New deals in old-fashioned docs

Kiplinger's Personal Finance Magazine, August, 1998 by Jane Bennett Clark

A few years ago Dr. Laura Popper, a pediatrician in New York City, decided to join what she could not beat: She signed up with Oxford Health Plans, a huge HMO that was threatening to swamp her practice. "It was unclear whether you could survive without joining," she says.

Six months ago, while Oxford was undergoing serious financial problems, Popper made another decision: She walked away, severing her ties to managed-care networks altogether. "I didn't leave Oxford primarily for economic reasons," she says. "I left because I was so unhappy. Going to work was painful."

Popper's complaints about HMOs--that they give doctors too little time and autonomy to care for patients adequately--are shared by an increasing number of her colleagues. Close to 1,000 physicians have joined forces in recent months to promote practices with few or no links to HMO networks. The payoff for patients, they say, is more attention during office visits and less interference from administrators.

"I don't owe anything to an insurance company," says Dr. David Fields, an obstetrician-gynecologist in New York City. "I worry about my guidelines and the patient's needs."

That's what appeals to Hilary Wechsler Gibson of North Stamford, Conn.; whose five-month-old son, Teddy, was delivered by Fields. "When I'm talking to him, he treats me as if I'm his only patient," she says. "And there are no other steps," such as the referrals that managed-care organizations often require.

STEPPING OUTSIDE THE SYSTEM. Although the move to independent doctors is more ripple than tidal wave, enough patients have been willing to step outside the system, at least part of the time, to keep private practices afloat, says Scott Holleran, a spokesman for the American Private Physicians Association, in Santa Monica, Cal. "It's not as if managed care is going out of business tomorrow. But there is this real market out there that physicians are responding to."

Ironically, independent doctors are benefiting from changes in the managed-care industry, including a trend toward offering some coverage even when members go outside the network--the so-called point-of-service option. Nearly four-fifths of plan members in employer-sponsored managed-care plans had some POS coverage in 1997, according to a survey by Mercer/Foster Higgins, a benefits consulting firm.

Those patients are "willing to spend the extra money to get better care or to get a second opinion" outside the network, says Dr. Mark Schiller, founder of the Independent Doctors of San Francisco, Orange County and San Diego. In fact, the additional expense can be considerable: Patients in POS plans usually pay the first $250 of out-of-network costs, plus 30% of each out-of-network bill.

Private practices have also been fortified by the introduction of medical savings accounts (MSAs), which allow self-employed people and employees of small companies to set up tax-free savings accounts for medical expenses. Because the arrangement encourages out-of-pocket payments and bypasses insurance for routine medical expenses, independent-physician groups are aggressively pushing the plans.

"MSAs are the way to go because they give control back to the patients," says Kathryn Sutton of Physicians Who Care (www.pwc.org), a 3,500-member group based in San Antonio. So far, about 100,000 MSA accounts are in operation, says Dan Perrin of Eclipse Medisave America Council, an MSA advocacy group; next year, medicare will offer the option to seniors as well.

Still, independent practitioners suffer one big disadvantage--a lack of access to a broad base of patients. "Most people get insurance through their employer. If I'm not participating in their HMO or PPO, they go to a doctor who is," says Dr. Thomas Lagrelius of Torrance, Cal., founder of the Independent Doctors Traditional Practice Association. To combat the doc-by-directory syndrome, private-practice organizations are forming their own referral networks and marketing their members. A list of independent doctors in Lagrelius's organization, for instance, is available at www.indoc.com.

RELIEVING THE PAIN. Private doctors are also reaching out in a more tangible way by offering discounts of 10% to 30% to patients willing to pay up front. "I've cut my fees significantly for people who can't afford them," says Popper, who lost patients when she left Oxford.

Says Lagrelius: "There should be no reason why a patient paying for his own health care shouldn't be able to walk into a facility and say, 'I want the discount you're giving to a managed-care company." Lagrelius has sometimes cut his fee in half to accommodate a particular patient's situation. Other doctors are not willing to shave prices but will let you pay over time.

Does all this mean a return to the days when seeing the doctor meant writing a big check on the way out the door?

Not exactly, says Dr. Robert Reid, president of the California Medical Association. Reid points out that many HMOs in California, where managed care dominates the marketplace, have become more consumer-friendly, offering such enticements as direct access to specialists. On the other hand, he says, some independent doctors in California have hung on despite huge HMO inroads, and a fair portion of patients will always be willing to support private practices. "As long as we have a pluralistic system," Reid says, "there will be room for private medicine."