Organizational impact on medicine: The HMO concept

This paper examines the role of physicians within the HMO (health maintenance organization) context. The development of HMOs in the United States is traced from their origins to the present time. The literature reveals the emergence of four factors within the practice of medicine; a shift of control away from physicians, the reduction of their prestige, the redefinition of medical quality and increased patient control over the treatment regimen. The paper concludes that (a) while physicians remain relatively powerful, some of their control and prestige are eroded by the organizational setting, (b) HMO physicians must pay greater attention to colleagues, personnel and patients than their fee-for-service counterparts and (c) definitions of medical quality are becoming increasingly rationalized.     

Caring for patients under Medicaid mandatory managed care: perspectives of primary care physicians

The purpose of the study was to describe the experiences of primary care physicians caring for Medicaid recipients in a demonstration mandatory health maintenance organization (HMO) managed care program. The authors collected data through semistructured individual or focus group interviews with 14 physicians and through interviews with the chief executive officers of the three HMOs participating in the demonstration program. Interview questions, developed initially from a review of the literature, addressed physicians' experiences as primary care providers for Medicaid recipients under traditional fee-for-service and under managed care arrangements through the demonstration program. Four themes emerged: providers' hassles and burdens, the complex needs of Medicaid patients, improved access to care under managed care, and individual providers' disconnect from the processes of health policy implementation and program evaluation.     

Trends in health care financing: opportunities for family planning agencies

In response to spiraling health care costs in the US, several alternative health care delivery systems have evolved. The delivery of subsidized family planning services in particular is being affected by declining levels of government support. The most rapidly growing of alternative delivery systems is the health maintenance organization (HMO). HMOs provide a voluntarily enrolled population a guaranteed, specific range of physician and hospital services in return for a fixed periodic payment. There are 3 types of HMO: the group model, in which doctors are members of a partnership or service corporation that contracts with employers or individuals to provide medical services; the taff model, in which physicians are direct employees of the HMO; and the independent practice association (IPA) model, a physicians' group that enters into a contract with an HMO and receives reimbursement for every patient seen. In 1986, over 21 million Americans were enrolled in approximately 262 HMOs around the country. HMOs are unequaled in their success at reducing hospital utilization; they have achieved savings of hospital costs of 20-40%. Another system for delivering and financing health care is the preferred provider organization (PPO) under which patients are assigned to a designated panel of health care providers who offer services according to a discounted fee schedule. New hybrid systems that combine many of the features of both systems are emerging. Most of the newly organized health care delivery systems described focus on utilization control and keeping costs down. A common way of ensuring coordinated health care delivery is through primary care case management. To initiate or establish relationships with HMOs or other health care delivery systems, family planning agencies should consider such activities as: undertaking surveys to study the market; training new employees on developments in health care financing; and recruiting board members with HMO experience.     

Rural-urban differences in primary care physicians' practice patterns, characteristics, and incomes

CONTEXT: Low salaries and difficult work conditions are perceived as a major barrier to the recruitment of primary care physicians to rural settings. PURPOSE: To examine rural-urban differences in physician work effort, physician characteristics, and practice characteristics, and to determine whether, after adjusting for any observed differences, rural primary care physicians' incomes were lower than those of urban primary care physicians. METHODS: Using survey data from actively practicing office-based general practitioners (1,157), family physicians (1,378), general internists (2,811), or pediatricians (1,752) who responded to the American Medical Association's annual survey of physicians between 1992 and 2002, we used linear regression modeling to determine the association between practicing in a rural (nonmetropolitan) or urban (standard metropolitan statistical area) setting and physicians' annual incomes after controlling for specialty, work effort, provider characteristics, and practice characteristics. FINDINGS: Rural primary care physicians' unadjusted annual incomes were similar to their urban counterparts, but they tended to work longer hours, complete more patient visits, and have a much greater proportion of Medicaid patients. After adjusting for work effort, physician characteristics, and practice characteristics, primary care physicians who practiced in rural settings made $9,585 (5%) less than their urban counterparts (95% confidence intervals: -$14,569, -$4,602, P < .001). In particular, rural practicing general internists and pediatricians experienced lower incomes than did their urban counterparts. CONCLUSIONS: Addressing rural physicians' lower incomes, longer work hours, and greater dependence on Medicaid reimbursement may improve the ability to ensure that an adequate supply of primary care physicians practice in rural settings.     

