Journal of Community Health Vol. 1, No. 2, Winter 1975
H E A L T H MAINTENANCE ORGANIZATIONS: ARE THEY FOR THE INNER CITIES? Stanford A. Roman, Jr., M.D.*
ABSTRACT: Health Maintenance Organizations present some major l i m i t a t i o n s as a m e a n s to address t h e h e a l t h care n e e d s in our n a t i o n ' s i n n e r cities. T h e HMO as it has b e e n a f f e c t e d b y HMO legislation is discussed a n d an i d e n t i f i c a t i o n m a d e o f t h o s e areas t h a t m a y adversely a f f e c t the delivery o f health services to inner-city r e s i d e n t s w h e r e costs m a y b e greatest for t h o s e w h o can least a f f o r d it.
With President Nixon's December 1973 signing of the Health Maintenance Assistance Act, the HMO became a household word. It is still too soon to assert with any confidence what effect this legislation will have on the delivery of health care in our inner cities: we must examine, first, the overall HMO strategy; second, h o w this legislation promotes that strategy; and finally, what more may be needed for the legislation to accomplish its goals. Originally, the HMO was created out of a concern for the rapid increase in medical care costs, an increase that did not appear to be associated with an improvement in health status. This appraisal was based upon constant infant mortality and age-adjusted mortality rates, among other things. Economic analysis was applied to the medical care market in an attempt to understand further the health care crisis. Because of minimal competition, limits on provider entry, and a low informational base among consumers, medical care has not been truly analogous to a supply-anddemand situation. The price of medical care does not directly affect the amount supplied; and the demand for most medical care services is only moderately affected by its price. Bearing these inconsistencies in mind, the HMO was designed to: 1. Increase competition in the marketplace, i.e., the most efficient HMO should have the lowest cost. 2. Introduce the economies of scale, i.e., the larger the production capacity, the less expensive each unit should be. 3. Introduce incentives for lowering costs, i.e., prepayment of a set price should enable b o t h consumer and provider to operate more efficiently b y encouraging health maintenance and prevention. 4. Encourage free choice of providers.
*Dr. Roman is Director of Ambulatory Care, in the Department of Medicine at Boston City Hospital and the Department of Medicine at Boston University School of Medicine, 818 Harrison Avenue, Boston, Massachusetts 02118. 127
128
JOURNAL OF COMMUNITY HEALTH
Theoretically, this approach does have some merits. If, indeed, prep a y m e n t is adopted, the HMO is rewarded if it decreases hospitalization and decreases unnecessary service; and if the consumer is informed about the pros and cons o f each HMO in an area, a form of competition may be introduced. If there are measures of quality and appropriateness of service, a more efficient quality health care system may evolve. Unfortunately, most consumers are not well informed about either the maintenance of health or the relative merits of one provider organization versus another, and there are no good measures of the quality or the appropriateness of most services. Hence, we have a form of medical care formulated to solve a specific economic problem but lacking the essential teeth to enable it to be effective. The inner-city areas have long been identified with high disability rates. It was hoped that the HMO could be used to lower these rates and effect some economic savings. But how does the presence of chronic disability affect our idealized HMO? If disability leads to an increased utilization of services, then an HMO serving such areas will be at a distinct disadvantage compared to the HMO that has fewer disabled people or one that has more consistently healthy patients. While our inner-city HMO is struggling to stay out of the red, with five to six patient visits per person per year, the HMO more strategically located operates well in the black, with utilization rates of two to three visits per person per year. Can we be certain that those HMOs with a patient population drawn largely from the poor, the poorly educated, the disadvantaged minorities, and the aged will not be forced to decrease utilization inappropriately considering the needs of the people served? A criticism being levied against Medicaid, in the states possessing fairly comprehensive coverage, is that Medicaid provides physicians with incentives to offer unnecessary services. The HMO in the inner cities may be offering an incentive n o t to provide necessary services. This situation is reinforced by t h e absence of any true measures of quality and appropriateness in the ambulatory care setting. P r e p a y m e n t as a Strategy Why promote prepayment? The performance of prepayment groups has been studied m a n y times since their introduction. 1'2 Among the giant representatives of this type of service are the Kaiser-Permanente Group in California and the Health Insurance Plan of New York (HIP). 3 Both have been able to decrease expenditures for health care as a consequence of decreased hospitalization and fewer surgical procedures.X However, the question remains: Is the decreased hospitalization secondary to this mode of practice or to a decreased access to hospital beds in these programs? 4 A built bed is, indeed, a filled bed. s The recent initiation of certificate-of-need requirements in some intrastate regions to limit the number of inpatient beds may have the same effect on health care expenditures as the prepay-
