More HMO Stuff

(as if you needed it?)

Contents:

What to look for in an HMO
HMO's Seek to Build on Victory
Managed Friendship
HMO's Change Prescriptions
HMO Manger in Heaven
Sample Letter to Congressperson
HMO EXECS MAKING MILLIONS
How To Kill HMO's (& history)
How to Contact HMO's
MH Parity Legislation
Another Horror Story
Containing Costs at Patient Expense
Current HMO News from Medscape

Source: Sunday Oklahoman, November 23, 1997

August 19, 2000 New York Times Article

Managed Care Companies Seek to Build on a Legal Victory By MILT FREUDENHEIM

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eartened by a federal court victory in Philadelphia last week in the managed care wars, lawyers for several major health insurance companies are seeking to consolidate a host of lawsuits accusing managed care companies of misleading customers. They also hope to transfer the suits from Miami to Philadelphia. The federal district judge who is hearing arguments in the cases in Miami said Thursday that he would rule shortly on whether to suspend action there while requests to move the suits are decided. The plaintiffs, who are seeking class-action status for their suits, say the main issues in the cases are still in contention. They accuse managed care companies of violating at least two important federal laws. They say that the companies are violating racketeering laws by misleading consumers about the quality of health care they are receiving, and they contend that the companies are violating their fiduciary duties under the Employee Retirement and Income Security Act, or Erisa. A federal appeals court in Philadelphia ruled last week that the U.S. Healthcare unit of Aetna did not violate racketeering laws when it advertised that it was providing quality medical care even as it was encouraging cost-cutting by doctors. The company had defended the advertising as permissible "puffery."

Lawyers on both sides in the managed care lawsuits said that ruling, which upheld dismissal of the racketeering charge by a lower court last October, was a blow to arguments in suits across the country that rely on the Racketeering Influenced and Corrupt Organization law, which can result in triple damage awards.

But the plaintiffs' lawyers said the ruling in Philadelphia did not apply to the types of racketeering claims they are making in the Florida cases. And they are still seeking court rulings on charges that managed care practices violate other laws.

Stephen Neuwirth, one of the plaintiffs' lawyers, said that in a ruling in June, the Supreme Court offered indirect support for assertions that managed care officials had violated their fiduciary duties to patients under Erisa.

He noted that the high court suggested that managed care companies might have a fiduciary duty to disclose information beyond the requirements of the Erisa law.

The Supreme Court is likely to face the issue of disclosure under Erisa again. Mr. Neuwirth, a partner with Boies Schiller & Flexner, said appeals courts had ruled both for and against the managed care industry on the issue: supporting the companies in a Texas case and ruling against them in Missouri.

The main thrust of the Supreme Court decision in June, however, upheld core practices of managed care. In that case, the court dismissed a federal lawsuit by an Illinois woman, Cynthia Herdrich. She asserted that her health plan had violated its duty under Erisa by placing its own financial interests ahead of its members' well-being by offering incentives to doctors to restrict care.

In the Herdrich ruling, Justice David H. Souter wrote for the court that financial incentives were essential to managed care, and noted that Congress had encouraged the managed care system.

Several lawyers for the companies declined to speak on the record.

Aetna and its Prudential Health Care unit have asked a committee of federal judges, the Multidistrict Litigation Panel, to consolidate at least eight cases against Aetna and Prudential and transfer them to Philadelphia. Industry lawyers said several other big managed care companies were considering making similar requests to the panel.

Plaintiffs' lawyers, including some from firms that have won big class-action settlements against tobacco companies, have asked the multidistrict panel to consolidate the federal managed care cases in Miami. The panel is expected to decide the issue at a Sept. 22 meeting in New York.

Judge Federico Moreno also said in Miami Thursday that he would rule next month on a separate request by Humana to dismiss the suits against that company. Humana had agreed to consolidate the suits in hopes of obtaining an early decision.

In addition to the federal suits, Aetna, Kaiser Permanente and other managed care companies are also being sued under state consumer protection laws.

Ask questions about Personal Finance, Entrepreneurs, Small Business and more. Get answers and tell other readers what you know, in Abuzz, new from The New York Times.

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MANAGED FRIENDSHIP
____________________________________________

Welcome to Managed Friendship, a whole new way of thinking about friends and relationships! The Managed Friendship Plan (MFP) combines all the advantages of a traditional friendship network, with important cost-saving features.

How Does It Work?

Under the Plan, you choose your friends from a network of pre-screened accredited Friendship Providers (FPs). All your friendship needs are met by members of your Managed Friendship Staff.

What's Wrong with my Current Friends?

If you're like most people, you are receiving friendship services from a network of friendship providers haphazardly patched together from your old neighborhoods, jobs, and schools. The result is often costly duplication, inefficiency, and conflict. Many of your current friends may not meet national standards, responding to your needs with inappropriate, outmoded, or even experimental acts of friendship. Under Managed Friendship, your friendship needs are coordinated by your designated Best Friend, who will ensure the quality and goodness of fit of all your friendly relationships.

How Do I Know That the Plan's Panel of Friends Is Not Made Up of a Bunch of Losers Who Can't Make Friends on Their Own?

Many of today's most dedicated and highly trained Friendship Providers are as concerned as we are about delivering Quality Friendship in a cost- effective manner. They have joined our network because they want to focus on acting like a friend rather than doing the paperwork and paying the high bad-friendship premiums that have caused the cost of traditional friendship to skyrocket. Our Friendship Providers have met our rigorous standards of companionship and loyalty.

What If I Need a Special Friend, Say, for Poker or Fishing?

Special Friends are responsible for most of the unnecessary and expensive activities that burden already costly relationships. Under the Managed Friendship Plan, your Best Friend is qualified to pre-approve your referral to a Special Friend within the Managed Friendship Network should your needs fall outside of the scope of his/her friendship.

Suppose I Want to See Friends Outside the Managed Friendship Network?

You may make friends outside of the Managed Friendship Network only in the event of a Friendship Emergency.

What is a Friendship Emergency?

The Managed Friendship Plan covers your friendship needs 24 hours a day, 365 days a year, even if you need a friend out of town, after regular business hours, or when your Best Friend is with someone else. You might be on a business trip, for instance, and suddenly find that you feel lonely. In such cases, you may make a New Friend, and all approved friendly activities will be covered under the Plan, provided you notify the Managed Friendship Office (or 24-hour Friendship Hotline) within two business days.

What Friendly Activities Are Covered Under the Plan?

Friendly Activities that are typically covered include:

- Agreeing with you

- Appearing sympathetic

- Chewing the fat

- Dropping by

- Feeling your pain

- Gossiping

- Hanging out

- Holding your hand (up to 5 minutes per activity)*

- Joshing

- Kidding around

- Listening to you whine

- Partying

- Passing the time

- Patting your back

- Ribbing

- Sharing a meal

- Shooting the breeze

- Slinging the bull

- Teasing

*up to 15 minutes under the Premium Gold Friendship Plan

What Friendly Activities Are Not Covered Under the Plan?

Activities that would not be pre-approved include (but are not limited to):

- Bar hopping

- Bending over backwards

- Drinking to excess - Giving a hoot

- Going the extra mile

- Lending money

- Real empathy

- Sexual favors

- Truly caring

- Using illicit drugs

How Can I Find Out More About the Managed Friendship Plan?

A simple call is all it takes. If you need a friend, just call our toll-free number. Or visit our web site. Sign up for the Managed Friendship Plan and rest easier that all of your appropriate friendship needs will be met.