Higher fees paid to US physicians drive higher spending for physician services compared to other countries

Higher health care prices in the United States are a key reason that the nation's health spending is so much higher than that of other countries. Our study compared physicians' fees paid by public and private payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom, and the United States. We also compared physicians' incomes net of practice expenses, differences in financing the cost of medical education, and the relative contribution of payments per physician and of physician supply in the countries' national spending on physician services. Public and private payers paid somewhat higher fees to US primary care physicians for office visits (27 percent more for public, 70 percent more for private) and much higher fees to orthopedic physicians for hip replacements (70 percent more for public, 120 percent more for private) than public and private payers paid these physicians' counterparts in other countries. US primary care and orthopedic physicians also earned higher incomes ($186,582 and $442,450, respectively) than their foreign counterparts. We conclude that the higher fees, rather than factors such as higher practice costs, volume of services, or tuition expenses, were the main drivers of higher US spending, particularly in orthopedics.     

Rural–Urban Differences in Primary Care Physicians' Practice Patterns, Characteristics, and Incomes

ABSTRACT:  Context: Low salaries and difficult work conditions are perceived as a major barrier to the recruitment of primary care physicians to rural settings. Purpose: To examine rural–urban differences in physician work effort, physician characteristics, and practice characteristics, and to determine whether, after adjusting for any observed differences, rural primary care physicians' incomes were lower than those of urban primary care physicians. Methods: Using survey data from actively practicing office-based general practitioners (1,157), family physicians (1,378), general internists (2,811), or pediatricians (1,752) who responded to the American Medical Association's annual survey of physicians between 1992 and 2002, we used linear regression modeling to determine the association between practicing in a rural (nonmetropolitan) or urban (standard metropolitan statistical area) setting and physicians' annual incomes after controlling for specialty, work effort, provider characteristics, and practice characteristics. Findings: Rural primary care physicians' unadjusted annual incomes were similar to their urban counterparts, but they tended to work longer hours, complete more patient visits, and have a much greater proportion of Medicaid patients. After adjusting for work effort, physician characteristics, and practice characteristics, primary care physicians who practiced in rural settings made $9,585 (5%) less than their urban counterparts (95% confidence intervals: −$14,569, −$4,602, P < .001). In particular, rural practicing general internists and pediatricians experienced lower incomes than did their urban counterparts. Conclusions: Addressing rural physicians' lower incomes, longer work hours, and greater dependence on Medicaid reimbursement may improve the ability to ensure that an adequate supply of primary care physicians practice in rural settings.     

HMO penetration and the geographic mobility of practicing physicians

In this study, we assessed the influence of changes in health maintenance organization (HMO) penetration on the probability that established patient care physicians relocated their practices or left patient care altogether. For physicians who relocated their practices, we also assessed the impact of HMO penetration on their destination choices. We found that larger increases in HMO penetration decreased the probability that medical/surgical specialists in early career stayed in patient care in the same market, but had no impact on generalists, hospital-based specialists, or mid career medical/surgical specialists. We also found that physicians who relocated their practices were much more likely to choose destination markets with the same level of HMO penetration or lower HMO penetration compared with their origin markets than they were to choose destination markets with higher HMO penetration. The largely negligible impact of changes in HMO penetration on established physicians' decisions to relocate their practices or leave patient care is consistent with high relocation and switching costs. Relocating physicians' attraction to destination markets with the same level of HMO penetration as their origin markets suggests that, while physicians' styles of medical practice may adapt to changes in market conditions, learning new practice styles is costly.     

A comparison of satisfaction levels between traditional and managed care Medicare recipients

The Spokane County health department conducted a survey of randomly selected households in the county. The survey combined several previously validated instruments. Since the purpose of this study was to compare satisfaction levels and access and communication issues of Medicare recipients in Health Maintenance Organizations (HMOs) to Medicare recipients using the traditional fee-for-service (FFS), a subpopulation was used. The results of this study did not support the findings of previous studies; HMO members were older and had no differences in health status from traditional FFS members. HMO members were more educated, had higher incomes, and were more satisfied with their care than the FFS group. The authors suggest that these differences from previous studies may be due to the fact that the majority of HMO respondents are in not-for-profit HMOs which return a fairly high proportion of the insurance premium to the patients in the form of medical care. They also suggest that not-for-profit HMOs may be different than for-profits due to the lack of pressure to return profits to the stockholders.     

The quality of ambulatory care in Medicare health maintenance organizations.