HMOs and the Poor
129
ment structure. Generally, it appears that: (a) people in a prepayment group are more likely to seek care when illness occurs; (b) the treatment is more likely to be performed by an appropriate specialist within the prepaid group; and (c) the patient is more likely to receive preventive care, forestalling the need for more expensive acute care later. If we consider these as indirect measures of quality of care, then the prepaid group practice is associated with a better quality of care. Statistical evidence for this inference is scanty and leaves the health professionals to be divided into the "believers" and the "nonbelievers". The Legislated HMO In the HMO legislation, management accountability is a legal necessity. To achieve this, certain types of organizations may be formed. The nature of these organizations is not specified. The organization may provide care through its own physicians, through associated medical groups contracted by the legal management organization, or through "individual practice associations". Within this extremely flexible frame, any practice responsive solely to an enrolled prepayment population is questionably met. If the "individual practice association" is a new term for the medical foundations, seen primarily in California, which are associations of physicians in private practice (often organized through the auspices of a local medical society), then the medical responsiveness to only an enrolled population may not be accomplished. A question may also be raised about how effective an HMO structured on the individual practice association will be in promoting competition in a given area. Coupled with this factor of the population to be served is the failure to determine how the physician is to be reimbursed--by salary, on a capitation basis, or on a fee-for-service basis. These choices sorely deviate from any theoretical considerations of prepayment having certain advantages that should be encouraged. Such confusion may also create a conflict of object i v e s - w h e n the HMO managements are to be rewarded for minimizing cost and the physicians, paid on a fee-for-service basis, are to be rewarded for increased services. T h e U n d e r s e r v e d Patient
There is some encouragement in the bill for HMOs to enroll underserved people. There is also an a t t e m p t to prevent HMOs from manipulating their enrollment to include low-risk groups: enrollees must be broadly representative of the age, sex, and income groups in the area to be served and not more than 75% of the people may come from the underserved. We must be cautious as we look to the needs of the inner-city resident. Can an HMO survive economically if 75°70 of its enrollment population is among the underserved? May not 50% or 55% or 20% be more necessary? This concern
130
JOURNAL OF COMMUNITY HEALTH
has been voiced in many quarters, for, although the underserved are included, current legislation presently encourages the formation of HMOs in areas with a non-underserved population and to which a controlled percentage of the underserved has access, limited as it may be. An HMO that focuses on the inner-city ghettos would quickly approach 75%. Another solution might be a large central management unit with several sites for delivery of primary c a r e - t w o located in inner-city, ghetto areas and two located in a suburban, moderate- or upper-income a r e a - a separate-but-equal situation. It is not b e y o n d the realm of possibility that such an organization could survive, if the inner-city enrollee were able to participate in policy decisions. As the law now states, one third of the policy-making b o d y must be composed of e n r o l l e e s - t h e medically underserved would then need to be equitably represented among this group of consumers. But if we have learned anything from history, we would have to be concerned that such an idealized dual system would actually be separate and unequal. Usually, the standard benefits of an HMO are comprehensive. However, I must insert a note of caution: Medicare and Medicaid patients are entitled only to benefits outlined in Title XVIII and Title XIX, respectively. Witkin any particular HMO, this may create a dual system of care and, in states with minimal Medicaid benefits, this dual system may be more than alarming. When drug treatment and alcohol abuse are included among the basic services provided, these problems b e c o m e acceptable primary care problems. If, however, HMOs are designed to be fiscally self-sufficient, then what volume of these problems can they treat without categorical