A Conversation with Robert A. Berenson, M.D.

The new director of HCFA’s Center for Health Plans and Providers wants to bring managed care options to Medicare recipients and overhaul guidelines governing payment rates for cognitive services.

Two decades after serving on the White House domestic policy staff for President Carter, Robert A. Berenson, M.D., once again is working full time in the administration of a Southern Democrat. Earlier this year, Berenson, a board-certified internist, was appointed director of the Center for Health Plans and Providers at the Health Care Financing Administration. This is not Berenson’s first contribution to the Clinton administration. In 1993, he was an adviser to the White House task force on health care reform, co-chairing panels on malpractice reform and on health plan structure and function.

Prior to accepting the HCFA post, Berenson was a consultant with the Lewin Group near Washington. Before that, he was a practicing internist in Washington for 12 years, and was a founder and medical director of National Capital Preferred-Provider Organization, a plan with more than 150,000 enrollees.

Much of Berenson’s energy in his new job will be spent rolling out Medicare+Choice, an expanded set of managed care options for Medicare beneficiaries, created as part of the Balanced Budget Act of 1997. Berenson is also working on overhauling the latest version of HCFA’s “Documentation Guidelines for Evaluation and Management Services.” The guidelines govern Medicare rates for cognitive services. Physicians complained about the volume of paperwork needed to comply with the 1997 revision of E&M guidelines, so HCFA agreed this spring to revise the revision, and is working with medical societies to come up with something less cumbersome and time-consuming.

Berenson spoke about these and other topics with Senior Contributing Editor Patrick Mullen.

MANAGED CARE: You’ll spend a lot of your time in this job making the new Medicare Part C, Medicare+Choice, work. Where does that stand? How will working with Medicare change for physicians, and how soon will those changes take place?

ROBERT BERENSON: I anticipate that this year will look pretty much like past years, with existing Medicare risk contractors converting into Medicare+Choice organizations. We anticipate — and certainly this is one of the goals of the Balanced Budget Amendment and the Medicare+Choice structure — having options other than HMOs. So I think practicing physicians will find that they’ll be approached by organizations, maybe HMOs but maybe independent organizations, to participate in Medicare PPOs. Whether physicians get involved with a provider-sponsored organization start-up will be highly dependent on where they’re practicing.

MC: What kind of market or what set of circumstances would be ripest for a PSO?

BERENSON: An organization that has some experience at managing risk and has put together a functioning hospital-and-physician group structure. I think it’s fair to say that the solvency requirements and definition of the PSO make it hard for a physician-only organization or a hospital-only organization to actually function as a PSO. It really needs to be an integrated organization that includes a strong hospital piece and a strong physician piece, where they have already had experience managing risk and where the payment rate is attractive. There will be some parts of the country where we do not now have Medicare risk contractors and where the goal of improving payments may not be achieved for a couple of years because of technical aspects of how the formula is derived. So there may be some places where, even though it’s a good idea and there’s an organization, the payment rate still may not support taking that kind of a leap. There’s two ways to go for a PSO to qualify for Medicare+Choice: It can be a state-licensed entity that functions and looks like a PSO, but is basically a provider organization. At that point, technically it’s not a PSO, since it comes under state solvency and other requirements. The other way is for a PSO to come in under the federal waiver option, which means that it was unable to get a state license. In any case, I think it’s going to be highly variable.

MC: Is there any way to anticipate how large a part of the mix PSOs will be, or is it too early?

BERENSON: It really is too early. We don’t know. It’s based on whether you happen to be in an organization that wants to get into this business or not.

MC: Why should a provider organization get into this business?

BERENSON: At least some physicians would believe that dealing with Medicare as a direct contractor, rather than through a carrier or an HMO, permits you to have more control over your practice environment and reduces some administrative costs. I’m actually more sympathetic to the first argument than to the second. I think physicians underestimate the amount of administrative activity that has to happen related to marketing, compliance with state regulations and compliance with either voluntary accreditation systems or federal requirements for Medicare contractors. If the provider organization is the direct contractor, it will have to hire that kind of help or contract for that kind of help. I also think physicians overestimate the amount of money that’s going into profit making. Some physicians talk as though these for-profit HMOs just take the money and give it to shareholders or put it on the stock market.

MC: Or put it in their executives’ pockets.