Who Decides What's Appropriate for Me?

We do. Isn't that what friends are for?

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HMO'S INSIST ON MEDICATION CHANGES TO PATIENTS' DETRIMENT

More and more often, physicians are being asked to switch their patients from an expensive medication to a different one that the HMO can buy cheaper.

While this may seem a rational approach to budgeting, it doesn't always serve the patient well. And in some instances, it can end up costing the organization much more than it saves.

We recently received this story from a reader: (King Features Syndicate):

(...) "The HMO told my doctor to put me on something else, which she did. She put me on Prinivil and Lasix, which didn't help me, so then she put me on Cozaar. I developed an irregular heart rhythm. My doctor put me on procainamide, but it gave me severe abdominal pain and bloody mucus in my stool.

"I was referred to a cardiologist who tried quinidine but it made my mouth and throat so terribly dry I couldn't stand it. JThen I got Norpace, which gaave me urinary problems.

"I am now on Tambocor and Toprol along with Synthroid, Cozaar and Lasix. Many days I feel dizzy and have headaches. I wish they hadn't messed with my original blood pressure medicine."

No one can prove that changing this patient's medications triggered her heart rhythm problem and all the subsequent complications. But we share her sentiments about the switch. Not only is her quality of life diminished, but the HMO ended up paying for some very expensive medicines and a cardiologist.

When nonphysicians start telling doctors which drugs to prescribe because of cost considerations, the results can be disasterous.

One man almost died when his insurance company insisted heneeded to switch from Zantac to cimetidine (generic Tagamet) to control symptoms caused by a hiatal hernia. The cimetidine triggered an inflammation of the pancreas that required hospitalization. Despite this, the managed care company still refused to pay for Zantac.

Hospitals can be equally shortsighted. The fact that they cut a good deal with a drug compan;y should not force doctors to switch patients form a medicine on which they are doing well to one that is unfamiliar.

Insurance companies and HMO's need to look beyond the bottom line. Saving money in the short run can cause costly complications later.

Patients and physicians need to be assertive and stand up to short-sighted, bean-counting bureaucrats.

Subject: Your HMO

"HMO -- Heavenly Maintenance Organization"

A doctor, a nurse, and the top executive of an HMO have died and are in line together at the Pearly Gates. St. Peter speaks with them and asks them what good they have done in their lives.

The doctor says, "I have devoted my life to the sick and needy and have had a part in caring for and healing thousands of people.

St. Peter replies, "That's great. Go ahead in to heaven. And what about you?"

The nurse states, "I have supported the Doctor and his patients my entire life as an adult, have taken time to explain things to patients and have helped them lead healthy lives."

"Wonderful. Please proceed in with the Doctor. And what about you?"

The HMO executive says, "I was the president of a very large Health Maintenance Organization. I was responsible for the healthcare of millions of people all over the country.

St. Peter says, "Oh, I see. Please go on in ... but you can only stay two nights!"

Sample Letter in Support of H.R. 1415 / S. 644 "The Patient Access to Responsible Care Act of 1997" Please try to put the following in your own words, and feel free to include anecdotes or descriptions of your experiences with managed care, and why you believe managed care legislation is needed.

for House members:
The Honorable {full name}
U.S. House of Representatives
Washington, D.C. 20515

for Senators:

The Honorable {full name}
United States Senate
Washington, D.C. 20510

Dear (Representative/Senator) {last name}:

I am writing to ask for your support for legislation to help ensure that managed care delivers on its potential to improve patient quality of care. I am concerned that too many managed care firms go for short term profits at the expense of taking good care of their enrollees.

I do not believe that Congress should try to prohibit inappropriate managed care practices one body part at a time. Instead, I support holding managed care plans to more general quality standards to protect patients, and to help ensure that health care providers can give them the care they need.

Consequently, I urge you to cosponsor the "Patient Access to Responsible Care Act", sponsored in the House (H.R. 1415) by Rep. Charles Norwood (R-GA) and in the Senate (S. 644) by Senator Al D'Amato (R-NY).

This legislation would require plans to give their enrollees the option of choosing a point-of-service coverage package. It would give consumers standardized information regarding plan policies and performance, so they can make informed decisions about which plan to purchase.

It would require plans to have appeals processes for patients who believe they are inappropriately denied care, and it would require plans to cover needed emergency care. The legislation does NOT mandate that plans cover specific benefits. It simply gives people the ability to make good health care choices, and to regain a measure of control over their health care services.

I firmly believe that this legislation will actually help the better managed care firms who are already providing high-quality care. These plans are not the problem.

The Patient Access to Responsible Care Act will make it harder for those managed care plans which are skimping on services to operate. Managed care plans shouldn't be allowed to make money by denying services, they should be pushed to make money by providing more efficient and effective care.

Please cosponsor the Patient Access to Responsible Care Act. I believe enactment of this bill would go a long way toward improving the quality of health care for the large majority of our nation's citizens who are enrolled in managed care plans, whether by choice or by the choice of their employer. Thank you for your time and attention on this issue. I look forward to hearing your reply, and I hope I can count on your support.

Sincerely,

{name}

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HMO EXECS MAKING MILLIONS

David B. Goldstein, Ph.D.
6401 Poplar, Suite 306
Memphis, TN 38119
phone: (901) 869-0520; fax: (901) 869-0521
email: donnagold@email.msn.com

Sender: familiesusamc@list1.channel1.com
Date: Wednesday, September 16, 1998 3:15 PM
Subject: From_Families_USA: Updated HMO Report

PRESS RELEASE
September 16, 1998
Contact:Lorie Slass. Lslass@familiesusa.org
202-628-3030

DESPITE INDUSTRY LOSSES FOR 1997 AVERAGE COMPENSATION OF TOP HMO EXECS TOPS $2 MILLION

Industry Hypocritically Wages Advertising Campaign "Concerned" About Lawyers Profiting From Consumers and Costs of Protections

As the managed care industry posted losses for 1997, its top executives continued to take home millions of dollars in compensation according to a new report released today by Families USA, the national consumer health watchdog organization. Top HMO executives in the nation's largest for-profit managed care companies, on average, made $2 million in 1997.

As an update to an analysis of 1996 compensation for managed care executives, Families USA compiled 1997 compensation and stock options numbers for top managed care executives and found the highest paid executive, for the second year in a row, was Stephen Wiggins, former CEO of Oxford Health Plans, Inc., who took home over $30.7 million in 1997 and was sitting on almost $8.7 million in stock options. In 1996, Wiggins made $29.1 million and was sitting on stock options valued at $82.8 million.

Despite industry losses in 1997, four out of five of the top paid HMO industry executives saw compensation, exclusive of unexercised stock options, increase significantly in 1997. In addition to Wiggins;

Wilson Taylor, Chairman and CEO of CIGNA went from $11.6 million in 1996 to $12.5 million in 1997.

William McGuire, CEO of United HealthCare saw his compensation increase by over $7 million, from $1.2 million in 1996 to $8.6 million in 1997.

Compensation for James Stewart, Executive Vice President of CIGNA, went from $4.8 million in 1996 to $7.3 million in 1997.

Of the top five, only Robert Smoler, Executive Vice President at Oxford Health Plans, saw a decrease in compensation, going from $10.1 million in 1996 to $6.9 million in 1997. (See Table 1 below, for the 25 highest paid HMO executives.)