outside assistance? For many years, drug addiction and alcohol abuse ran rampant in the inner city. When more people became involved, they became a national issue that prompted categorical assistance programming. Certainly, it is appropriate to wonder whether the HMO will be limited in its ability to deal with these problems economically. For this reason, encouragement would be provided for establishing HMOs in areas where drug problems are more manageable. From a policy perspective, the HMO may be a reason to decrease or to terminate categorical assistance programs in these areas. Concerns in the Future It is not my intent to destroy the concept of the HMO or HMO legislation. It is clear, however, that a critical stance must be taken b y inner-city residents and health professionals. We cannot afford to ignore the fact that the legislation may have negative implications for our inner cities. Sutton's Law--Go to where the m o n e y is--can no longer act as a motive for b l i n d l y accepting current health policy trends. If the HMO is to address sincerely the needs of the inner cities, the degree of comprehensiveness of any national health insurance policy must be examined. It is b e y o n d the
HMOs and the Poor
131
scope of this paper to analyze the alphabet soup of national health insurance proposals. However, I must point out that acceptance of anything far removed from the so-called labor proposals by K e n n e d y and Griffith, in light of the HMO experience, will increase further the gap between the served and the underserved, the outer city and the inner city: "What we are tackling in health care is probably one of the most complicated experiments in intergovernmental, interprofessional and public-private relations ever undertaken in American history . . . . Moreover, we are tackling it at a time of resource constraints that make these hard choices much more difficult. The real test will come in the communities and the professions. ''6 We must evaluate the HMO carefully, for it may be the inner-city communities that have the most to lose if the HMO is a failure.
REFERENCES 1. Klarman HE: The effect of prepaid group practice on hospital use. Pub Health Rep 78: 955-965, 1963. 2. Somers AR: An evaluation of prepaid group practice. Inquiry 6: 3-27, 1969. 3. Cook WH: Profile of the Permanente Physician: The Kaiser-Permanente Medical Care Program. New York, Commonwealth Fund, 1971. 4. Klarman HE: Economic Research in Group Medicine: New Horizons in Health Care. Winnipeg, Canada, First International Congress on Group Medicine, 1970, pp 178-193. 5. Roemer MI, Shain M: Hospital Utilization under Insurance. Chicago, American Hospital Association, Monograph Series No. 6, 1959, pp 29-30. 6. Lewis IJ: Science and health care--The political problem. N Engl J Med 281: 888-896, 1969.
H E A L T H MAINTENANCE ORGANIZATIONS: ARE THEY FOR THE INNER CITIES? Stanford A. Roman, Jr., M.D.*
ABSTRACT: Health Maintenance Organizations present some major l i m i t a t i o n s as a m e a n s to address t h e h e a l t h care n e e d s in our n a t i o n ' s i n n e r cities. T h e HMO as it has b e e n a f f e c t e d b y HMO legislation is discussed a n d an i d e n t i f i c a t i o n m a d e o f t h o s e areas t h a t m a y adversely a f f e c t the delivery o f health services to inner-city r e s i d e n t s w h e r e costs m a y b e greatest for t h o s e w h o can least a f f o r d it.
With President Nixon's December 1973 signing of the Health Maintenance Assistance Act, the HMO became a household word. It is still too soon to assert with any confidence what effect this legislation will have on the delivery of health care in our inner cities: we must examine, first, the overall HMO strategy; second, h o w this legislation promotes that strategy; and finally, what more may be needed for the legislation to accomplish its goals. Originally, the HMO was created out of a concern for the rapid increase in medical care costs, an increase that did not appear to be associated with an improvement in health status. This appraisal was based upon constant infant mortality and age-adjusted mortality rates, among other things. Economic analysis was applied to the medical care market in an attempt to understand further the health care crisis. Because of minimal competition, limits on provider entry, and a low informational base among consumers, medical care has not been truly analogous to a supply-anddemand situation. The price of medical care does not directly affect the amount supplied; and the demand for most medical care services is only moderately affected by its price. Bearing these inconsistencies in mind, the HMO was designed to: 1. Increase competition in the marketplace, i.e., the most efficient HMO should have the lowest cost. 2. Introduce the economies of scale, i.e., the larger the production capacity, the less expensive each unit should be. 3. Introduce incentives for lowering costs, i.e., prepayment of a set price should enable b o t h consumer and provider to operate more efficiently b y encouraging health maintenance and prevention. 4. Encourage free choice of providers.
