Special E-Mail Bulletin #2
May 2000
More on Texas--Aetna Consent Order
Special E-Mail Bulletin
Hi, gang.
Late last month I wrote to you about the Consent Order signed by Aetna/USHealthcare and the Texas Attorney General. It's being touted as a "landmark" settlement to level the managed care playing field.
Here's another look at some potential problems with the Texas-Aetna settlement, and some of the issues that might come to your local market if this Consent Order is used as the model for Aetna (and other healthplans) in your state. This appeared today on WebMD. It's a little long, but worth reading.
Gil Weber
Aetna's Consent Order With Texas: Lawsuit Settlement or Sweetheart Deal?
Critics Say While Offering Patient Protections, Agreement May Be Bad News for State's Physician Groups
By Bonnie Darves
WebMD Business Writer
May 1, 2000 -- The long-awaited April 11 settlement of a lawsuit filed by former Texas Attorney General Dan Morales against Aetna U.S. Healthcare was initially touted as a win for patients and physicians. But on closer scrutiny, the deal is showing signs of having potentially disturbing ramifications for the state's physician groups.
Last week in Texas, health lawyers with expertise in managed care contracting, along with the Texas Medical Association, began dissecting the 52-page consent order signed by Aetna and Texas Attorney General John Cornyn. They are now expressing concerns about some of its provisions.
"There are good things in this [consent order], and it is not a totally unusable document. It's just that it went way beyond what ... they needed to do to deal with the HMO [Aetna], without bringing in those people it was going to impact," says David Hilgers, an Austin attorney who represents physician groups in managed care contract issues. "There was no malicious or bad intent on the attorney general's part, but I think they just didn't realize all the implications."
One of the most serious issues, according to Hilgers, who has reviewed the consent order, is that the settlement goes well beyond resolving the complaints in the original lawsuit -- and in doing so, reaches into areas not addressed by the initial suit.
"This is basically intervention in the practice of medicine. HMOs shouldn't be able to intervene in the practice of medicine, nor should the attorney general in settlement orders," Hilgers tells WebMD. "That seems to me inappropriate in litigation that deals with the HMO, when nobody else is at the table. It's not an appropriate way to utilize a settlement document between two parties."
Filed in December 1998 by then Attorney General Dan Morales, the lawsuit accused Aetna -- and United Healthcare and PacifiCare, whose cases await resolution -- of using unfair trade practices, employing inappropriate financial incentives to limit patient care, and other violations of Texas managed care law.
The Texas Medical Association has already spent "many hours" in meetings with the attorney general's office, says Kim Ross, TMA's vice president of public policy. He expects those discussions, some including the American Medical Association's legal counsel, to continue through this week.
"We'll be submitting formal joint commentary with the AMA that asks questions about the intent of some of the provisions," Ross says. "Since Aetna would intend to use this as a template around the country, we wanted to give it a very thorough scrubbing. The gestures appear to us to be sincere, but there are several areas where there's some good, bad, and ugly -- all of which may be rectified by the due diligence we're doing now."
"I think the way to see this is ... as a set of principles as well as processes that we've agreed to with the attorney general," John T. Kelly, MD, Aetna's director of physician relations, tells WebMD. "We see these as a very important step forward."
Key aspects of the consent order -- to be fully implemented by Aetna within 90 days of its April 11 signing and by Prudential on Jan. 1, 2001 -- affecting physicians' business dealings with Aetna include:
Ability for individual physicians and small physician groups -- primary care groups with 10 or fewer physicians and specialty groups with 25 or fewer -- to opt out of the "all-products clauses" that Aetna has made standard in the past. While Aetna has not agreed to waive the all-products clauses with larger physician groups and networks, Kelly says Aetna is "certainly willing to, and prepared to, sit down and talk to the physicians in the larger groups and help explore with them how certain of these principles might work for them and work for us. We're always open to further discussions about how to implement this." Advance notice of contract changes or changes in drug formulary.
Physicians will be notified 90 days in advance of significant changes affecting policies or procedures that may affect physicians' contractual arrangements with Aetna.
Establishment of an "office of independent ombudsman" within Aetna, which will give patients and physicians an additional avenue for having their grievances heard and addressed: "If this can truly be structured as an independent entity, that could be huge in terms of oversight," Ross tells WebMD.
An agreement that small primary care practices may choose either fee-for-service reimbursement or capitation and that capitated practices have the right to an annual reconciliation. The practices will receive additional payment if capitation revenue turns out to be less than the corresponding fee-for-service reimbursement.
Hilgers says that while the April 11 consent order offers certain financial protections for small physician groups, it also imposes what he views as unreasonable terms or burdens on physician organizations in the areas of 1) actuarial analysis of risk contracts and 2) individual physicians' contractual relationships with Aetna. And much of the onus for compliance is on physicians, not Aetna, Hilgers maintains.