"The hypocrisy of the industry on the issue of health care costs is startling," said Ron Pollack, executive director of Families USA. "They lose money in 1997 but spend millions to compensate their top executives, spend millions on advertising and lobbying to kill patient protections, and then they go around scaring the American public saying they will need to raise premiums to cover the very minor costs of comprehensive patient protections."

At the launch of a recent advertising campaign against managed care consumer protections, the Health Benefits Coalition, an organization made up of for-profit managed care companies said patient protections would "boost trial lawyer's profits" and would force premiums to go up.

Aetna/US Healthcare, CIGNA, United Healthcare and Humana are members of the Health Benefits Coalition.

According to the Congressional Budget Office analysis of the Patients' Bill of Rights Act, comprehensive consumer protections would raise premiums only four percent. For consumers that means less than $2 per month.

"The industry's duplicitous concerns about costs are an attempt to hide the fact that they don't want to ensure that patients are protected and they do not want to be held accountable for the health care decisions they are making," added Pollack.

The analysis also found that the executives were sitting on stock option packages averaging $4.5 million, up from $4.2 million per executive in 1996. The five executives with the largest unexercised stock options packages were,

William McGuire, ($61.2 million);

Alan Hoops, President and CEO, PacifiCare Health Systems ($32.8 million);

Wilson Taylor, Chairman and CEO of CIGNA ($20.0 million);

Jeffrey Folick, Executive Vice President of PacifiCare ($19.1 million);

and Malik Hasan, Chairman of the Board and CEO of Foundation Health Systems ($17.8 million).

(See attached, Table 2, for executives with the 25 largest unexercised stock option packages.)

The companies with the highest average compensation, exclusive of unexercised stock options, per top executive were:

CIGNA at $7.2 million, up $2 million from the 1996 average of $5.1 million; Oxford Health Plans at $6.4 million, down over $5 million from the 1996 average of $11.7 million; United Health Care Corporation at $2.9 million, up almost $2 million from the 1996 average of $.9 million; Aetna at $1.7 million, down from $5.6 million in 1996; and Humana who up from $1.5 million in 1996 to $1.6 million in 1997. All averages are for the top executives as reported to the Securities and Exchange Commission.

The companies with the highest average unexercised stock option packages per top executive were: United HealthCare ($17.0 million); PacifiCare Health Systems ($15.5 million); CIGNA ($10.6 million); Foundation Health Systems ($7.5 million); and Oxford Health Plans ($3.2 million). The analysis examined executive compensation using each company's filings to the Securities and Exchange Commission in 1997. Companies included in the analysis are Aetna, CIGNA, Coventry, Foundation Health Systems, Inc., Humana, Maxicare Health Plans, Mid-Atlantic Medical Services, Oxford Health Plans, PacifiCare Health Systems, RightCHOICE Managed Care, Sierra Health Services, Trigon Healthcare, United HealthCare, United Wisconsin Services, and WellPoint Health Networks.

Families USA is the national organization for health care consumers. It is non-profit and non-partisan and advocates for high-quality and affordable health and long-term care for all Americans.

Table 1:

The 25 Highest Paid HMO Executives 1997 Annual Compensation (Exclusive of Unexercised Stock Options)

>1. Stephen Wiggins, Chairman & CEO, Oxford Health Plans, Inc. $30,735,093
>2. Wilson Taylor, Chairman and CEO, CIGNA Corporation 12,456,169
>3. William McGuire, CEO, United HealthCare Corporation 8,607,743
>4. James Stewart, Executive Vice President, CIGNA Corporation 7,306,921
>5. Robert Smoler, Executive Vice President, Oxford Health Plans, Inc. 6,918,509
>6. Gerald Isom, President, Property and Casualty, CIGNA Corporation 5,737,691
>7. Ronald Compton, former Chairman and CEO, Aetna 5,383,148
>8. H. Edward Hanway, President, CIGNA HealthCare, CIGNA Corporation 5,282,734
>9. Donald Levinson, Executive Vice President, CIGNA Corporation 5,177,026
>10. Eugene Froelich, Executive Vice President, Maxicare Health Plans, Inc. 4,720,483
>11. David Jones, Chairman of the Board, Former CEO, Humana, Inc. 4,495,798
>12. George Jochum, Chairman of the Board, President and CEO, Mid-Atlantic Medical Services, Inc. 3,779,358
>13. Travers Wills, COO, United HealthCare Corporation 3,461,09614. Gregory Wolf, President and CEO, Humana, Inc. 2,954,430 >15. David Snow, Jr. Executive Vice President, Oxford Health Plans, Inc. 2,835,477
>16. Peter Ratican, Chairman of the Board, President and CEO, Maxicare Health Plans, Inc. 2,620,483
>17. Jeffrey Folick, Executive Vice President, PacifiCare Health Systems, Inc. 2,184,470
>18. Jeffrey Elder, Senior Vice President, Foundation Health Systems, Inc. 2,129,008
>19. Andrew Cassidy, Executive Vice President, Oxford Health Plans, Inc. 2,004,509
>20. Allen Wise, President and CEO, Coventry Corporation 1,974,171
>21. Alan Hoops, President and CEO, PacifiCare Health Systems, Inc. 1,745,788
>22. Leonard Schaeffer, Chairman and CEO, WellPoint Health Networks, Inc. 1,596,097
>23. Anthony Marlon, Chairman and CEO, Sierra Health Services, Inc. 1,555,184
> >24. Erin MacDonald, President and COO, Sierra Health Services, Inc. 1,540,315
> >25. Norwood Davis, Jr., Chairman, Trigon Healthcare, Inc. 1,437,744

Table 2:

The 25 Executives with the Largest Unexercised Stock Option Packages in 1997

>1. William McGuire, CEO, United HealthCare Corporation 61,178,652
> >2. Alan Hoops, President and CEO, PacifiCare Health Systems, Inc. 32,777,354
>3. Wilson Taylor, Chairman and CEO, CIGNA Corporation 19,959,470
>4. Jeffrey Folick, Executive Vice President, PacifiCare Health Systems, Inc. 19,076,327
>5. Malik Hasan, Chairman and CEO, Foundation Health Systems, Inc. 17,778,0146. Wayne Lowell, Executive Vice President, PacifiCare Health Systems, Inc. 13,224,331
>7. Jay Gellert, President and COO, Foundation Health Systems, Inc. 12,263,445
> >8. Travers Wills, COO, United HealthCare Corporation 11,431,203
> >9. Eric Sipf, Regional Vice President, PacifiCare Health Systems, Inc. 10,313,347
> >10. James Stewart, Executive Vice President, CIGNA Corporation 9,800,057
> >11. Gerald Isom, President, CIGNA Property and Casualty, CIGNA Corporation 9,062,053
> >12. Stephen Wiggins, Chairman and CEO, Oxford Health Plans, Inc. 8,654,000
> >13. H. Edward Hanway, President, CIGNA HealthCare, CIGNA Corporation 7,295,973
> >14. Donald Levinson, Executive Vice President, CIGNA Corporation 6,631,215
> >15. Gregory Wolf, President and CEO, Humana, Inc. 5,821,274
> >16. Richard Huber Chairman, CEO and President, Aetna, Inc. 5,755,562 17. Leonard Schaeffer, Chairman and CEO, WellPoint Health Networks, Inc. 5,724,912
18. James Carlson, President, Health Plans, United HealthCare Corporation 4,867,000
> >19. William Sullivan, President and CEO, Oxford Health Plans, Inc. 4,617,000
> >20. Norwood Davis, Jr., Chairman, Trigon Healthcare, Inc. 4,478,573
> >21. Karen Coughlin, Senior Vice President, Humana, Inc. 4,195,934 22. David Koppe, CFO, United HealthCare Corporation 4,012,708 23. David Snow, Jr., Executive Vice President, Oxford Health Plans, Inc. 3,952,780
> >24. Thomas McDonough, CEO, Strategic Business Services, United HealthCare Corporation 3,801,120
> >25. Dale Berkbigler, Executive Vice President, Foundation Health Systems, Inc.3,687,463

Patrice Franklin, Deputy Field Director
Families USA
1334 G Street N.W.
Washington, DC 20005
202-628-3030

pfranklin@familiesusa.org

Web Site: Families USA

5/2000 UPDATE:

Read it Here

1999 HMO Executive Pay Strong Despite Poor Showing [Medscape Money & Medicine, 2000.

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If a CEO's most important job is delivering shareholder value, 1999 was hardly a banner year for executives of managed care companies.