*Dr. Roman is Director of Ambulatory Care, in the Department of Medicine at Boston City Hospital and the Department of Medicine at Boston University School of Medicine, 818 Harrison Avenue, Boston, Massachusetts 02118. 127
128
JOURNAL OF COMMUNITY HEALTH
Theoretically, this approach does have some merits. If, indeed, prep a y m e n t is adopted, the HMO is rewarded if it decreases hospitalization and decreases unnecessary service; and if the consumer is informed about the pros and cons o f each HMO in an area, a form of competition may be introduced. If there are measures of quality and appropriateness of service, a more efficient quality health care system may evolve. Unfortunately, most consumers are not well informed about either the maintenance of health or the relative merits of one provider organization versus another, and there are no good measures of the quality or the appropriateness of most services. Hence, we have a form of medical care formulated to solve a specific economic problem but lacking the essential teeth to enable it to be effective. The inner-city areas have long been identified with high disability rates. It was hoped that the HMO could be used to lower these rates and effect some economic savings. But how does the presence of chronic disability affect our idealized HMO? If disability leads to an increased utilization of services, then an HMO serving such areas will be at a distinct disadvantage compared to the HMO that has fewer disabled people or one that has more consistently healthy patients. While our inner-city HMO is struggling to stay out of the red, with five to six patient visits per person per year, the HMO more strategically located operates well in the black, with utilization rates of two to three visits per person per year. Can we be certain that those HMOs with a patient population drawn largely from the poor, the poorly educated, the disadvantaged minorities, and the aged will not be forced to decrease utilization inappropriately considering the needs of the people served? A criticism being levied against Medicaid, in the states possessing fairly comprehensive coverage, is that Medicaid provides physicians with incentives to offer unnecessary services. The HMO in the inner cities may be offering an incentive n o t to provide necessary services. This situation is reinforced by t h e absence of any true measures of quality and appropriateness in the ambulatory care setting. P r e p a y m e n t as a Strategy Why promote prepayment? The performance of prepayment groups has been studied m a n y times since their introduction. 1'2 Among the giant representatives of this type of service are the Kaiser-Permanente Group in California and the Health Insurance Plan of New York (HIP). 3 Both have been able to decrease expenditures for health care as a consequence of decreased hospitalization and fewer surgical procedures.X However, the question remains: Is the decreased hospitalization secondary to this mode of practice or to a decreased access to hospital beds in these programs? 4 A built bed is, indeed, a filled bed. s The recent initiation of certificate-of-need requirements in some intrastate regions to limit the number of inpatient beds may have the same effect on health care expenditures as the prepay-
HMOs and the Poor
129
ment structure. Generally, it appears that: (a) people in a prepayment group are more likely to seek care when illness occurs; (b) the treatment is more likely to be performed by an appropriate specialist within the prepaid group; and (c) the patient is more likely to receive preventive care, forestalling the need for more expensive acute care later. If we consider these as indirect measures of quality of care, then the prepaid group practice is associated with a better quality of care. Statistical evidence for this inference is scanty and leaves the health professionals to be divided into the "believers" and the "nonbelievers". The Legislated HMO In the HMO legislation, management accountability is a legal necessity. To achieve this, certain types of organizations may be formed. The nature of these organizations is not specified. The organization may provide care through its own physicians, through associated medical groups contracted by the legal management organization, or through "individual practice associations". Within this extremely flexible frame, any practice responsive solely to an enrolled prepayment population is questionably met. If the "individual practice association" is a new term for the medical foundations, seen primarily in California, which are associations of physicians in private practice (often organized through the auspices of a local medical society), then the medical responsiveness to only an enrolled population may not be accomplished. A question may also be raised about how effective an HMO structured on the individual practice association will be in promoting competition in a given area. Coupled with this factor of the population to be served is the failure to determine how the physician is to be reimbursed--by salary, on a capitation basis, or on a fee-for-service basis. These choices sorely deviate from any theoretical considerations of prepayment having certain advantages that should be encouraged. Such confusion may also create a conflict of object i v e s - w h e n the HMO managements are to be rewarded for minimizing cost and the physicians, paid on a fee-for-service basis, are to be rewarded for increased services. T h e U n d e r s e r v e d Patient