The quality of ambulatory care received by Medicare recipients who enrolled in health maintenance organizations (HMOs) was compared to the care received by fee-for-service (FFS) Medicare recipients, in a quasi-experimental, non-randomized design. Both samples were drawn from the four major geographic areas in the country, and included two types of HMO practices: staff/group models, and independent practice associations (IPAs). A panel of expert physicians developed criteria for evaluating ambulatory care, and medical record abstractions using these criteria were performed on 1,590 outpatient records: 777 FFS and 813 HMO (441 staff/group, 372 IPA). While individual items of medical histories and physical examinations were performed most often for staff/group HMO patients and least often in FFS patients, odds ratios (OR) for performance in staff/group HMO patients were particularly large for health maintenance items: tonometry (OR = 8.4), mammography (OR = 2.7), pelvic examination (OR = 5.3), rectal examination (OR = 2.9), fecal occult blood test (OR = 3.3). The results suggest that recommended elements of routine and preventive care are more likely to be performed for Medicare enrollees in staff/group HMOs than in FFS settings.     

Consumer acceptance of prepaid and fee-for-service medical care: results from a randomized controlled trial.

Do consumers find the care provided by health maintenance organizations (HMOs) and that provided in the fee-for-service (FFS) system equally acceptable? To address this question, we randomly assigned 1,537 people ages 17 to 61 either to FFS insurance plans that allowed choice of physicians or to a well-established HMO. We also studied 486 people who had already selected the HMO (control group). Those who had chosen the HMO were as satisfied overall with medical care providers and services as their FFS counterparts. The typical person assigned to the HMO, however, was significantly less satisfied overall relative to FFS participants. Attitudes toward specific features of care favored both FFS and HMO, depending on the feature rated. Four differences (length of appointment waits, parking arrangements, availability of hospitals, and continuity of care) favored FFS; two (length of office waits, costs of care) favored the HMO. HMO versus FFS differences in ratings of access to care and availability of resources mirror differences in the organizational features of these two systems that are generally considered responsible for the significantly lower medical expenditures at HMOs. Regardless of their origin, less favorable attitudes toward interpersonal and technical quality of care in the HMO have marked consequences: dissatisfaction and disenrollment.     

Use of preventive care services,beneficiary characteristics,and Medicare HMO performance

Medicare health maintenance organization (HMO) enrollees use more preventive care services than their fee-for-service (FFS) counterparts. This may be because those who enroll in HMOs have characteristics that make them more disposed to use preventive care. To investigate this possibility, we examined the use of four preventive care services by respondents to the 1996 Medicare Current Beneficiary Survey (MCBS). Unadjusted preventive care use rates for HMO enrollees were slightly higher than rates for non-HMO enrollees with private supplemental insurance. However, after adjusting for enrollee characteristics (sociodemographics, health behaviors, health status, and functioning) we found that preventive care use rates for HMO enrollees were substantially higher--consistent with HMO enrollees being less disposed to use preventive care. In comparing preventive care service rates across groups, managers and policymakers may want to consider taking into account beneficiary characteristics that are correlated with the disposition to use preventive care.     

Mandatory HMO enrollment in Medicaid: the issue of freedom of choice

In areas where HMOs have enrolled a small proportion of the general population, physician participation is less in mandatory HMO programs for Medicaid beneficiaries than in fee-for-service Medicaid. But where HMOs have enrolled over one-quarter of the general population, participation rates are indistinguishable under the two systems. In those areas, mandatory enrollment restricts freedom of choice of provider. A plausible reason for this is that individual practice associations, which contract with large numbers of physicians with both fee-for-service and HMO patients, are becoming the lead form of HMO.     

The Growth of Managed Care and Changes in Physicians' Incomes, Autonomy, and Satisfaction, 1991–1997

Using survey data collected in 1991 and 1997 from a panel of almost 1,500 physicians, we analyzed the relationship between changes in physicians' incomes, practice autonomy, and satisfaction, and the growth of HMOs and physicians' perceived financial incentives. Both the growth of HMOs and financial incentives to reduce services were significantly related to lower income growth, reductions in practice autonomy, and decreases in satisfaction. Changes in income and autonomy were both positively and significantly related to changes in satisfaction. Controlling for changes in income and autonomy, HMO growth was no longer significantly related to changes in satisfaction. Having a perceived financial incentive to reduce services remained a negative and significant determinant of the change in career satisfaction.     

HMOs and physician recruiting: a survey of problems and methods among group practice plans.

A mail survey was conducted among 69 group practice health maintenance organizations (HMOs) to collect information on the recruiting of primary care physicians and specialists. In reporting on difficulties in recruiting physicians for primary care, the medical directors of HMOs indicated that the greatest problem was locating obstetrician-gynecologists. Among specialists, recruiting for orthopedists was reported as being most difficult, although plans that employ neurologists and anesthesiologists generally reported great difficulty in recruiting these specialists. The most important source of new physicians is the pool of the those completing residencies, describe by nearly three out of four plans as a very important resource. The next most important source was faculty or staff of medical schools or teaching hospitals. The recruiting methods reported by most plans as the most useful are direct personal contacts and advertisements in newspapers and journals. About one-fourth of the HMOs found unsolicited inquiries from physicians a useful method of recruiting. The problem most frequently reported in recruiting new physicians was that of matching fee-for-services incomes and second, but far less frequently mentioned, was physician prejudice against group practice. About one in four plans report that residents trained in their own HMOs were a useful recruiting source.     

