UPMC Health Plan Touts Fewer Care Restrictions
The following is an interview with Mark Schmidhofer, MD, Chief Medical Officer, UPMC Health Plan.
PND: How long has UPMC Health Plan been operational?
MS: We've had our Medicaid product since 1996. We enrolled employees and families of Tri-State Health System in a self-funded arrangement in January 1998 and we sold our first insured lives in July 1998. The Health Plan is the financing arm of UPMC Health System.
PND: What were the Health Plan's goals for its first two years, and how do they compare with your results?
MS: We had three goals in starting the Health Plan. The first goal was to grow membership. As of July, we have a total of 217,018 members, including 142,608 commercial members and 74,410 Medicaid members. The bulk of our commercial enrollees are in our Enhanced Access HMO product; some are in a traditional point-of-service product and we have a few in a comprehensive product, which is like a typical indemnity plan. Our network has some 3,800 physicians.
Our second goal was financial stability. We knew there would be startup costs and we targeted a break-even point. We are ahead of our budgets with regard to projected losses. In fact, we have been at break-even since March on both product lines.
Achieving customer satisfaction was our third goal. We began a provider-sponsored delivery network that would eliminate the obstructionist role that many insurance companies play in their relationship with physicians and patients. We wanted to be viewed more favorably by both providers and members and produce better health outcomes for those who chose us as their insurer. Our 1999 member satisfaction ratings tell us that our philosophy is working. The Health Plan enjoyed the highest member and provider satisfaction ratings, particularly with regard to not putting up barriers to care.
PND: What do you mean by enhanced access HMO?
MS: For a slightly higher copay, the Enhanced Access HMO allows members direct access to network specialists without a referral from their primary care physician. In the majority of other health plans, if you need to go to the hospital, the admission needs to be approved. If you need a CT scan, it has to be approved. If you need an MRI, it has to be approved. If you need to see a specialist, that has to be approved. In our model, we have no micromanagement. When a physician orders a test, the patient gets it without needing permission from the HMO. If the physician says the patient should be in the hospital, he or she doesn't need our permission to do it; we just pay the claims.
We're not saying that anything a physician wants to do is always medically appropriate. We do monitor what's going on. But we don't think the time to argue about that is when the patient is in a physician's office. It's better to set up guidelines ahead of time; to track and trend over time and share this information with physicians by saying, "Perhaps this particular activity is going on a little more than it is nationally or than in other parts of the city. Let's look at it and see what's appropriate and what's not."
From a physician standpoint, the standard HMO approach has been one of denial management; that is, the insurance company tries to control what services can be delivered to members in an attempt to control costs. We found that approach to be objectionable because care decisions are most appropriately made between the physician and patient. Sitting in a medical director's office and saying yes or no to an authorization without having met the patient isn't the best way to care for people.
PND: Are your contractual relationships with physicians and hospitals outside the orbit of the UPMC Health System different from contracts with UPMC Health System providers?
MS: No. We have the same contracts for system and non-system hospitals and system and non-system physicians.
PND: Do you use capitation or other financial incentives to discourage overutilization of services?
MS: All our physicians are reimbursed on a fee-for-service basis. Currently, we have no financial incentives for over- or underutilization of services. In fact, when we began the Health Plan, we proposed potential risk models to our physicians and they told us they didn't want that approach. And we listened. Our physicians have told us that they prefer incentives based on clinical outcomes rather than financial performance, and we are working with providers to determine what the best measures are. We feel that strict adherence to financial performance runs the risk of withholding needed care from people.
PND: What results have you seen from these policies?
MS: We have seen a steady reduction of utilization from the beginning. Our provider costs have been in line in all areas except pharmaceutical costs, which have risen dramatically as they have for everyone. Our utilization numbers are as good as, or better than, any other insurer in the local area. By sharing performance expectations with our providers, we engage their active participation to be as careful as they can about their utilization decisions. We think those initiatives have been very rational and productive and we have seen the results in that our costs have actually come down.
PND: How else do you intend to control costs?
MS: The goal of the Health Plan is to be financially stable. We are committed to be responsible stewards of the member health care dollar. We want to ensure that members get every single health-related service needed to maintain and improve their health and functional status. We want to give them the right tests, the right treatment, at the right time and in the right place, but not more than is needed. We think our model has achieved this result. With the increasing technologic armamentarium, we are minimizing our administrative costs and taking advantage of the synergies between the Health Plan and UPMC Health System.
We think our physicians and other providers will work with us because we are less restrictive, and, once we provide them with better and more information than other health care insurance companies, they'll make better cost-effective and medically appropriate decisions.
PND: How can having less restrictive controls on utilization lead to better cost control?