There is some encouragement in the bill for HMOs to enroll underserved people. There is also an a t t e m p t to prevent HMOs from manipulating their enrollment to include low-risk groups: enrollees must be broadly representative of the age, sex, and income groups in the area to be served and not more than 75% of the people may come from the underserved. We must be cautious as we look to the needs of the inner-city resident. Can an HMO survive economically if 75°70 of its enrollment population is among the underserved? May not 50% or 55% or 20% be more necessary? This concern
130
JOURNAL OF COMMUNITY HEALTH
has been voiced in many quarters, for, although the underserved are included, current legislation presently encourages the formation of HMOs in areas with a non-underserved population and to which a controlled percentage of the underserved has access, limited as it may be. An HMO that focuses on the inner-city ghettos would quickly approach 75%. Another solution might be a large central management unit with several sites for delivery of primary c a r e - t w o located in inner-city, ghetto areas and two located in a suburban, moderate- or upper-income a r e a - a separate-but-equal situation. It is not b e y o n d the realm of possibility that such an organization could survive, if the inner-city enrollee were able to participate in policy decisions. As the law now states, one third of the policy-making b o d y must be composed of e n r o l l e e s - t h e medically underserved would then need to be equitably represented among this group of consumers. But if we have learned anything from history, we would have to be concerned that such an idealized dual system would actually be separate and unequal. Usually, the standard benefits of an HMO are comprehensive. However, I must insert a note of caution: Medicare and Medicaid patients are entitled only to benefits outlined in Title XVIII and Title XIX, respectively. Witkin any particular HMO, this may create a dual system of care and, in states with minimal Medicaid benefits, this dual system may be more than alarming. When drug treatment and alcohol abuse are included among the basic services provided, these problems b e c o m e acceptable primary care problems. If, however, HMOs are designed to be fiscally self-sufficient, then what volume of these problems can they treat without categorical outside assistance? For many years, drug addiction and alcohol abuse ran rampant in the inner city. When more people became involved, they became a national issue that prompted categorical assistance programming. Certainly, it is appropriate to wonder whether the HMO will be limited in its ability to deal with these problems economically. For this reason, encouragement would be provided for establishing HMOs in areas where drug problems are more manageable. From a policy perspective, the HMO may be a reason to decrease or to terminate categorical assistance programs in these areas. Concerns in the Future It is not my intent to destroy the concept of the HMO or HMO legislation. It is clear, however, that a critical stance must be taken b y inner-city residents and health professionals. We cannot afford to ignore the fact that the legislation may have negative implications for our inner cities. Sutton's Law--Go to where the m o n e y is--can no longer act as a motive for b l i n d l y accepting current health policy trends. If the HMO is to address sincerely the needs of the inner cities, the degree of comprehensiveness of any national health insurance policy must be examined. It is b e y o n d the
HMOs and the Poor
131
scope of this paper to analyze the alphabet soup of national health insurance proposals. However, I must point out that acceptance of anything far removed from the so-called labor proposals by K e n n e d y and Griffith, in light of the HMO experience, will increase further the gap between the served and the underserved, the outer city and the inner city: "What we are tackling in health care is probably one of the most complicated experiments in intergovernmental, interprofessional and public-private relations ever undertaken in American history . . . . Moreover, we are tackling it at a time of resource constraints that make these hard choices much more difficult. The real test will come in the communities and the professions. ''6 We must evaluate the HMO carefully, for it may be the inner-city communities that have the most to lose if the HMO is a failure.
REFERENCES 1. Klarman HE: The effect of prepaid group practice on hospital use. Pub Health Rep 78: 955-965, 1963. 2. Somers AR: An evaluation of prepaid group practice. Inquiry 6: 3-27, 1969. 3. Cook WH: Profile of the Permanente Physician: The Kaiser-Permanente Medical Care Program. New York, Commonwealth Fund, 1971. 4. Klarman HE: Economic Research in Group Medicine: New Horizons in Health Care. Winnipeg, Canada, First International Congress on Group Medicine, 1970, pp 178-193. 5. Roemer MI, Shain M: Hospital Utilization under Insurance. Chicago, American Hospital Association, Monograph Series No. 6, 1959, pp 29-30. 6. Lewis IJ: Science and health care--The political problem. N Engl J Med 281: 888-896, 1969.
