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Sometimes while he was waiting to be fired, Dr. B. found himself wondering how something so obvious could also be so secret. America’s largest insurance companies had taken over the practice of medicine, yet no one seemed to notice. He worked for five of them now and saw evidence of their power everywhere. He saw it on the highway, where his eye was always drawn to Aetna’s billboard urging him to “Be Happy. Be Healthy.” He saw it whenever he entered a drugstore, which more often than not featured a merry banner—“Welcome Sanus Health Plan Members!”—thanking yet another insurance company for its business. He saw it in his mail, which was full of cheery correspondence (“Welcome to the MetLife Family!”) and less-friendly updates on what the companies called his “economic progress”—his contribution to their bottom line.

He saw it too in the way the efficient young clerk from Blue Cross inspected his office, telling him not only where he must put his fire extinguisher but also what kinds of questions he must ask the patients Blue Cross insured—about drugs, alcohol, and other personal information that he once investigated with archaeological delicacy. But mainly he saw it in his patients, who were bewildered and angry because their insurance companies—instead of their doctor—were now in charge of their care.

I have known Dr. B. for almost twenty years. He is in his forties, a product of good schools, divorced, irascible, and somewhat theatrical. The classic solo practitioner, he is a doctor in for the long haul; he beams when he talks about new patients who are the children of old patients. Dr. B. didn’t become a physician because of family imperatives, the chance to get rich, or because the world of medicine was the only one in which he felt comfortable. In choosing a career after college, he found that he simply believed in the power of one person to heal another. He believed too that practicing medicine was as much art as science; having little interest in the glamorous, lucrative world of high-tech medicine, he reveled in his small office, where his receptionist wore jeans and his patients—artists, professionals, eccentrics—reflected the population of his inner-city neighborhood. No one much cared that his equipment was not the latest of that he kept the TV on during the baseball playoffs, or that he never wore a lab coat. His patients usually called him by his first name. “I don’t want everyone to like me,” he sometimes said. “If you practice bland medicine, then no one’s happy.”

But several years ago Dr. B. began to realize that he wasn’t happy. He sensed that somehow he had become an anachronism, that there was no longer a place for the kind of personal medicine he liked to practice. His colleagues were realizing it as well: At hospitals, over coffee, at cocktail parties, the docs gathered in groups and whispered among themselves. They couldn’t treat people the way they needed to anymore because of the insurance companies. They were on the phone all the time, haggling with insurance company clerks instead of practicing medicine. They were referring patients to doctors they didn’t know or didn’t trust because of insurance company rules. They talked about how they were going broke while insurance companies were getting richer and richer—the health insurance industry took in $265 billion in premiums in 1993. Dr. B., diagnosing his own condition, admitted that his anger had become chronic. He felt himself becoming a medical Cassandra. It was for this reason that one of our casual discussions evolved into the possibility of an article, and Dr. B. agreed to be interviewed. His one request was that his identity be protected. Like many doctors interviewed for this story, he feared retaliation from insurance companies. Even so, he thought that people needed to know what was happening to their medical care.

Maybe you are like one of Dr. B.’s patients, and you are only dimly aware that a change has taken place in your health care. If you are like most people, you’ve spent the past few decades worrying far more about the cost of care than the quality; you just want to be sure that you and your family are shielded from the catastrophic expenses that accompany catastrophic illness. What has been most important to you about health insurance is that you have it. Whether you belong to a health maintenance organization (HMO) or a preferred provider organization (PPO) or whether you participate in the old-fashioned reimbursement arrangement is of only passing interest. You want to be sure you are covered—and if you are, you probably followed the Clinton administration’s effort to reform health care from a distance and with some apprehension. Maybe you were even relieved when nothing happened. No change, you might have reasoned, is better than a change for the worse.

