint Health Plan, a health maintenance organization, to provide primary care services. He also handles Medicare and indemnity insurers' (traditional insurance companies') patients.
"The bottom line, the end summary, is that (managed care) has reduced my income and increased my overhead," he said. "I get paid less, but there's more work that has to be done to comply with the insurance companies' regulations and rules."
Baltz, a physician since 1973, says it matter-of-factly. He remembers the heady fee-for-service days 20 years ago when doctors set their fees for each procedure or service, but he, like many of his cohorts, know those days are long gone.
Dr. Douglas Grant, an Appleton family practice doctor employed by Affinity Medical Group, won't argue with Baltz's experience, but he said maybe the most troubling thing about managed care is HMOs looking over the physician's shoulder.
"The worst part, and it's not terribly bad, is the continual harassment, and I call it harassment, that we get from management," he said.
The HMO or the clinic is pressuring doctors to do things its way, he said, noting it's understandable for the HMO corporate environment but a difficult position for physicians who are trained extensively to practice medicine. The HMOs, for example, will inform doctors on the preferred drug for a particular treatment.
"It's quite a change from being in control of a situation and the decision to being told you're not doing it right," he said. "That, frankly, has been a huge change in mental status for doctors to put up with .... "
Baltz and Grant aren't condemning managed care, and they feel they can still practice quality medicine. They even see good in it, like the preventive programs and the record-keeping that provides a better system for sharing information on patients.
But, they said, managed care has had a profound effect on them as physicians.
HMOs deserve some blame, as do the provider corporations that employ physicians. The HMO and the provider corporation, sometimes in concert, control the revenue and push practices they feel will hold down costs, without, the doctors quickly add, damaging medical services.
Some doctors, especially specialists, have left the area or quit in recent years because of typical HMO financial and practice restraints and corporate-controlled medicine. However, physicians say government regulation, the expensive malpractice threat looming out there, and the vulnerability of any doctor to vindictive corporate or government scrutiny also have driven many to early retirement.
"It's easy to blame the managed care," said Dr. Jack Meyer, a family doctor employed by Affinity in Little Chute.
He said an HMO can be unpleasant when it forces patients to change doctors because "it tears down relationships that people have built with their providers over time."
But he added: "In my day-to-day life, it's not the HMO that causes the most problems; it's the paper work from government regulations and nursing homes, I'll tell you. Tons and tons of work get generated from government regulation."
If consumers in the managed care environment experience frustration, anger and resignation, physicians—the lifeblood of the medical provider system—feel the same thing.
They understand why it happened. It was the blank-check fee-for-service and uncontrolled cost increases 20 years ago that brought an outcry among purchasers of health care services, especially companies paying for their employees' health insurance. That spawned what is called managed care, a system of pre-paid medicine designed to control costs, and and the creation of the two Fox Cities HMOs—Network and Touchpoint health plans.
It has forced physicians to talk the language usually reserved for business people; they use terms like "overhead," "cost of doing business" and "productivity."
Employed doctors can face cost control pressures from the HMO and their employer/provider corporation. They have budget restrictions with both groups. However, even independent physicians, who contract with the HMOs and other insurers, face financial pressures.
"There are a lot of physicians who are very unhappy with health care today," said Kevin Nolan, chief executive officer of Menasha-based Affinity Health Systems, the umbrella corporation that includes Network.
He said health care systems must find a way to provide fair compensation for fair productivity from physicians. At the same time, unproductive physicians have been sent packing because the system can't afford them.
That said, Nolan added, "I don't think it's a pay issue (with doctors); I think it's a do-you-value-me issue," he said, noting physicians want their relationship with patients to be respected. "We value the physician who is in the trenches every day working on that relationship."
That may be true, but the matter of compensation has led to many battles and constant tension among physicians, health systems managers and the purchasers of health services.
James Raney, who recently retired as chief executive officer of ThedaCare Inc., the Appleton-based umbrella corporation that is part owner of Touchpoint, knows the feeling.
"It's been very, very difficult to maintain strong working relationships with particular specialty physicians at a time when reimbursements are going down, and it will continue to be a very difficult issue to deal with," he said. "There's no magic bullets for solutions to this."
Primary care physicians, i.e., family doctors, are at the low end of the doctoring pay scale. Several said the range today is from $80,000 to $150,000 a year, partly based on the number of patients seen. Health care organization executives say some family doctors are paid well over $150,000 locally and in rare cases over $200,000.