BERENSON: Personally, I find the kinds of executive salaries that I’ve seen from some of the plans fairly appalling. At the same time, it’s really a small amount compared to the size of what we’re talking about. But the more important point is that there are not a lot of profits going to shareholders right now. Just look at Oxford Health Plans and some other organizations. It’s not a terrifically lucrative business at this point. Plans are increasing their premiums because of that.

MC: You’ve been on both sides of what seems to be a great divide between physicians and health plans. You’ve practiced internal medicine for twelve years, and you’ve started a PPO. When you talk to physicians, what do you tell them is the value of managed care?

BERENSON: There’s a fundamental structural problem. Purchasers in the commercial market wanted price competition and got it. They are most interested in the lowest-priced plan, but at the same time are responsive to their employees, who want a wide choice of providers. So how do you put those two things together? You ask for point-of-service products, or you ask the plan to expand its networks to include everybody. So what you have then are commodities, rather than defined delivery systems. In many markets, most doctors work with most plans, as do most hospitals. Say you’re medical director at the plan level, and you’re trying to figure out a good expenditure of resources. You’ve got a profound problem. Your competitors are going to get the benefits of all of your major investments in almost anything you can think of doing, whether it’s education or providing computer systems in your doctors’ offices or whatever it might be.

MC: Because these are not group-practice physicians locked into a particular plan.

BERENSON: And group-practice plans have opened up through all their expansion and IPA wraparounds. So it is hard in some ways to find what value is added by the plan, and I’m sympathetic to plans that don’t know how to distinguish themselves in the market, given what’s happened. One of the problems here — and it’s unfortunate but true — is that apparently consumers mostly value choice of provider. They don’t value the potential for higher quality that I think would come from tighter networks, from some restrictions on choice in exchange for accountability.

MC: Clinical quality that’s demonstrable.

BERENSON: Yes, and so I think we’re in a bad situation where plans don’t have much opportunity other than to ratchet down price, maybe becoming a little too arbitrary on coverage denials, or being a little rigid on medical necessity. So doctors naturally react to that and you have the potential of managed care not being achieved. At that point, the impulse of physicians to carve themselves out and be their own risk-bearing entity makes a lot of sense. Given all of that, the way to convert these networks from broad-based indistinguishable commodities into something meaningful is for physicians to step up and say, “We’ll organize our own group, we’ll have control over what we do, and we’ll live within this capitated budget.” That’s the evolution that should happen, but you have some large plans that really don’t like that evolution. So it varies by region.

MC: HCFA will be playing a role in perhaps helping the market move. One piece of that is requiring Health Plan Employer Data and Information Set, or HEDIS, performance statistics from plans that contract with Medicare.

BERENSON: That’s right, but today the most profound thing that HCFA’s model does is that it permits choice of plan by the individual. The Federal Employee Health Benefits Program permits that and Medicare permits that. If you have purchasing cooperatives that begin to permit that and large employers encourage individual choice, a major outcome would be that physicians wouldn’t feel that they had to be in all plans. Their loyal patients could find them in the plans they were comfortable with. Purchasers would be the organizers, would collect and require plans to submit HEDIS data and all that, but individuals would make the choice. You would have a market-oriented healthy kind of negotiation between plans and physicians. The doctor would bring something to the table. A doctor could say to a plan, “My patients will stick with me over here, so if you and I can’t work something out, I don’t really need to join your plan.” That, to me, is much healthier than arbitrary any-willing-provider laws or putting burdensome due-process requirements on contracting. I honestly believe more individual choice of plan would go a long way toward reforming the market, and that would be healthy.

MC: How long before we see such a system?

BERENSON: It’s going to take many years. I’m reminded of twenty years ago or thereabouts when we started requiring nutrition labeling. I remember seeing Loretta Lynn doing Crisco commercials and saying, “Crisco has no cholesterol.” Crisco is loaded with saturated fat that will do you in, so I thought, “Boy, this information isn’t entirely helpful.” She wouldn’t be able to get away with that today. Most of the public knows that it has to reduce cholesterol and saturated fat at this point. So I think we have to be humble about information. When you go from nothing to suddenly providing HEDIS data, I am sure a lot of consumers will be confused initially — but that’s the only way to go. Over the long run, many beneficiaries will become expert at making plan selections.