Primary care gatekeepers in HMOs

The most pressing issue in health care delivery today is inflationary cost increases. The gatekeeping role of primary care physicians, particularly family physicians, may lower health care costs through a more judicious use of specialty referrals, expensive tests, and hospitalization. The study of such an impact is most readily carried out in the practice setting of health maintenance organizations (HMOs), where there is a defined patient population. Incomplete data and lack of sensitive indicators of the gatekeeping effect are limitations of this preliminary study. The results show, however, that the internal organization of an HMO does not influence hospital and ambulatory care utilization rates, with the exception that HMOs staffed by a group of salaried physicians (staff HMOs) reported higher ambulatory care utilization. No significant differences were demonstrated in hospital or ambulatory care utilization rates among the HMOs using more primary care physicians or family physicians than others. The results indicate that ambulatory care utilization rates are proportional to the number of physicians per 1,000 members. The results also suggest that there may be an inverse relationship between hospital utilization rates and the number of primary care physicians, especially if they are family physicians. Further studies need more specific indicators to evaluate the effect of the gatekeeping role in health care delivery.     

The promise and pitfalls of explicitly rewarding physicians based on patient insurance

In a large multi-specialty group practice treating approximately equal numbers of health maintenance organization (HMO) and fee-for-service (FFS) patients, we analyzed a natural experiment by the administration to introduce a dual incentive system for physicians. We examine the impact on care when they announced that each physician would be remunerated for HMO care based on a per capita budget, but for FFS care based on billable services. Data were 86,230 episodes for treating patients under age 65 with seven common illnesses. There was no evidence that the intended impact (reducing HMO care) occurred; instead, there were undesired and unintended effects (reduced care for FFS and upset physicians and threats to their corporate culture).     

Using a population-based database to explore the inter-specialty differences in physician practice incomes in Taiwan

Gaining an understanding of the distribution of physician incomes between different medical specialties could assist policymakers to predict the future medical manpower supply. The purpose of this study is to examine the differences in medical specialty-specific gross practice incomes between office-based physicians in Taiwan. The primary data source for the study, which includes 7444 office-based physicians, was provided by the Taiwan Department of Health, with the dependent variable of interest to this study being the annual gross income of physician practices, whilst the independent variable is physician specialty. The study controlled for physicians' age, gender, specialty-board status, type of practice, location of clinic and urbanization level of the community in which the practice was located. Multivariate regression analyses were carried out to explore the relationship between physician specialty and gross practice income. This study finds a significant relationship between the annual gross income of physician practices and the physician's medical specialty (P < 0.001). Of all physicians, those specializing in rehabilitation and orthopedics had the highest gross practice incomes; conversely, obstetricians and gynecologists had the lowest gross practice incomes. The regression analyses demonstrated that after adjusting for socio-demographic and professional characteristics, gross practice incomes of physicians were significantly related to their medical specialty. This study concludes that differences in the gross practice incomes of physicians were significantly related to medical specialties. Those physicians specializing in procedure-based specialties, such as rehabilitation and orthopedics, had higher practice incomes than their counterparts in other more diagnosis-oriented specialties such as family practice and pediatrics.     

Characteristics of physicians practicing in alternative primary care settings: a Quebec study of local community service center physicians

Since the early 1970s, there have been two primary care networks in Quebec: the traditional one characterized by private practice remunerated on a fee-for-service basis, and the public one comprising 15 percent of physicians and characterized by salaried practice within publicly funded local community health service centers (CLSCs). Using data collected on 616 Quebec generalists, 333 in private practice and 283 in CLSCs, we compared physicians' profiles in both networks. In contrast to their colleagues in private practice, CLSC physicians are younger, more often women, and more often graduates of innovative primary care training programs. They are more sensitive to the biopsychosocial nature of health problems and to giving patients an active role in their care. Significant differences were also observed in physicians' self-reported clinical practices, more so for women than for men. The study suggests that alternative primary care settings attract physicians that are more preventive and socially oriented. As a result, they may contribute to the emergence of a more comprehensive type of medical practice in health care delivery systems.     