A national medical management group puts the average U.S. salaries at $139,000 for family practice doctors; $141,000, internal medicine; and $135,000, pediatrics.
Specialists have a wider gap. One specialized surgeon said his income was $100,000 to $200,000 a year. Another, a general surgeon, said his peers make $150,000 to $200,000 a year, while certain other specialists can make up to $500,000.
Doctors said only a handful of physicians, like top brain and heart specialists, reach the $1 million mark.
Dr. Philip Vogt is an independent physician and general surgeon who is closely associated with ThedaCare. He said his salary has been fairly flat in the 1990s, especially in recent years. The volume of patients is up dramatically, probably 15 percent to 20 percent a year, but the average reimbursement is down, he said.
He said HMOs have reduced reimbursements, but Medicare and the non-HMO firms, or indemnity insurers, have also tightened reimbursements.
His surgical group hasn't lost money, but it sees more patients just to stay even, a common story among area doctors.
"I don't think anybody makes that much any more," he said.
Vogt said he works 60 or 70 hours a week, and his group would like to hire another surgeon, especially one with special skills.
Baltz, an internal medicine physician who practices in primary care, said the reduced reimbursements push income down, while overhead costs, like staff, facilities, equipment, billing expenses, bookkeeping, etc., keep rising. "It makes business very difficult," he said.
Dr. Robert Peterson, an independent physician in Waupaca, works under preferred provider organization and HMO contracts, plus Medicare and non-HMO insurers' contracts.
Sandee Peterson, his wife and office manager, said the HMO-covered patients generate the most paperwork, even more than the PPO patients, forcing her to increase her office staff.
"When we do a referral, especially for people in the HMOs, it used to be when you referred a patient, you sat down and you wrote a letter, 'Dear Doctor Jones, I am referring this patient; please see below, he has this problem, sincerely, Dr. Bob,'" Sandee Peterson said.
"Now for HMO patients, when you refer them, you have to fill out a referral form for the insurance company, (exchange phone calls and faxes), and find a doctor in their plan who's in the area.
"You're on the phone to find a doctor; you want them to send a list of who's in their plan," she said, noting that lists often are outdated and a certain doctor may be no longer acceptable to the HMO.
"It used to take 10 minutes to write a (referral) letter; sometimes (with the HMO now), it takes three hours and you still also have to write that 10-minute letter," she said.
Doctors say they usually get their referral requests approved, but they have to jump through HMO hoops which can take time.
Meyer said physicians are always aware of costs. "We try hard to use less expensive medicines," he said.
"We try hard to avoid tests that aren't necessary. But, unfortunately, the costs we do generate are substantial; they can be substantial for the patient, (too)." He said physician groups, like his Affinity clinic in Little Chute, have a budget and how doctors practice medicine can affect that budget.
Baltz said referrals to specialists indirectly affect a physician's budget because the HMO measures expenses. A referral to a specialist is another expense, and the fee for that referred treatment, like a heart catheterization, is tied to the referring doctor. His or her reimbursement can be affected, he said.
He echoed comments of other doctors that area physicians generally work hard and are dedicated to their patients.
"In the Valley we have very good honest physicians with a lot of integrity," Baltz said. "It may not be 100 percent, but it's pretty close to it, and the same with the insurance companies; they're not being abusive."
NEW CONCEPTS LINK PAY, PRODUCTIVITY
By Arlen Boardman
Post-Crescent business editor
Touchpoint Health Plan and Network Health Plan have created new physician compensation models for 2000 that put more weight on productivity and create more sophisticated measures for determining reimbursement, plan managers say.What they also represent, the managers say, is compensation models that are fairer and have more incentives to improve the provider system.
"In general, it's (all about) trying to respond to the changing marketplace," said Dr. Dean Gruner, chief medical officer for Touchpoint, the health maintenance organization partly owned by ThedaCare Inc.
Dr. Scott Nygaard, Affinity Health System Inc.'s chief medical officer, said the health plan has a new pay model for 2000, its first major overhaul since its first model was created about a decade ago.
"It gives us a lot more ability to be accountable to Affinity and the public," he said.
Both provider systems spend much of their time trying to adjust or tweak their physician compensation. They worry about unhappy doctors and try to fashion reimbursement models that will satisfy them.