MC: That’s a struggle you’re going to be going through the next couple of years, getting the word out about Medicare+Choice to Medicare beneficiaries.

BERENSON: Yes, that’s exactly right. With the commercial population, at least in many parts of the country, most people are aware of reviewing choices, calling in a family member or an employee benefits manager for advice, and making a choice. It’s much more daunting to do this with the Medicare population.

MC: How will HCFA reach Medicare beneficiaries to tell them about their new options and how they work?

BERENSON: We’re obligated and committed to handbooks and 800 phone lines and Internet lines, et cetera. I think organizations like the American Association of Retired Persons and others play a role here. I would also emphasize that a lot of the information and interpretation of HEDIS data doesn’t necessarily have to be made by the end user. If I’m buying a car, I might read Consumer Reports recommendations. I know what color I want, if the car looks good — but I personally depend on other people’s knowledge of what’s under the hood.

MC: You’re not going out to do the rigorous test drive on twelve cars.

BERENSON: You’ve got it. There’s an equivalent notion here. Also, consumers often are comfortable with a doctor, or want to pick people in a certain part of town, or definitely want a certain hospital. At the same time, I assume that there will be rating systems.

MC: And some are beginning to emerge.

BERENSON: Yes. Again there will be questions about whether the information is reliable and accurate. That’s an evolutionary process. I don’t think we should expect or demand that this is all going to work perfectly, even in the first five years. There are thirty-nine million or so beneficiaries in Medicare. Some beneficiaries won’t want to take advantage of any of these options and will say, “Keep me in Medicare,” while others will say, “The options are terrific.” That’s fine. Another reason why individuals, and not purchasers, should have choice is to avoid mismatches. Some people would rather save money and not have all the access, and other people would rather not be limited and are willing to spend more money. There have been surveys to demonstrate the mismatches that happen to people in an employer situation. They just wish they could have the HMO option to save money, and others would like to pay more to be able to see their own doctor. People who make their own choice have a true sense of empowerment. Even if, early on, some of us looking at it would say they didn’t use the right criteria, that’s our judgment, not their judgment.

MC: HCFA is revising the new documentation guidelines for evaluation and management. I understand that in the fall you’ll have recommendations on where things go from here. Where does that stand?

BERENSON: At a recent AMA meeting, I articulated three problems that I saw with the 1997 draft that we are working on: First, it was awfully complicated just to understand. Because of that, physicians were required truly to spend more time on documentation than they needed to to provide good care. Second, in some cases, the information was actually interfering with communication. There was so much information provided that in an emergency room situation, or in other situations, the important information was getting obliterated. My third problem is one that I don’t think most doctors are as concerned about, but I am strongly concerned about. There was an implicit invitation to upcode by providing the basis for getting level 4 and level 5 visits by being comprehensive. There was an implicit invitation to do what was not necessary for a patient, in order to justify higher levels of coding. We need to make it clear, and we’ll continue to make it clear, that in these guidelines that cannot be the result. We cannot have an orthopedist who is seeing a patient for back pain suddenly doing heart and lung examinations to be able to justify comprehensive billing. That will be an ongoing concern. I hope we can find the right solution. I think we can.

MC: Why did you take this job? Where do you see the value of what you do?

BERENSON: Basically, in my career I’ve worked in the government, I’ve worked as a private physician, I’ve worked in managed care. My first job after internship was in the federal government, in the Public Health Service. One reason I stayed in Washington was to at least be around government and public service. I have an opportunity now to actually do public service. I’m not making a career decision to stay in government; I’m coming in as a political appointee to be in a specific job where I thought I had the qualifications. I’d like to make a difference, especially at a time when Medicare+Choice was passed by the Congress. I think that the direction of Medicare will be determined over the next five years. To some extent, what we’re able to do at an administrative and operational level to balance cost and quality will go a long way toward determining how the financing of Medicare will be handled.

MC: So you think if you and those around you do your jobs right, you might be able to build confidence that Medicare’s delivery system makes sense?

BERENSON: I think that’s right. It involves both Medicare+Choice and the fee-for-service side, because a lot of the Balanced Budget Amendment actually reforms fee-for-service delivery. On both sides we need to do our job so that this is not just an open-ended hole where money gets spent without any accountability.

MC: Thank you.