Still, last year's poor financial performance, patient backlash against managed care policies, and class-action lawsuits didn't make much of a dent in CEOs' paychecks, according to a recent survey by Atlantic Information Services, Washington, DC. Salaries for CEOs of publicly traded managed care companies ranged from a high of $1.17 million for Cigna Chairman Wilson Taylor to $350,000 for Humana President and CEO Michael McCallister.

Aetna President and CEO Richard Huber, who accused physicians of being greedy when they refused to participate in the payer's HMO product, took home $1 million in 1999, but resigned under shareholder pressure in late February. See below for the survey.

1999 Executive Compensation at Publicly Traded Managed Care Firms (Executives are ranked by company in order of largest annual salary)

Name/Title                Company                  Annual Salary       Bonus       Other Compensation

Wilson Taylor, Chairman       Cigna Corp.       $1,173,100       $4,000,000       $286,987

H. Edward Hanway, President and CEO       $711,500 $2,500,000       $82,815

Richard Huber, Former Chairman/CEO/President Aetna Inc.      $1,000,000      $680,800       $73,513

Leonard Schaeffer, Chairman and CEO WellPoint Health Networks, Inc.      $999,992      $2,200,000       $138,444

Alan Hoops, CEO, Corporate President PacifiCare Health Systems, Inc.      $920,000       $1,104,995      $580,992

Norwood Davis, Chairman Trigon Healthcare, Inc.      $764,000       $917,280      $352,651

Thomas Snead, President and CEO      $405,940      $463,777      $24,528

Anthony Marlon, M.D., Chairman and CEO Sierra Health Services, Inc.      $654,320       $327,600      $99,487

Jay Gellert, President and CEO Foundation Health Systems, Inc.      $500,000      No Bonus      $68,971

Thomas Barbera, President and CEO Mid Atlantic Medical Services, Inc.      $499,994      $163,695      $3,200

Mark Groban, Chairman       $497,859      $163,267      $3,200

John O'Rourke, Chairman, President and CEO RightCHOICE Managed Care, Inc.      $400,000      $284,460      $145,583

Norman Payson, MD, Chairman and CEO Oxford Health Plans, Inc.       $350,000       $350,000      $64,058

David Jones, Chairman Humana Inc.      $205,000       No Bonus       $776,961

Michael McCallister, President and CEO      $350,000       $250,000       $172,820

1999 Executive Stock Options at Publicly Traded Managed Care Firms

Managed care company executives in 1999 were granted stock options to purchase company stock at a given price, with the assumption that the stock will appreciate over the vesting period. (Executives are ranked in order of largest number of stock options granted.)

Name/Title Company             Number of Stock Options Granted During 1999      Exercise Price per Share       Current Stock Price as of April 6, 2000

Wilson Taylor, Chairman Cigna Corp. 202,800 88,078 113,305 83,051 113,305 $81.1875 $78.6875 $90.4688 $90.6563 $83.2188 $79.1875

H. Edward Hanway, President and CEO 106,000 3,872 45,669 73,071 $81.1875 $78.6875 $95.8750 $84.5938 $79.1875

Jay Gellert, President, CEO Foundation Health Systems, Inc. 500,000 N/A $7.75

Norman Payson, MD, Chairman and CEO Oxford Health Plans, Inc. 400,000 $18.625 $14.5625

Leonard Schaeffer, Chairman and CEO WellPoint Health Networks, Inc. 140,000 42,792 42,791 42,791 12,787 19,391 45,469 15,209 $70.69 $70.69 $103.49 $23.63 $78.88 $82.44 $72.88 $72.88 $73.4375

Richard Huber, Chairman, CEO, and President Aetna Inc. 100,000 100,000 100,000 $90.125 $86.250 $50.250 $56.9375

Alan Hoops, CEO, Corporate President PacifiCare Health Systems, Inc. 60,000 100,000 $71.59 $45.31 $50.1875

Anthony Marlon, MD, Chairman and CEO Sierra Health Services, Inc. 50,000 100,000 $14.94 $8.00 $4.6875

Thomas Barbera, President and CEO Mid Atlantic Medical Services, Inc. 85,000 60,000 $8.25 $12.00 $9.4375

Mark Groban, Chairman 85,000 60,000 $8.25 $12.00 $9.4375 David Jones, Chairman Humana Inc. 5,000 $18.7813 $7.50

Michael McCallister, President and CEO 30,000 100,000 $19.2500 $7.4688 $7.50

Thomas Snead, Jr, President and CEO Trigon Healthcare, Inc. 40,000 40,000 $37.3125 $31.0000 $35.25

Norwood Davis, Jr., Chairman 50,000 $37.3125 $35.25

John O'Rourke, Chairman, President and CEO RightCHOICE Managed Care, Inc. 26,558 $11.50 $13.25 SOURCE: Atlantic Information Services, Inc., 2000.

Medscape Managed Care

From Ear, Nose & Throat Journal How to Kill Managed Care Gideon H. Lowe, III, MD, FACS, Assistant Clinical Professor of Ophthalmology, University of Southern California School of Medicine; Private practice, Los Angeles, California. [Ear, Nose & Throat Journal 77(8):592, 594, 596, 598-600, 602, 604-605, 608, 1998.© 1998 MEDQUEST Communications, LLC]

Section 1 of 3

CONTENTS Managed Care is Born

Managed Care Meets Health Care

Killing Managed Care: A Plan for Action

References

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Managed Care is Born:

Managed care had its origins in the US military of the 1960s. Its principal designer was Alain Enthoven, an economist at the RAND Corporation. When President John Kennedy appointed Robert McNamara, CEO of the Ford Motor Company, to be Secretary of Defense, McNamara named Charles Hitch of the RAND Corporation as Assistant Secretary. When Hitch came to Washington he brought a number of his RAND colleagues, including Enthoven, who himself was to later become Assistant Secretary of Defense.

This new group established the Office of Systems Analysis within the Department of Defense, and began formulating cost-benefit analyses and what they called the planning-programming-budgeting system (PPBS), which was a method of economically evaluating and comparing alternative defense programs aimed at accomplishing the same goals.

Because of PPBS's pretension to science and its apparent exactness, President Lyndon Johnson, in a statement to Cabinet members and agency heads on August 25, 1965, directed that it be used throughout the Federal government.