The models treat all kinds of insured patients alike and seek to encourage physicians to do the right thing in treating patients, the plan managers say. They also encourage higher productivity.
ThedaCare has had three models since it was formed in 1987. The first went to 1993, the second to 1999, and the new one began this year.
Gruner said the first model was very basic, produced in the early days of managed care. The second model created more teamwork and more revenue sharing risk, but it was still largely a fee-for-service concept.
"This was a transition model," he said, which included a fee schedule, and payments based in part on frequency of service and type of procedure.
The schedule also included a pay withhold, i.e., doctors and hospitals received only about 80 percent of their reimbursement. The other 20 percent was to be paid only if the organization was profitable.
In the early years, 100 percent of the millions of dollars of withheld funds was eventually paid to doctors, but that percentage paid declined in recent years from about 98-plus percent in 1996 to none in 1999.
In the 1996-1999 period, Touchpoint didn't pay out $43 million in withheld funds, a move that kept Touchpoint in the black until it lost $1.7 million last year.
Gruner said it has been a difficult time, forcing Touchpoint to reduce the 2000 fee scheduled by 10 percent. Touchpoint didn't lose doctors because of the change, but they're not happy about it, he said.
Gruner called it a one-time action and used a patient analogy to explain the move: "When the patient is in a drastic situation, you need to put the patient in intensive care. You don't just sit around and watch."
The 10 percent fee cut is to be added back in 2001 and 2002, and Touchpoint is counting on insurance premium increases to help accommodate that. Except for the cut, Gruner likes the 2000 model. It gives doctors more accountability, which they wanted; more control; and a better balance between financial and clinical quality incentives, he said.
For primary care doctors, it provides a fee for service, but also quality targets, like successful procedure outcomes, with financial incentives tied to them. A doctor may get additional money for fulfilling Touchpoint's program to notify and test all diabetic patients, an effort to reduce blindness.
The model also includes a 10 percent withhold, instead of 20 percent, and some of the withhold can be earned by meeting quality targets, Gruner said.
Affinity and its HMO, Network Health Plan, operated with the same model from its inception in the late 1980s to 1999, although Nygaard said it was tweaked regularly.
He said under the old system, doctors were paid fees based on the patient's insurance plan. All but the HMO patients were fee for service, with varying and discounted fees. The discount is based on what the insurer, be it Medicare or another, actually pays.
Nygaard said a production formula was used to establish fees.
For the HMO patients, a doctors group was paid a set amount based on the HMO membership.
"It's like being on a salary to take care of people," and not really tied to incentives, Nygaard said.
With the 2000 model, productivity is more important and doctors are credited for seeing more patients and handling their cases effectively. "You've got to do work to get a credit," Nygaard said.
For the patient, the new model, unlike the old, doesn't differentiate based on insurance.
"When somebody walks in, we don't want physicians thinking about what kind of payer the patient is," he said. "We want to provide care for the patient and to get credit for the work for doing the right thing."
Nygaard said he believes the change will ease if not eliminate the physician discontent Affinity has faced.
"Overall, it's been well received ... it makes people feel that what they're doing is being valued more fairly," he said.
WHAT LIES AHEAD IN THE FUTURE OF MANAGED CARE?
By Megan Mulholland
Jason Brenden knows he and others in their 20s and 30s rarely use their employer's health insurance. Post-Crescent staff writer
"The vast majority of people are overinsured," said Brenden, new products manager for Interstudy Publications, a St. Paul, Minn.-based group that studies health maintenance organizations. "Unless you're pregnant, most young people don't need a lot of health care. People accept the benefit and are used to it. Many could go months, or even years, without having the full coverage. But the employer is still paying thousands of dollars."
Many trendy ideas are floating across the nation as ways to remedy the rising cost of health care and to stop HMOs from bleeding to death.
"The combination of declining consumer satisfaction and rising costs ... is leading many companies to say there must be a better way to deliver health care," said Jack Bruner, leader of Hewitt Associates' national health care practice. "Many are starting to look at new approaches to health care that would give consumers more choice and control."
According to a survey of nearly 600 U.S. companies by Hewitt, 62 percent say managed care has negatively affected consumer satisfaction, 60 percent believe it has constricted access to care and 37 percent say it has negatively affected quality of care.
In addition, one in four companies expects employee satisfaction with managed care will decline over the next three years.