MS: The key is the accountability of our providers. We took away the bureaucratic controls and eliminated restriction. As a method of cost control, restriction implies that things are being done inappropriately. It implies that those restrictions are resulting in the withholding of certain care and that the provision of that care was not necessary. In most instances, the restrictive policies of insurance companies tend to create resentment, both in the member and the provider. The Health Plan has the accountable provider model. In exchange for not being restrictive, we ask our providers to sit down with us on a monthly or quarterly basis where we say, "You had 20 patients who had heart attacks and this has been their outcome. Our pharmacy records show some of them aren't taking the medicines that we know they should. Why? Do you want to look at them again? Some patients might have stayed in the hospital longer than others. Let's look at the charts and see whether this was necessary or not. Some of them received tests that national guidelines suggest that they should get and some of them did not. Why is that? Is it because you made a mistake? Is it because it is not warranted? Is it because you didn't know about it?"
We believe that giving the provider the ability and authority to do and order what they think is right in exchange for being accountable, results in better care. Now, I have to tell you when we started this was an unproven concept. We've been in business a couple of years now and we are proving that it works. Our care costs are not going up, they've always been in line, and our outcomes are better not worse.
PND: What are the advantages and disadvantages of being tied to an integrated delivery system?
MS: The big advantage is when we want to monitor information across all our provider institutions. If each of those hospitals has the same tracking system, it's easier to trend and compare information. The economies of scale and cost efficiencies that they achieve transfer to us as well. When you take a health system that has primary care physicians and specialists, inpatient, outpatient, rehab and nursing home facilities, we at the Health Plan are able to sit down and talk with the same financial folks, the same utilization management people, and the same clinical people.
The only disadvantage might be the perception in the community that because we are provider-owned, we might be a financial drain on the Health System or vice versa. Perhaps if our products were incorrectly priced just to make money, this would be the case. However, this isn't how we operate. We foster our relationship with the Health System and take advantage of the natural tension that occurs between a provider organization and a payer. For example, the Health System has understood our need to add non-system hospitals to our network.
PND: Isn't it a financial disadvantage to be tied to a health system that provides some of the region's most expensive care?
MS: The Health System gives some of the most complex care for the sickest people in our region. Because there is a very high level of specialized care that needs to be available, we pay those institutions more for those complex procedures, as would any other insurer. But we do not pay more for routine care. As a system, our costs are certainly no higher than anyone else. In fact, our system also includes the St. Margaret Hospitals, the Horizons and the Lees, where costs are less. We also foresee that some of the new technological advances, which cost more on the front end, will cost less on the back end. A gamma knife procedure, for example, allows someone to sit under the x-ray machine and get a tumor ablated as an outpatient or with a one-night hospital stay. This is opposed to having brain surgery where the skull is cut and the patient is on a respirator for three or four days, then in the hospital for a week or 10 days and can't go back to work for a month.
PND: What obstacles does Highmark pose, given its huge market share, huge reserves, broad provider panel and brand identification within the market?
MS: It was difficult going up against that, particularly because we were a startup company. There was a period of time when employers were saying to us, "Look, we think you offer a lot. We're looking forward to competition. But we're not even sure you're going to be in business next year so come back in a year and we'll give you an opportunity at that point."
With Highmark being as large as they are, they have historically been very aggressive in their pricing. The fact that they've lost money from some of their products certainly suggests that they have been underpricing products. When we came into the market, we said we would not underprice just for the sake of market share. What that means is that if our competitors want to keep an account and price it below what it costs them to deliver the product, then we won't look as competitive to that group.
The good news is that we're doing great. The community had some initial concerns but the Health Plan has been successful at alleviating those issues. Some companies have been apprehensive about offering us as a competing plan because they were concerned about retaliation with respect to their rates, but our market share is increasing faster than we anticipated. And many groups, like Beckwith Machinery and the University of Pittsburgh, which initially offered us as one of a number of options, recently chose us as a sole replacement.
We're getting excellent satisfaction ratings on our clinical programs from members and providers. While Highmark has slightly more physicians than we do, the UPMC name is just as strong as Highmark. We believe our access is better. With our Enhanced Access HMO, members are getting accountable providers and lack of insurance company interference. We've got the best doctors and the best hospitals and certainly enough for almost anyone.
The bigger difference is how we execute our strategy. Rather than reducing provider payments, we manage costs by eliminating variation in the way care is delivered through clinical guidelines, which focus on managing the care and health status of our region. The core of our management style is one of sharing information and being accountable for performance. We certainly wouldn't trade the productiveness of our model for a few more physicians in our network. We believe that being a good partner, being less restrictive and showing that we are responsible stewards of the health care dollar will carry the day.
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