After Physicians Protest, An HMO Changes Its Mind

A major insurer’s proposed innovation in Florida — a system in which capitation would have been shared by a group of specialty networks — has been withdrawn after what the HMO says is a lot of misunderstanding.

“Put up or shut up.” That’s the message Tampa specialist physicians got not long ago from the area’s CIGNA plan, a market leader controlling 30 to 40 percent of their patient dollars.

CIGNA had decided to change the way it paid for and managed specialty care. The managed care company signed a deal with Burlingame, Calif.-based Vivra Specialty Partners, a network management company that cares for six million patients nationally. Vivra’s assignment was to create a series of single-specialty networks, each capitated separately, to serve CIGNA’s 160,000 patients in the Tampa Bay area.

Starting in July, CIGNA patients were to get their Ob/Gyn, ophthalmology, general surgery, ear-nose-and-throat, orthopedics, nephrology, cardiology and allergy/asthma care through Vivra-managed single-specialty networks.

Despite potential loss of patients, specialists stayed away in droves from the new Vivra networks. Beaten, CIGNA sounded a retreat less than three months later.

“It was an effort we tried to promote, but maybe its time was premature,” ventures CIGNA spokesman David Feng, adding: “Maybe market sophistication wasn’t there, so this model didn’t work.”

Contracting confusion

CIGNA’s scheme has worked in other Florida markets, but belly-flopped in Tampa. Why? Among other factors, the managed care giant changed its marching orders a bit too quickly, area doctors said.

“Sign with Vivra or cease to be a CIGNA doctor,” the managed care plan in effect told its 700-odd area specialists on April 10 of this year. Physicians had less than three weeks to decide, or protest. If they didn’t go with Vivra, individual specialist contracts were set to terminate a few weeks later.

Doctors were not the only group critical of CIGNA’s move — or at least its timing. “Pretty much everyone down here said that they should have talked to the physicians ahead of time,” says Kent Roberson, a provider relations representative for the Santa Ana, Calif.-based network management company Admar Corp. “Why wasn’t it done over a period of six months or a year instead of having it pushed down their throat within 30 days?”

What’s more, specialists were frightened and confused by the Vivra contract, which didn’t specify pay rates but rather set up a shared capitation system shifting reimbursement up or down depending on claim volume. Some primary care physicians, meanwhile, worried that the restructuring would make it hard to get patients in for specialist visits.

“They were asking, ‘Should we object or what can we do?'”, says Jim Blanco, executive vice president of the Hillsborough County Medical Association, which fielded a flurry of calls from concerned physicians.

But CIGNA was hardly dropping a bombshell, its executives protest. In neighboring south Florida, the company shifted to single-specialty networks with the same payment mechanism a long time ago, and the medical community hasn’t exactly gone out of business.

Success in other markets

“I think the proof’s in the pudding,” says Peter Dandalides, M.D., vice president for medical administration of CIGNA Healthcare of Florida Inc. “The fact that we have a sister market where they’ve been through it and satisfaction surveys are strong is a testament to the fact that this reimbursement model works.”

At the beginning of any change in network structure, there’s always some turmoil, Dandalides says. Every time you change the way physicians are compensated or managed, he suggests, there’s going to be a small but vocal group making its discontent known until they’ve had time to learn more.

Even members of that group had begun to change their tune, he claims. “There are always some people who feel that they don’t have enough information and time,” Dandalides says. “What I’m hearing back now is that they really didn’t have an idea of what was going on.”

The specialty-network story

CIGNA already runs a number of specialty networks in south Florida. Some of the networks have been in place for five years, quite a long time in the rapidly shifting and highly competitive south Florida marketplace. In that market, doctor-initiated cardiology, orthopedics, ENT and Ob/Gyn networks are now managed by Vivra.

Vivra’s ground rules for Tampa would have been more or less the same as those in effect in south Florida. The difference — apparently a significant one — was that CIGNA/Vivra planned to forcibly build the Tampa networks from the ground up. In contrast, CIGNA contracted with existing networks in south Florida.

Physicians contracting with Vivra would have participated in a steering committee overseeing network operations. Networks were to be managed on a day-to-day basis by a dedicated medical director whose job was to keep an eye on utilization and quality data. The medical director would also have developed disease management programs to better cope with high-cost, resource-consuming conditions common to the specialty.

“Our concept here is that by focusing on a specialty and applying a lot of resources, we can apply them in a manner that is very difficult for anyone to do on an ad hoc basis,” says Jacob Lazarovic, M.D., Vivra’s vice president of business development and clinical affairs.

What employers want

CIGNA had good reasons to put this successful strategy in place in Tampa, Dandalides says. Employers who pay the bills want to see specialty costs drop while keeping networks large, and placing specialty management in Vivra’s experienced hands seemed an effective way to do that.

Far from trying to screen out specialists, Dandalides had hoped to make new allies, he says. Managed care execs were hoping to match the success of the Ob/Gyn network Vivra set up in south Florida. “When we were all done we actually had more Ob/Gyns in our network than we did before,” Dandalides notes. “The goal in Tampa was to do exactly what we did there.”

But then again, Tampa physicians haven’t been through the managed care wringer to the same extent that south Florida doctors have. “The Tampa area is relatively unused to specialty networks,” says Lazarovic, a former Blue Cross and Blue Shield of Florida medical director based in Miami. “Physicians are getting adjusted to operating under a new system.”

Adjustable fees

As for payment, Vivra planned to handle matters in a way very similar to the way CIGNA did. Specialists were going to be paid on a relative-value scale, with their check being based on the total number of relative value units they delivered every month. The main difference would have been that the value of each unit would have been adjusted by a floating conversion formula, either either up or down depending on utilization. That conversion would have been the same even if there had been a rash of high-cost cases.

Every month, CIGNA planned to pay Vivra an amount based on per-member, per-month capitation. Vivra would then take its 10- to 15-percent management fee and establish a monthly allocation pool for physicians with the remaining funds, from which it would issue checks based on the number of services delivered, adjusted by the relative value scale, the floating conversion and utilization. At no time, Vivra and CIGNA insist, would the pool have “run out.”

By August, doctors would have received payments for July, in an amount determined by all of the factors above. Vivra and CIGNA, however, had a world of trouble explaining this to doctors, who wrongly believed that compensation for services done July 30 would be lower than compensation for services done July 1.

A ‘minor’ variation

All told, the sliding-scale payment scheme sounds a lot more risky than it really is, Lazarovic says. Even if there are a few costly cases, or people are just a bit sicker that month, that really doesn’t affect compensation all that much. “If one month, more people needed to have appendectomies than another month, then the payment would drop by a tiny amount,” Lazarovic admits. “But spread over 160,000 members, the variation in services that can occur is pretty minor.”

In fact, adds CIGNA’s Dandalides, “if utilization rates are such that optimal levels of quality are reached, we’d expect reimbursement to be on par or higher than previously. The idea is to make it so that people can get comfortable and not practice defensive medicine.”

“Physicians didn’t feel comfortable and that’s OK,” says CIGNA’s David Feng. “The money allocated for physician reimbursement for would have shown minor variations over time, but physicians would always have been paid for services rendered and CIGNA would have been responsible for catastrophic risk.”

Contributing editor Anne Bilodeau writes about health care issues from her home in Rockville, Md.

MANAGED CARE July 1996. ©1996 Stezzi Communications

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