According to Howard Waitzkin, MD, PhD, of the Department of Medicine and School of Social Sciences at the University of California at Irvine,[1] PPBS had several tenets:

Distrust of military professionals, who were felt to have vested interests in continually expanding their programs at the expense of the rest of the federal budget. It was said that independent analysts were needed to promote informed and cost-conscious defense policy decisions.

Trust in managers, who would take proposals from the military brass and subject them to cost-benefit analyses, presenting the conclusions to the President and others.

"Choice among competing alternatives," which was emphasized to allow the high-level managers in the Department of Defense the freedom to pick the most economical tactic or strategy, such as investment in ten 50-kiloton warheads or one 10-megaton warhead.

A quasi-scientific method, which lent an air of certitude and irrefutability to the procedure. Waitzkin notes that "The complexity and esoteric features of such studies tended to make them inscrutable to military officers and congressional representatives unschooled in economics."[1]

The "tools" the managers used to further PPBS were cost-benefit analyses, long-range defense plans based on economics and concept papers. These were used to override military and congressional objections.

"Incrementalism with strains" is a curious expression used by Enthoven for the process by which the old ways of doing things were gradually replaced in a step-wise fashion, causing the military officers, the military contractors and Congress to experience the "strains" of these changes.

Resistance by these groups, however, eventually resulted in the failure of PPBS in the military, and it became apparent that administrators in other Cabinet-level departments did not fully institute PPBS to begin with. Even when it was being fully employed in the military, PPBS did not prevent the extremely rapid and relentless increase in spending during the Vietnam War.

From 1969 to 1973, Enthoven was vice-president, then president of the medical products division of Litton Industries, a large military contractor in California. During his tenure he became interested in healthcare economics.

When he joined the Stanford University faculty in 1973 as a professor of both management and healthcare economics, he naturally tried to fit his systems-analysis theories, developed at the Pentagon, into his work on health policy.

In 1977 he offered President Jimmy Carter a draft of his "Consumer Choice Health Plan" based on managed competition in the private sector. Carter rejected his plan, but Enthoven submitted it to the New England Journal of Medicine, where it was published in 1978 (volume 298, pages 650-658 and 709-720). The plan contains the same guiding principles as those of the PPBS from the Vietnam era:

Distrust of medical professionals. Enthoven maintained that physicians function as a "guild," limiting the effect of market forces on them. In his 1988 book Theory and Practice of Managed Competition in Health Care Finance,[2] he promoted a concerted effort to "break up the medical guild."

Trust in managers. This has developed as another basic tenet of managed competition, that managers, mostly outside the medical profession, must make decisions on behalf of individuals and families while physicians must organize themselves into economic units.

"Choice among competing alternatives." The "sponsors," as Enthoven calls them, are to choose between competing health plans; the managers of the plans themselves must then control clinical decisions to ensure that their plans are of low cost and have good "outcomes" or they will not be chosen.

A quasi-scientific method. As Waitzkin says, "The aura of scientific method also pervades arguments on behalf of managed competition. Again, rather than calling for more powerful scientific methods, such as randomized, controlled trials on a regional or state level to evaluate managed competition as opposed to single-payer or other policies, Enthoven uses case studies selectively to justify key claims.

Like PPBS before it," Waitzkin continues, "managed competition thus becomes a set of scientifically oriented principles to be implemented without prior scientific test."[1]

"Tools" for managers. For managed care, these include methods of pricing, standard benefits packages based on cost-benefit analyses, annual enrollment and disenrollment procedures, quality assurance methods, and what Enthoven terms "pro-competitive actions" aimed at curtailing the economic power of doctors and other providers of health care.

"Incrementalism with strains." Those who will feel the "strains" as managed care is phased in are the medical "guild," the patients, and insurance companies that are not set up to deal with managed care.

Enthoven favors legislation that permits managers to selectively contract with "preferred providers," that outlaws the ability of physicians to boycott, that prohibits price-fixing by physicians, and that prevents other "concerted refusals to deal" by doctors and others. Many of the laws that further his aims are already on the books, as will be shown subsequently in this article.

It is an historical fact that Enthoven's managed competition theories, which were expressed in PPBS, were failures in the military. He avers, though, that they were not really tested there. What he cannot maintain, however, is that these theories, when applied in the medical arena, have any validity at all.

Current experience with managed care companies speaks for itself. His theories, like those of many social planners, seek to impose a single view on the masses while penalizing those who have contributed most to the social good (the military professionals, for one, in protecting our borders, and physicians, for another, in eliminating disease).

Enthoven is a man with a theory who seems to be seeking ego fulfillment and notoriety by persuading those in authority to apply it. One is reminded of the acceptance of Marx' and Engels' theories and the subsequent human misery that resulted from that acceptance.[3]

During the 1980s Enthoven met regularly with Paul Ellwood, Lynn Etheredge and others at Ellwood's home in Jackson Hole, Wyoming. They became known as the "Jackson Hole Group" and were active in promoting the theories of managed care to insurance companies, government policy-makers and the media.

Because of this, insurance companies, such as CIGNA, Prudential, Aetna and Blue Cross, began to move to managed care in the 1980s. However, when Allied Signal Corporation (one of the 30 components of the Dow-Jones Average) converted to managed care in 1988, this legitimized managed care to all of corporate America. Allied Chairman Edward Hennessy and Personnel Director Ted Halkyard decided to go with managed care because their company's medical expenses were rising dramatically.

They received much criticism from their employees who had been used to over-utilizing fee-for-service medicine, and their memoirs are interesting to read in this regard.[4]

continued...

Full article at: Full Article

This is being reposted with permission and may be re-posted or distributed to other appropriate ng, lists, etc. Please note that I am not the author -- just the poster.

----------------
Colleagues:

Some time back (July 97 acutally) I sent the following message in response to an article published elsewhere and then reported on the PSYUSA network. The original article dealt with efforts by one state to pass Mental Health Parity legislation and the suggested role played by the National Alliance for the Mentally Ill (NAMI). My response in 1997 was as follows (sorry for the length):

Please do not be fooled by the efforts of the National Alliance for the Mentally Ill and the publicity they seem to be seeking with regard to the Parity for Mental Illness issue. NAMI has supported Parity for Serious Mental Illness (SMI) _only_. While they indicate to the public that they are in favor of parity, NAMI has worked quite hard in several states to thwart efforts at FULL parity in favor of SMI parity for only a few "biologically based" diagnoses.

In Louisiana, two bills were reported out of the Insurance Committee of the State House, one legislating _full_ parity and the other, authored by the Chair of the Committee and a "friend" of insurance companies, legislating SMI parity for 5-6 "bilogically based" diagnoses. The latter SMI bill was amended in Committee to include children.

Representative Donlon, Chair of the Committee, worked very hard to exclude children from the bill. Both bills were reported to the Floor of the House.

When the FULL parity legislation was debated, the Full parity bill was amended by Rep. Donlon into a SMI bill which did _not_ include children. His efforts received the full support of NAMI while the Louisiana Psychological Association, Social Work Association, Mental Health Association, and Friends and Family of the Mentally Ill and other organizations fought, not only to keep children in the bill, but to expand coverage to all mental illnesses.

Representative Donlon, the insurance lobby, and NAMI succeeded in pushing through a SMI bill which will include the very limited number of "biologically based" diagnoses and excludes children. The bill now moves to the Senate where hopefully we can do something to truly end the discrimination.

