Physician, cut thy costs - medical providers are considering taking part in the cost cutting battle - includes related information on physician specialization, American College of Physician's reform criteria, and worker's compensation - Cover Story

Business & Health, June, 1991 by M. Mary Conroy

Everybody knows that health care costs are out of control-everybody, that is, except physicians. But now even the providers are getting the economy message and considering taking part in the cost cutting battle.

By M. Mary Conroy

M. Mary Conroy is a freelance writer specializing in health care issues.

For organized medicine, and the doctors which it serves, there is some new handwriting on the wall and both the organizations and the doctors can read the message: reduce costs. But are doctors and their organizations heeding? if they have been, consumers haven't noticed. When the New York City-based Conference Board asked 7,000 consumers to rate on a "good buy/ bad buy" basis 50 products and services, doctor's services were ranked 46th in value, while hospitals bottomed out the list. For health care services that were competing with cars, cable television, and chicken (ranked number one by nearly half the respondents) only pharmaceuticals were called a good buy, ranking 20th on the list.

As Joseph Boyle, M.D., executive vice president of the American Society of Internal Medicine, says, "It's time for physicians to stand up and be counted as those who are in the forefront of quality care at a reasonable price." Adds John Ball, M.D., executive vice president of the American College of Physicians, "There's no longer time for a patchwork solution to the nation's medical problems. It's time for a systemic overhaul."

The PPO response

One indicator that doctors are getting on the managed care bandwagon is the increasing memberships in preferred provider networks-as well as even smaller entities. W.C. Williams III, M.D., Richmond, Va., president of the newly formed National Association of Managed Care Physicians, estimates that 350,000 doctors nationwide participate in "some form of managed care."

A 1989 survey of PPOs by Managed Care Digest indicates physicians' willingness to sign on with PPOs; contracts to specialists increased by 65 percent and to primary care physicians by 34 percent. And, significantly, more of those physicians are being paid on a capitation basis: 80 percent in 1989, up from 64 percent in 1988.

The survey also found that 33 percent of the 708 PPOs operating in 1989 were offering exclusive provider options, plans in which enrollees are funneled to an even smaller number of physicians and hospitals, a significant change from earlier PPO plans that sought to contract with the largest number of providers. Joseph Duva, consultant at New York City-based Ernst & Young, notes that EPOs (see B&H, March 1991) are marketed as a better cost containment vehicle.

Physicians also seem to be interested in other methods of cost containment. Seminars on such subjects as health care rationing and unnecessary prolongation of terminal patients' lives are regularly packed by physicians.

So what's being done?

The economics of health care is an issue that physicians, both organized and otherwise, have until recently been less than eager to discuss. The traditional opinion of organized medicine had been that health care delivery should be dealt with solely as a quality issue and not a cost issue. But changing times and mounting health care cost inflation have compelled medicine's leaders to change tacks. in just the past year, organized medicine has taken action in the following areas:

* Patient access to care. The AMA, after protracted debate, put its stamp of approval on a patients' bill of rights and has given lukewarm endorsment to the concept of health care as a right rather than a privilege.

In an associated move, AMA, under the banner Health Access America, put forth a plan that would expand Medicaid and mandate all employers to offer health insurance (at least minimum benefits) for all employed persons.

* Physician payment. Most major groups within organized medicine have endorsed the soon-to-be-enacted Resource-Based Relative Value Scale (RBRVS) to pay physicians treating Medicare patients. The RBRVS payment formula allots specific "units" for physician work, overhead, and malpractice costs; modifies each by a geographic practice cost index; and assigns a dollar value conversion factor to each unit to arrive at an exact fee for each service.

Experts agree that, as intended, the RBRVS will increase payments to primary care physicians and decrease those to surgeons and other specialists. Under the plan, specialized surgeons could see Medicare reimbursement drop 20 percent or more, while family practitioners could see a 38 percent increase. (See B&H, August 1989.) Using examples drawn from the preliminary RBRVS schedule published on August 31, 1990, the national reimbursement rate for a comprehensive office visit would be $58.30. Adjusted geographically for a physician practicing in Manhattan, the rate would increase to $66.30; a doctor practicing in Beaumont, Tex., would get $55.80.

ET, go home ! Although the AMA quarreled little with the RBRVS, it vigorously opposed another part of Medicare's revised reimbursement plan: expenditure targets, or "ETs." Medicare had proposed setting a yearly budget number, or ET; if the budget was exceeded, the following year's ET would be reduced to make up for it, and vice versa. The AMA, which opponents accused of being out to protect doctors' incomes, fought back hard, publishing a newspaper ad featuring a photo of a vulnerable-looking elderly woman and a caption reading, "How do you tell someone on Medicare she's an expenditure target?" The resulting battle with HCFA led to "Volume Performance Standards" which, unlike ETs, can only be adjusted upward.