North Med HMO

NorthMed HMO is viewed by its owners as an important vehicle for integrating rural providers in northern Michigan. Through the HMO, rural providers hope to be able to contract with government programs, while retaining private-sector patients through employer contracts. For most rural providers, NorthMed HMO does not yet represent a major source of revenues. However, the HMO is about to embark on an expansion that, if successful, will increase its importance to providers and its visibility within the service area. This planned expansion is likely to place severe demands on the financial and managerial resources of the organization. Physicians. NorthMed HMO offers a model of a rural-based HMO in which physicians play a dominant role. Rural physicians in northern Michigan own Northern Physician Organization, a physician organization which, in turn, is the major stockholder in NorthMed HMO. The geographic expansion of the HMO is tied, in large part, to the geographic expansion of the membership of Northern Physician Organization. NorthMed HMO enters new communities when a significant number of physicians in those communities joins Northern Physician Organization. When physicians purchase ownership shares in the physician organization, they indirectly become part owners of the HMO. Participation in NorthMed HMOs network has offered limited benefits to rural physicians at a minimal cost. By being a participating provider in NorthMed HMO, physicians can remain available to their patients who choose the HMO as a health insurance option. NorthMed HMO has not been aggressive in attempts to influence physician practices, and physicians bear no financial risk as a result of their participation. Participating physicians are paid under a fee-for-service arrangement with no risk sharing related to hospital use. Indirectly, through Northern Physician Organization's ownership role in the HMO, physicians have the potential to gain financially from NorthMed HMOs growth if the HMO were to be sold, but this diffuse incentive is unlikely to have an impact on physicians' day-to-day behavior. The relationship between NorthMed HMO and its physicians is likely to change soon. The number of HMO patients seen by physicians will increase if the HMO succeeds in securing Medicare and Medicaid contracts, and if its new point-of-service option attracts additional private-sector enrollees. NorthMed HMO plans to contract with Northern Physician Organization on a capitated basis to serve the HMOs enrollees, an arrangement that would place financial responsibility for managing care delivery more directly on participating physicians. This is likely to result in more aggressive utilization review and quality assurance measures. In effect, rural physicians will be faced with a difficult trade-off that they have, to this point, largely avoided: They will be asked to accept financial risk and oversight of their practices in return for the assurance that their HMO can successfully compete for local patients (and their insurance dollars) against health plans that are owned and managed by entities located outside of their rural area.     

United Health Care of North Carolina

Physicians. While many of the rural physicians interviewed in North Carolina would prefer not to deal with HMOs at all, they are generally positive about their relationships with United Healthcare of North Carolina. These physicians chose to contract with the HMO to obtain new patients and to retain existing patients. They are satisfied that their participation has accomplished these goals. Their reimbursement arrangements are easy to understand, and most view the payment amounts as satisfactory. The physicians regard the size of the HMOs provider network and the open-access structure of the HMO as positive features that allow them to make referrals without the restrictions imposed by some other HMOs. To date, participation in United Healthcare of North Carolina has imposed few burdens on rural physicians. They are reimbursed on a fee-for-service basis, and their financial risk has been limited. They do not perceive that the HMO has had a significant impact on the way they practice medicine. This situation may change in the future if enrollees from United Healthcare of North Carolina and other HMOs constitute a greater proportion of their practices and if these HMOs move toward capitated reimbursement. The attitudes of rural physicians toward United Healthcare of North Carolina also may change if the HMO attempts to more actively manage the care provided to its enrollees. United Healthcare of North Carolina plans to eliminate physician risk sharing (in the form of withholds) and replace it with bonus payments. As one HMO executive said, the plan wants to “put incentives where they belong.” If rewarding good performance instead of punishing poor performance yields intended consequences, it may provide United Healthcare of North Carolina with a competitive advantage in rural areas. First, because such a change offers an opportunity to augment a physician's income instead of diminishing it, physicians might prefer to contract with the HMO rather than with other HMOs. Second, because bonus payments depend on performance, United Healthcare of North Carolina providers may produce outcomes that allow reductions in premium prices or expansions of benefits compared with the HMOs competitors. Hospitals. Rural hospitals cited similar motivations (attracting and retaining business) for participating in United Healthcare of North Carolina and similar levels of satisfaction with their relationships. In their experiences, the HMO has been fair in its negotiations and reimbursement. Although they contract with multiple HMOs, these rural hospitals do not perceive that HMO participation has had a significant impact on hospital operations. Because these hospitals, like many rural hospitals, rely heavily on Medicare (and, to a lesser degree, on Medicaid) as revenue sources, the future impact of managed care on their operations will depend in large part on the extent to which significant proportions of their Medicare and Medicaid patients enroll in HMOs.