A defined contribution
About 40 percent of companies in Hewitt's survey would support legislation to change the tax code to enable a defined contribution approach to health care. Companies would provide employees with a voucher or set amount of money to select and buy their own health coverage. In Wisconsin, 32 percent favored the voucher system.
"The employer says, 'We'll pay so much and do what you want with it,'" Brenden said. "You can set it aside, invest it. It's something that is growing, and it'll grow faster and be the standard setup for the employer. If you have 100 employees and you pay each $3,500 in health benefits, then, there you go. You know, rather than having an unknown cost."
"This approach would give consumers more choice and, ultimately, more control over their health care decisions and dollars," Hewitt's Bruner added.
Vouchers could encourage employers to scrap private health care coverage. They could also help lower costs by giving consumers the power of selecting their health insurance plans.
To save money, Brenden said, make the consumer liable for all medical costs and change the way health insurance is set up through employers.
"I'd be in favor of the consumer having more price sensitivity," he said. "Most people do not have much medical costs: About 15 percent of the consumers pay 85 percent of the medical costs."
Employers in Wisconsin are talking about—but not yet acting on—a voucher system, said Eric Borgerding, director of legislative relations for Wisconsin Manufacturers & Commerce.
"Surprisingly, some large, self-funded employers are responding to costs going up, employee dissatisfaction with coverage, and the straw that breaks the camel's back, legislation at the state and federal level that opens plan providers up for responsibilities," Borgerding said.
"We suffer from a strong economy, and thus the related demand—the labor shortage. The cost issue in health care is somewhat counterbalanced by the need to attract and retain employees. We're concerned if that takes a downturn, it's going to start impacting on labor and costs. That's when the cost of health care will really be a problem."
With a labor shortage, employers are all but required to offer health benefits; in a weaker economy, with more workers than jobs, that won't be necessary.
Having the consumer choose a plan makes sense, said Marty Finkler, a health care consultant and an economist at Lawrence University.
"But this is complicated stuff," Finkler said. "To make an informed decision is difficult. Employers aren't even all that informed. Even the most knowledgeable lay persons, with the best Internet search skills, cannot replace physicians in selecting the most cost-effective medical therapies. You can't just read Consumer Reports.
"(Vouchers will) likely to be used more, but I don't find them real attractive."
Insurance for an individual is expensive and the sickest will have rapidly escalating premiums, he said.
Wellness and prevention
"Managed care alone is not the answer," said Pat Schoeni, director of public affairs for the National Coalition on Health Care. More HMOs should encourage preventive measures, like taking an aspirin to reduce the chance of a heart attack, she said.
And some are doing just that, and gaining national recognition for their approach.
For example, Merrill Lynch practically bows to its employees' needs, offering a health plan considerably more generous than just about any other managed care program. It allows unlimited hospitalization, pays for most doctors chosen by employees, provides behavioral therapy for children and long-term mental health care, and doesn't limit access to brand-name drugs. And the company is saving money by expanding employee benefits, ABC News reported.
It monitors workers' health to prevent surgery and has 10 in-house clinics.
Merrill Lynch saved $25 million over the last five years, while employees' payroll contribution is about 25 percent less than the industry average.
A public service
According to U.S. Congress' General Accounting Office, administrative savings from a single payer reform—which claims high-quality insurance should not be bought and sold as a commodity—would total 10 percent of overall health spending.
"These administrative savings, about $100 billion annually, are enough to cover all of the uninsured, and virtually eliminate co-payments, deductibles and exclusions for those who now have adequate plans, without any increase in total health spending," wrote Drs. David Himmelstein and Steffie Woolhandler on the Physicians for a National Health Program Web site.
"A single payer system is better for patients and doctors. Canada spends $1,000 less per capita on health care than the United States, but delivers more care and greater choice for patients. Combining the single payer efficiency of Canada's system with the much higher funding of the United States would yield better care than Canada's."
Private insurers take, on average, 13 percent of premium dollars for overhead and profit, they said. That's even higher, about 30 percent, in big managed care plans like U.S. Healthcare.
In contrast, overhead consumes less than 2 percent of funds in the fee-for-service Medicare program, and less than 1 percent in Canada's program, the doctors said.
Blue Cross in Massachusetts employs more to administer coverage for about 2.5 million New Englanders than are employed in all of Canada to administer single payer coverage