For example, the consent order requires that every risk contract be actuarially assessed, regardless of what the size of the contract is and which parties are assuming the risk. If one group subcontracts with another group, the groups will be required to obtain an actuarial study for each "downstream" scenario. Besides being redundant -- "The HMO's numbers ought to be satisfactory," Hilgers says -- the requirement "adds another layer of cost and a tremendous burden to the system, and that cost is borne by whoever is taking the risk," he tells WebMD.
Potentially more problematic politically is the fact that the consent order essentially authorizes Aetna to sign direct contracts with each individual physician in a risk-bearing group, IPA, or network -- in addition to the physician organization's "umbrella" contract with Aetna. Physicians who don't sign individual contracts can be reported to the attorney general.
Kelly maintains that this requirement is intended as a measure to protect patients and provide continuity of care in the event of failure of, or contract termination by, the risk-bearing group.
"What has happened now and again is that an IPA may no longer either want or be able to do business with us," Kelly says. "Nonetheless, the physicians who participate in that IPA may want to continue to care for our members, so we've found that by having contracts with both the IPAs as well as the individual physicians, it enables those physicians who want to continue to care for our members to stay in the network." Kelly adds that "most physicians, when they understand this [individual-contract arrangement], frankly welcome this. They see it as enhanced protection for themselves."
Kelly says the individual contracts would be "structured differently" than the group contracts but would clearly specify the terms and compensation for the various products.
"All of that would be spelled out in the contracts with the individual physicians," he says.
Kelly claims the contract provision received Cornyn's blessing because of its continuity-of-care assurance: "He [Cornyn] thinks this is ultimately in the best interest of health care in Texas, and we happen to agree with him," Kelly says.
Spencer Berthelsen, MD, medical director of managed care for the 310-physician, 50-year-old Kelsey-Seybold Clinic in Houston, isn't convinced that continuity of care is the only motivation in the requirement.
"It's listed as a patient protection measure, but it can also be used to break up physician groups when there's a dispute between Aetna and the group," Berthelsen tells WebMD. "Also, from a practical standpoint, groups may have trouble recruiting the physicians who won't sign contracts with Aetna." He says some physicians in Texas, based on their experiences with the giant insurer, are willing to subcontract with groups that have Aetna contracts but aren't willing to sign direct contracts.
Hilgers is highly suspicious of Aetna's motives in requesting the individual-contract provision and critical of Cornyn's decision to allow that provision -- and others involving physician-insurer contracting relationships -- without seeking advice from the physician community. He says the provision, as it's written, has the net effect of allowing Aetna to terminate a contract with the group while requiring individual physicians to continue providing services under their individual contracts.
"It [the consent order] basically said, 'Would you install our business plan in your consent order?' I think it comes down to this," Hilgers tells WebMD. "Aetna says, 'This is the way we want to deliver health care; we don't want groups to sign on, we want individual physicians, so let's put that in there [the order].' This is definitely not a good thing for the physicians of Texas."
Even Morales has questioned the way the deal came down, especially the fact that the consent agreement has no "teeth" in terms of penalties for violating its terms. In a recent New York Times article, Morales was quoted as saying, "I suppose the most troublesome aspect is the complete absence of any administrative sanctions, fine or penalty."
Ross says that despite these concerns, the TMA remains optimistic that some of the potential problems can be resolved if the attorney general will address them in a clarifying, interpretive document that would accompany the consent order -- and be binding. He adds that the historically rocky relationship between Aetna and Texas physicians "has improved" in recent months.
"There are several good things here -- the ombudsman, the ability to reject contract provisions, the adherence to state laws -- but we have concerns with the language and intent," Ross says. "We're assuming this [agreement] represents the new Aetna and not the old Aetna. Quite frankly, regardless of motives, we want to know, is this the old Aetna in a pretty prom dress, or is this truly a new date?"
Aetna and Cornyn's office have, in fact, characterized the consent order as a groundbreaking settlement that could be used not only to settle charges against United Healthcare and PacifiCare -- the other defendants -- but also ultimately as a model set of guidelines for all managed care companies. But Ross says that unless the settlement undergoes substantial modifications to address physicians' concerns, extending it beyond Texas would only pave the way for more problems.
"As this [order] stands, we don't want to see it cloned with the other defendants," Ross tells WebMD. "We also would not want a poorly crafted or misunderstood or potentially manipulated document metastasized to 49 other states where Aetna has a presence."
That, in fact, is precisely what Aetna hopes to do, Kelly says.
"Obviously, we are looking at some of the key principles in the Texas agreement as a potential foundation for adjustments in our business model that we might implement elsewhere," he tells WebMD.
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