While there are those who see these efforts at full parity reduced to SMI parity as a "step in the right direction," I would caution my colleagues. Passing SMI parity will come back to haunt us. The insurance industry, seeing the parity handwriting on the wall, is now lobbying very hard and apparently effectively to limit parity to SMI.

By doing so, they will go to the Federal Legislature in the not too distant future with the ammunition, "See, it's what the states want!" SMI parity will be tauted as what the states want.

If at all possible, do not accept SMI parity unless it includes children and/or you can get the legislature to define SMI very broadly, not just limited to a few "biologically based" diagnoses. The state branches of NAMI may seem quite friendly to the issue but "beware of wolves in sheep's clothing."

Well, guess what we have learned! It is our understanding that Sen. Peter Domineci will be introducing a piece of federal legislation which will expand the Mental Health Parity Act of 1996. The propsed legislation provides for mental health parity in insurance coverage for Serious Mental Illness (SMI).

The language of the proposed bill indicates that it will include coverage for only a handful of "biologically based" mental illnesses. Those listed in the proposed bill are schizophrenia, bipolar disorder, major depression, obsessive compulsive disorder and severe panic disorders, autism, and "other severe and disabling mental disorders such as severe anorexia and severe attention-deficit/hyperactivity disorder." These terms shall mean "as defined in DSM IV." Parity for substance abuse is not provided.

It is noteworthy that the propsed legislation also includes parity for outpatient hospital days and outpatient visits for all mental health disorders. While on the surface this seems quite appealing, it is felt that this aspect of the bill was included to continue to garner the support of the coalition of mental health advocates but will likely represent the first piece of the bill sacrificed during the dabate on the bill.

The crafting of this legislation has been largely influenced by the National Alliance for the Mentally Ill, one of the very few patient advocate groups which does not favor FULL mental health parity, and the insurance industry. NAMI has placed itself in a win/win situation. If SMI parity passes, NAMI will praise their efforts. If FULL Mental Health Parity passes, NAMI will, in all likelihood, again sing their own praises suggesting they were able to get so much more than they had hoped they would.

It is also our understanding that Sen. Paul Wellstone, who was co-author of the previous Mental Health Parity Act, still favors FULL mental health parity and is working to improve this bill. I would suggest that we let Sen. Domineci know that we would like the discrimination in insurance coverage to end for ALL Americans with mental illness - including children with emotional disorders that do not fit into the limited list of diagnoses proposed.

Actuarial projections and actual data from states with FULL mental health parity indicate that the increased cost for FULL parity vs. SMI parity is extremely small because the bulk of the increase in premiums (some 95%) comes from covering the expenses of these 5-6 diagnoses.

So, please, if you do get actively involved in the direction of your profession, contact Sen. Domineci to request that he amend his bill to a FULL mental health parity bill and/or contact Sen. Wellstone to encourage his efforts at convincing Sen. Domineci that FULL partiy is the vehicle to end discrimination against, and to promote fairness to, ALL Americans with mental illness.

Glenn A. Ally, Ph.D.
Clinical Neuropsychologist
155 Hospital Drive, Suite 200
Lafayette, Louisiana 70503>br> email address: theallys@linknet.net

*********************************************************** Please feel free to distribute to other lists as you may deem appropriate. *********************************************************** '`'`'`'`'`'`'`'`'`'`'`'`'`''`'`'`'`'`'`'`'`'`'`'`'`'`'`'`'`'`'`'`'`'`'`'`

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Reprint requests: Gideon H. Lowe, III, MD, FACS, 1300 N. Vermount Ave., Suite 605, Los Angeles, CA 90027. Phone: 213-662-8194; fax: 213-662-9133.

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CONTACTING HMO'S:

Merit: 1800-999-9772 X 2992

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Vista: 619-563-0184

Green Spring: 410-740-9501

Value: 703-748-6648

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Managed Health Network: 213-299-0999

First Mental Health: 615-256-3400

MCC: 1800-926-2273

FHC: 1800-397-1630

Family Enterprises: 414-359-1040

American Psych Systems: 301-571-0633

CNR: 414-327-5197

Integra: 610-992-7000

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Plan 21: 713-621-6500

Comprehensive Behavioral Care: 1800-577-6677

Another Horror Story:

[LP had written:]

>> >Right now, our Congress is considering a Patient Bill of Rights Act >> >that would give consumers more rights and start limiting some of what >> >HMOs can do. Last year, Congress was unable to agree on a bill, and >> >we got nothing. This year, we have all got to make sure that they >> >pass a bill on this. The HMOs have apparently already started >> >shutting down in states where their ability to restrict a lot of stuff >> >has been over-ridden by legislation. >> > >> >Consumers, family members, and MH professionals all need to be heard >> >on this and we really all need to stand together for FULL MH parity >> >that is NOT restricted to just a few very specific diagnoses and >> >severity levels.

>> >Do you know that in a lot of plans, a patient who has coverage for >> >prescription medications finds that medications for ADHD are NOT >> >covered? These HMOs decide what is and is not covered arbitrarily, >> >it seems. And if you see a psychiatrist, your coverage is much less >> >than if you see a neurologist for the very same problem. >> > >> >This has to stop. And it's not going to unless people work together. >>

>

Somebody replied:

>Another side to this argument which will most likely be unpopular in this >group is that there are a significant number of consumers and family members >who support the HMO more restrictive guidelines, who feel that mental health >services should be restricted to specific diagoses and severity levels and >that the industry is overused and out of control, even causing harm in too >many cases.

To which LP replied:

You would vest the decision-making in the hands of people who do not have the welfare of the patient as their first priority or even their main priority? They are a business.

Somebody had also replied:

>There are also those who feel diagnoses like ADHD are overused, >resulting in too many children on medication, perhaps more to keep their >teachers and parents happy than anything else.

To which LP replied:

HMOs do not determine diagnosis. If professionals are overdiagnosing, you cannot and should not (IMO) use the HMO as a checks and balances system. Denying coverage based on a diagnosis excludes patients who need treatment.

Denying a treatment when there is evidence showing the serious impact of the condition on basic life functions should be criminal if there are data showing that treatment improves health and functioning.

If you go to my web site, you will find an article looking at the relationship between ADHD (combined type) and safety factors, injury risks, and the like. Children with ADHD do seem to be at risk for more accidents with more serious injuries. There are also data suggesting that they may run into other problems such as substance abuse and criminal problems.

So an HMO says they won't cover medications for ADHD? And you say, "Great, because too many kids are diagnosed incorrectly and/or put on meds for parents' or schools' convenience?"

What about all the kids who need it? There is no consistent evidence that environmental or behavioral manipulations are more effective than medication. And there are many kids who are suffering because even with alternative settings and accommodations, they are experiencing tremendous difficulty focusing. They may land up feeling like failures. They may land up giving up and not even trying.

I see kids like this every day in my practice. Kids who feel better about themselves when they can focus better. Kids who could not be maintained in school because of excessive hyperactivity.

And you like HMO's making such decisions??

Last year, I pretty much had to put my private practice on hold for almost two weeks to go fight an HMO. It was not the first time I've fought one as an advocate and it won't be the last.

This child had already had two apparent strokes related to his Tourette Syndrome and/or medications. The case was a heartbreaker. No hospital in our area knew what to do. Our only hope was an out of state hospital.

Because Tourette is considered "mental illness" under most plans, the benefits were under the control of the subcontractor/outsource for MH benefits. They wouldn't cover the out of state hospital. The child's doctors called and begged and filed an immediate emergency request. The HMO claimed they lost the papers and asked for them again. They were sent again. Under the laws of NYS, they had X amount of time to reply. They didn't reply. They went home for the night.

