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William H. McMicken, M.D.
Suite 323
2600 Philmont Avenue
Huntingdon Valley, Pennsylvania 19006

Page 20

Medically Related News Briefs

Physician's News Digest is the leading source of medical news of general interest and of local medical news in southeastern Pennsylvania and western Pennsylvania. Focusing on local health policy, medical economics and health care law, PND began its first print edition in 1987. PND's web site, which premiered in December, 1996, has unique features such as a medicine and computers column and daily updated news briefs, which you can sign up to be sent to you via e-mail. PND also offers a unique opportunity for those interested in reaching local physicians through advertising and list rentals.

Managed Care showdown in Texas
By Jeffrey Barg

Downtown Dallas


Dallas Texas Flag


Physicians Practice
Stanley Pomarantz, M.D.

Published February 1999







Dallas City Hall







Cotton Bowl


































































































































Texas has been a fertile breeding ground for measures designed to curb the excesses of managed care. In 1997, Texas was the first state to pass a law to enable medical malpractice lawsuits against health insurers, as well as other patient protections providing for stricter regulation of managed care. The Texas Department of Insurance has forced HMOs to strip gag clauses and certain financial incentives for limiting care from provider contracts. And the outgoing Texas attorney general has filed suit against six HMOs for using illegal financial incentives for physicians to limit care and penalizing physicians for not limiting care.

This may seem like a medical paradise to physicians from other states. But not all is well in paradise.

Many North Texas physicians are mad as hell and are dropping out of managed care plans in droves. One managed care plan in particular. As a former president of the Dallas County Medical Society put it in an essay written in 1997: "Aetna, I’m sorry I met ya’."

After years of escalating hostility and mistrust, two large integrated physician organizations have terminated their HMO contracts with Aetna U.S. Healthcare, which is poised to become the largest health insurance company in Texas and the nation with its purchase of Prudential HealthCare. In return, Aetna has invoked its "all products policy," which requires physicians to participate in all of Aetna’s products in order to participate in any. And in the case of the larger physician organization, Genesis Physicians Practice Association, Aetna has sent letters threatening to bring in the Federal Trade Commission for an antitrust investigation of the 560 physicians. The dispute has percolated up to the Dallas County Medical Society, the Texas Medical Association and the American Medical Association (AMA), which is using the Aetna actions here as a basis for opposing the purchase of Prudential HealthCare in a filing with the Justice Department.

By most accounts, these problems began in 1996 when Aetna purchased U.S. Healthcare in order to jumpstart their HMO business. According to a Wall Street Journal account published in July, 1998, Aetna adopted U.S. Healthcare’s more aggressive, stingy approach by replacing senior management positions with people from U.S. Healthcare, who in turn made drastic changes in customer service personnel, computer systems and provider contracts, resulting in widespread dissatisfaction among providers, patients and employers. In Westchester County, NY, for example, 37 percent of physicians chose not to renew their provider agreements with the company.

In Dallas, F. David Winter, Jr., M.D., a Baylor internist, said that prior to the purchase of U.S. Healthcare, Aetna was the best insurer he worked with in terms of approving referrals, getting reimbursed promptly and having a reasonable list of approved medications. Shortly after the purchase, however, getting approvals for referrals became problematic, approved medications kept changing, payments were delayed or sent to the wrong address, and it became difficult to get through on the telephone to Aetna, Winter said in an interview with Physician’s News Digest.

A decisive moment came last spring for Winter and his colleagues at HealthTexas Provider Network, a fully integrated joint venture between 220 physicians and Baylor Healthcare System. Aetna unilaterally lowered physician reimbursements despite the fact that they were in the middle of a contract that specified rates, according to Winter. Physicians were told that they could either accept the lower fee schedule or drop out of the contract. The physicians gave Aetna 90 days notice of termination, as required in their contract. In the last week of the 90 day period, Aetna said they would return to the original fee schedule and most of the physicians re-joined, except for certain specialties such as orthopedic surgery and gastroenterology.

Two months later, Winter and his colleagues discovered that Aetna was still reimbursing physicians under the reduced fee schedule. At first, Aetna denied doing this. After being confronted with proof, Aetna said that they would change to the original fee schedule, but that claims for the prior two months needed to be resubmitted in order to gain the difference for that period. Physicians complained that resubmitting every claim would be extremely costly and unnecessary. Aetna only relented on this condition when they found out that the Dallas Morning News was working on a story on the dispute, Winter said.

Winter also discovered that Aetna had sent a $30,000 payment to the wrong address. Aetna belatedly acknowledged their mistake and agreed to resend the payment, but it has yet to arrive seven months later.

In the meantime, because many Baylor specialists did not rejoin Aetna, Winter and his primary care colleagues were forced to refer their patients to specialists they did not know or that required patients to travel a long distance. Given the growing level of mistrust and hostility, as well as the toll of the hassles endured, the HealthTexas physicians again gave Aetna 90 days notice of the termination of their provider agreements. As of the first of the year, approximately 175 primary care physicians of HealthTexas are no longer seeing Aetna patients.

The dispute between the Presbyterian Hospital System physicians and Aetna is similar but far more polarized. In October of 1995, Genesis Physicians Practice Association entered into a risk contract with Aetna at Aetna’s insistence, according to Stanley Pomarantz, M.D., vice president of medical affairs for System Health Providers, Genesis’ management company. For a year-and-a-half, as Pomarantz tells it, all was well. Genesis received the financial and clinical data from Aetna it needed to effectively manage the risk contract. Payments were prompt and accurate.

But on April 1, 1997, the flow of financial and clinical data suddenly stopped. The number of problems getting claims paid grew exponentially. Genesis experienced a nine to twelve month information blackout and Aetna’s share of the group’s reimbursement problems ballooned to 50 percent although Aetna represented only 13 percent of Genesis’ business, Pomarantz said.

Pomarantz later found that these problems coincided with Aetna’s shift to U.S. Healthcare’s software.

Genesis sent a letter to Aetna in August of 1997 asserting that these problems constituted a breach of their HMO contract. Genesis and Aetna then set up work groups from both companies that met every other week. But the situation did not improve.

From November 1997 through January 1998, Aetna could not accept electronic claims, even though that was the method of filing claims encouraged by Aetna. When confronted with the problem, Aetna denied any responsibility. Later Pomarantz discovered that Aetna’s electronic gateway had been inadvertently closed while trying to correct another problem.

In the spring of 1998, Genesis began to see some pharmacy data from Aetna. But less than half had physician identifiers. Financial data came through, but was rife with errors and frequently was in unauditable form.

On June 12, Genesis sent Aetna notice of how these problems constituted a breach in their HMO contract, giving 30 days to correct the problems. At the end of June, Genesis made a seven-point proposal of ways the problems could be resolved. The proposal was rejected and 560 Genesis physicians gave 90-day notice of the termination of their HMO contract on July 12. Pomarantz said they were shocked that Aetna had not made a counter-proposal or accepted some of the seven points, since they had already adopted some of the points in their contracts with other Dallas physicians.

Aetna then attempted to sign up the Genesis physicians individually with hardball tactics. They invoked their "all products policy," shutting the Genesis physicians out of all of Aetna’s products even though the physicians only terminated their HMO contract. They sent out "hit squads" comprised of an Aetna representative and a NYLCare representative (Aetna purchased NYLCare in July 1998) to doctor’s offices with a bounty for each Genesis physician they could sign up, Pomarantz said. Pomarantz believes that Aetna thought they could break up the Genesis group. But when Aetna could not get physicians back individually, they charged that Genesis was putting