I called the HMO at 2:30 in the morning. I was told the night supervisor wasn't there. I told them to call her at home and wake her. I demanded to know how she could go home and go to sleep when a child was in danger and they were beyond the time frames.

I screamed. And I mean *screamed.* Those from spp who know me in RL know *exactly* how intense I can be and the temper I can have if a child is being screwed over.

The supervisor called me back in 5 minutes. I screamed some more. But by then, I had already lined up some top notch attorneys to advise me on the legal end, and I told the supervisor we'd be in court within 24 hours on this case and that I was calling a press conference and would have the entire organization behind this child. And yes, I was fully prepared to do all that .

The HMO finally agreed. By then, the bed that the hospital had been holding for the child was gone and there was no place to admit him. It took another week of working closely with the receiving hospital to get him in there. In the meantime, we all worried terribly and the child suffered and begged to die.

No, don't tell me that HMOs should EVER have such decision-making power. And don't tell me that only some diagnoses should be covered or that someone should decide what's "severe enough" to warrant treatment. What the hell does the child have to do to get help -- become so depressed that they're suicidal?

HMOs are a scourge. Even if Congress passes legislation restricting some of the stuff they do and boosting patient's rights, the fact that they will still be in existence is an outrage.

Yes, I know I am ranting again. I have spent 8 years advocating for children and the health care issue is a frequent problem. I shouldn't have had to fight almost every insurance company and HMO in our area to get them to recognize that Tourette Syndrome is NOT a "psychological" problem.

Please don't take any of my venting or sarcasm personally. I am not angry at you or feeling sarcastic towards you. It is the issue and position that frustrates the hell out of me.

Leslie

Containing HMO costs at patients’ expense

--------------------------------------------------------------------------------

Pegram vs. Herdrich

U.S. Supreme Court Case #: 98-1949 Argument date: Feb. 23, 2000 Decision date: June 12, 2000

CASE:

Dr. Lori Pegram, Carle Clinic Association and Health Alliance Medical Plans vs. Cynthia Herdrich

ISSUE:

Can patients sue their HMO’s by arguing that the organizations improperly give bonuses to doctors for holding down costs?

DECISION:

The Supreme Court , in a unanimous decision , ruled there’s no basis for suing. The court said no HMO organization could survive without some incentive, connecting physician reward with rationing treatment. Ruling otherwise, the court said, would set off an upheaval, leading to “the elimination of for-profit HMO’s”.

Supreme Court 2000: Privacy, power

BACKGROUND:

Cynthia Herdrich of Bloomington, Illinois, received her health care coverage from a company called CarleCare, an HMO for employees of State Farm and their families. In March 1991, she went to see one of the HMO’s physicians, Dr. Lori Pegram, complaining of abdominal pain. Six days later, the doctor found an inflamed mass in Herdrich’s abdomen.

In spite of the fact that her abdomen was noticeably inflamed, Dr. Pegram required her to wait eight more days before undergoing an ultrasound examination at a CarleCare facility more than 50 miles away, in Urbana, rather than allowing Herdrich to have the procedure done at her local hospital in Bloomington, Illinois. During the eight days of waiting, the appendix ruptured, causing an abdominal infection known as peritonitis.

In October, Herdrich filed a lawsuit against Dr. Pegram and the HMO. After some legal preliminaries, the case wound up in federal court as a claim under the federal Employee Retirement Income Security Act, popularly known as ERISA.

She argued that the HMO violated ERISA’s requirement to act for the benefit of patients — known under the statute as a fiduciary duty. The HMO’s payment of bonus payments to doctors who cut costs, she argued, had the effect of lowering the quality of health care.

The trial judge threw her lawsuit out, but on appeal, the federal Court of Appeals for the 7th Circuit reinstated it, ruling that an allegation that cost-cutting measures could be the basis for a lawsuit under ERISA. The court reasoned that the system of bonus payments created divided loyalties.

“The very same HMO administrators vested with the authority to determine whether health care claims would be paid, and the type, nature, and duration of care to be given, were those physicians who became eligible to receive year-end bonuses as a result of their cost-savings,” the court held.

The doctor and the HMO now appeal to the US Supreme Court.

ARGUMENT:

FOR PEGRAM, CARLECARE, AND HEALTH ALLIANCE

Carter Phillips, Washington, D.C. Gary Sudeth, Health Alliance, Urbana, Ill.

The appeals court decision should be reversed, because it in effect held that under ERISA, employers have a duty not to adopt HMO’s or other options for managed care which routinely use measures to contain costs, including financial rewards for health care professions to offer cost-effective treatment.

The court misapplied the part of ERISA law that imposes a fiduciary duty on HMO’s, ruling that HMO’s are fiduciaries regarding all the decisions they make about health care. In fact, ERISA imposes those obligations only when HMO’s are administering the overall plan, not when it is making medical decisions about individual patients.

ERISA does not forbid an employer to provide health care benefits through an HMO or other managed care arrangement. Since an HMO is an entity that assumes financial risk to provide health services, it therefore motivated to contain costs. Using an HMO is therefore a decision that necessarily entails cost-cutting. It cannot be a fiduciary violation to follow the terms of the plan design.

FOR HERDRICH

James Ginzkey, Bloomington, Ill.

No one can seriously contend that physician incentives benefit patients. No one can seriously contend that physician benefits don’t create egregious conflicts of interest. The AMA concluded in 1994 managed care can “reduce the quality of care received by patients.

In particular, by creating conflicting loyalties for the physician, some of the techniques of managed care can undermine the physician’s fundamental obligation to serve as a patient advocate.”

A 1998 survey by the New England Journal of Medicine of 766 California managed care physicians found that nearly 40% of the doctors reported that their contracts included some form of bonus or incentive to cut costs. The median amount of money was $10,500.

The only question is whether a patient can use ERISA to sue over that conflict, and the answer is yes. Congress adopted a broad definition of fiduciary responsibility. The HMO’s in this case attempt to argue that they can only be sued over their overall entrepreneurial decisions. But that is too narrow.

Besides, decisions like the one at issue in this case — to force a patient to wait eight days for a sonogram — are administrative decisions, not medical ones. There was no medical necessity for the patient to wait eight days.

FRIEND OF COURT BRIEFS FOR THE HMO ET AL.

American Alliance of Health Plans, Chamber of Commerce, and other industry groups. Stephanie Kanwit, Washington, D.C. Jeffrey Gabardi, Health Insurance Association of America. Louis Saccoccio, American Association of Health Plans. Steve Bokat, U.S. Chamber of Commerce.

Over 160 million Americans depend upon employer health plans for their health care coverage, and the lower court’s decision has the potential to destroy them. Nothing in ERISA precludes an HMO from providing incentives to doctors to be appropriately cost-conscious while fulfilling their professional obligations.

The nation’s employer-based health care system simply cannot function or indeed survive if every treatment decision made while implementing a managed care program is treated as if it were a fiduciary decision. In criticizing HMO’s that are designed to give doctors incentive payments, the lower court zeros in on the very type of HMO plans that cast doctors in the central role of directing, managing, and supervising medical care.

Besides, HHS has studied incentive plans and failed to find any link between the quality of care provided and the structure of physician incentive plans.

American Medical Association. Gary Howell, Chicago. Michael Ile, AMA.

Doctors should not be considered “fiduciaries” when they perform clinical services for payments in an HMO or when they receive compensation from an HMO. If the lower court ruling stands, it would subject doctors to tremendous uncertainty as to the legal standards applicable to their practice of medicine. Doctors making medical decisions are not officers of an HMO making administrative decisions, and the fact that they are paid does not change that.

FOR CYNTHIA HERDRICH

18 states (IL, CA, DE, FL, IA, MA, MS, MO, MT, NV, NJ, NC, OH, OK, PA, RI, TN & TX) Joel Bertocchi, solicitor general of Illinois.

The court must be careful in deciding this case not to do away with state regulation of HMO’s.

Health Care for All and other non-profit groups. Wendy Parmet, Health Law Advocates. Boston. The ERISA law is intended to encourage the establishment of health plans and protect those enrolled in them. But in this case, the HMO seeks immunity from both state and federal lawsuits for breeches of their responsibilities. Ruling against the HMO in this case will not open the floodgates to litigation. It will simply ensure that beneficiaries of managed care have the rights Congress intended them to enjoy.

Group of law, policy and ethics scholars. Louis Cohen, Washington, D.C.

HMO’s are generally covered by ERISA, and any person who has “discretionary authority or discretionary responsibility in the administration” of an HMO is exercising “fiduciary” decision-making. When an employer sponsored health plan HMO covers “medically necessary or medically appropriate” benefits and grants the HMO the authority to determine whether particular services are within these medically defined categories, the HMO may be making ERISA plan coverage determinations at the very moment it makes “medical necessity” decisions.

And when an HMO delegates that decision to a doctor, the HMO has a duty to assure that the doctor doesn’t have an improper conflict of interest. If the Supreme Court rules against Cynthia Herdrich, it would allow HMO’s to immunize themselves from lawsuits — even if the doctor determining that a patient doesn’t need a particular treatment is directly benefiting from avoiding that particular expense.

Pete Williams’ Supreme Court Briefing 1999-2000

Pete Williams covers the Supreme Court for NBC News.

AMA LAUNCHES SEARCHABLE DATABASE OF FULL-TEXT ARTICLES FROM THEIR JOURNALS All editorial material from The Journal of the American Medical Association (JAMA) and the American Medical Association's (AMA) Archives Journals is now available online through the AMA Publications Web site http://managedcare.medscape.com/12492.rhtml Read it Here

From the APA:

>December 2, 1999
>FOR IMMEDIATE RELEASE
>CONTACT: Tricia Alvarez, 202-336-5910 >

>FLORIDA PSYCHOLOGIST CHARGES MAGELLAN WITH RETALIATION >

>(Washington, DC) - Florida psychologist Richard Brown, Ph.D. charged this
>week that Magellan, the largest behavioral health managed care company in
>the country, arbitrarily terminated mental health services to his patients
>in retaliation for Dr. Brown's efforts to enforce his agreement with
>Magellan. >

>In an amended complaint filed in the Hillsborough County Circuit Court in
>Tampa against Magellan CBHS Holdings, Inc. and Merit Behavioral Care of
>Florida, Inc., Dr. Brown alleges that, through arbitrary blanket >terminations of care, the managed care company inappropriately interfered
>with the relationships that Dr. Brown had developed with his patients. The
>lawsuit charges that Magellan ignored repeated warnings from Dr. Brown that
>termination of care would be detrimental to his patients' well being,
>especially those who were in a critical phase of treatment. >

>The lawsuit further charges Magellan with fraudulent misrepresentation and
>breach of contract for failing to permit Dr. Brown to exercise his >professional judgement in providing services to his patients and for its
>refusing to pay for authorized services rendered to Dr. Brown's patients.
>The amended complaint expands on the initial lawsuit filed by Dr. Brown in
>April 1999 charging Magellan with failure to reimburse for preapproved
>mental health services. >

>The American Psychological Association (APA) and the Florida Psychological
>Association (FPA) are supporting the lawsuit against Magellan. >

>"The issue here is managed care decision making without regard to patient
>well-being. We're concerned about managed care companies making
>profit-driven decisions that ultimately harm patients by preventing them
>from receiving necessary mental health care," says Russ Newman, Ph.D., J.D.,
>APA's executive director for professional practice. >

> "I regret having to take this to the court level," says Dr. Brown, "but I
>feel it's the only way to ensure continuity of patient care. The managed
>care company's tactics created a critical situation. Now we need to make
>certain that my patients are going to get the care they need and deserve."
>The Brown vs. Magellan lawsuit is one a series of four lawsuits brought with
>the support of APA to challenge managed care practices that endanger the
>health of patients and prevent managed care companies from usurping the
>clinical decision making of qualified health care professionals. APA's
>national legal strategy is designed to expose, through a series of lawsuits,
>the degree to which managed care companies actually control and influence
>treatment decisions and to force greater accountability around quality
>health care, not just costs. >

>Other cases currently pending: >

>U.S. District Court for the District of New Jersey - lawsuit against MCC
>Behavioral Health Care, brought by the New Jersey Psychological Association
>(NJPA) and seven psychologists. NJPA and the psychologists filed the
>complaint as a result of MCC terminating the psychologists from its provider
>network "without cause," alleging the termination to be a means of MCC
>controlling treatment decisions by threat of removal for providers who do
>not comply with the company's treatment decisions. >
>Superior Court of the State of California for the County of Los Angeles -
>lawsuit against Aetna U.S. Healthcare, Inc. of California; Human Affairs
>International, a former subsidiary of Aetna; and Adventist Health Care, a
>subcontractor for Human Affairs International filed by the California
>Psychological Association. The complaint charges that Aetna's managed care
>entity engaged in false advertising. The complaint alleges that California
>residents were misled by claims of prompt, accessible mental health
>treatment services that the managed care entity does not, in fact, provide.
>Superior Court of the District of Columbia - lawsuit against Blue Cross/Blue
>Shield of the National Capital Area (BCBSNCA) and its HMO subsidiary,
>CapitalCare, brought by the Virginia Academy of Clinical Psychologists along
>with six clinical psychologists and two Blue Cross patients. The complaint
>states that BSBSNCA engaged in false advertising by promising employers who
>purchase the BCBSNCA/CapitalCare plan and patients who use the plan certain
>benefits that are not delivered. ># # #
>

>The American Psychological Association (APA), located in Washington, DC, is
>the largest scientific and professional organization representing psychology
>in the United States and is the world's largest association of >psychologists. APA's membership includes more than 159,000 researchers,
>educators, clinicians, consultants and students. Through its divisions in
>52 subfields of psychology and affiliations with 59 state, territorial and
>Canadian provincial associations, APA works to advance psychology as a
>science, as a profession and as a means of promoting human welfare.

--------- end of release.

THE MANAGED CARE BLUES by Jean Rosenfeld, published in the newsletter of the California Society for Clinical Social Work newsletter:

Hello, Goodbye- the treatment's brief;
We'll meet for several sessions.
I hope that this will bring relief.
Let's start with your confessions.

Your father drank, your Mom took pills;
Your uncle, he molested.
Your inner child's very small;
Development arrested.

Now please talk fast, the time is short.
Your mood is still depressed?
You have no friends. You beat your kids.
You're acting quite regressed.

Read self-help books, go watch a tape,
And do the twelve-step dance.
What do you mean, that doesn't help?
This is your only chance.

You feel that I'm not here for you?
No time for your transference.
I treat you to the full extent of
Your managed care insurance.

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