Yet despite events or nonevents in Washington, change has come, and because of the failure of the Clinton plan, the existing system is the one we are likely to have for a long time. It is known as managed care. This means that in an effort to control ever-increasing medical costs, insurance companies have changed the way they pay up. In the old-fashioned indemnity plans, customers paid their premiums and the insurance company reimbursed them for at least 80 percent of their expenses—for almost anything. Doctors were in charge; they treated and insurance companies paid. Now insurance companies are in charge. To save money, employers who offer health benefits are turning increasingly to HMOs and PPOs. In the former, insurance companies pay doctors a set amount per patient; patients are insured through their employers and can see only the doctors who belong to their particular health maintenance organization. In a PPO, doctors discount their fees to insurance companies that allow the physicians access to the companies’ vast patient pools; the patients, like those in HMOs, choose their doctors from these networks and pay a small fee each visit—typically around $10. Managed care sounds like a great deal: Patients save on out-of-pocket expenses, employers save on premiums, doctors are guaranteed a seemingly endless supply of patients, and insurance companies make money.

But managed care is not without its price. Costs, after all, cannot be contained without strict controls. Maybe you noticed the problem during a pregnancy, when, among hundreds of other concerns, you had to call the insurance company for approval before leaving for the hospital to deliver your baby. Maybe you noticed it the day your pediatrician ordered a chest x-ray for a sick child, and you had to wait, while his fever raged, for approval of the procedure. Maybe, new on a job, you felt a twinge of anxiety before you found your longtime doctor’s name in the booklet of approved physicians provided by your employer’s insurance company—the only doctors your employer would pay for you to see. Or maybe you felt just a whisper of a qualm when a new doctor asked you a question that seemed far too personal for a first meeting. “So do you have sex with men or women?” a physician asked an unmarried friend of mine and noted her answer on a chart.

Most likely you dismissed these incidents as minor annoyances. They seemed inconsequential, compared with the larger fact that your care was paid for. But what if things were different? What if, for instance, your insurance company wouldn’t pay for an experimental drug that might save your life? What if your insurance company would only pay for treatment in one of its own day clinics, but your doctor thought you needed to be hospitalized? Or would pay for your dialysis treatments only if you visited its health center across town instead of the one in your neighborhood? Or compromised your doctor’s allegiance, so that he felt more loyal to the insurance company, which paid his salary, than to you? What if, in short, all the criticisms of the Clinton plan—that patients couldn’t choose their doctors; that innovation would die; that bureaucrats, not doctors, would be running the system; that health care would be rationed—came to pass without a single congressional vote? And what if the primary obligation of American medicine was no longer to the patient but to the stockholders of America’s multibillion-dollar insurance companies? These questions are not hypothetical; they reflect what is happening in Dr. B.’s practice right now—and in medicine in Texas and the rest of the country. As Dr. B. likes to say with a sorry grin, “Managed care is fine—as long as you don’t get sick.”

The Victors

The heart of American medicine can no longer be found in a hospital, clinic, or doctor’s office, but in innocuous office buildings like the smoked-glass box on Houston’s North Loop near U.S. 290. Inside is the South Texas headquarters for Aetna Health Plans of Texas, a subsidiary of Aetna Life and Casualty Company, one of the fastest-growing health insurance providers in the state. Joseph T. Blanford III, the vice president of health services management, and Dr. T. Michael Cryer, the market vice president, administer the company’s managed-care plans in Texas, and to speak with them is to understand the extent to which the insurance industry has absorbed the medical profession.

They don’t look like the cold, insensitive bean counters Harris County physicians describe with fear and unmitigated scorn. The gray-suited Blanford is bland and reasonable in the manner of a high school principal. Cryer, tall, balding, and blazered, is soothing and affable in the manner of a family practitioner, which he once was. What distinguishes them is their confidence: Unlike almost everyone else in America—certainly most physicians—they know they have found a solution to the country’s health care costs, and it is managed care.

Insurance company executives say that the old indemnity system exercised no discipline on either doctors or patients. It rewarded the greediest doctors—the more tests, the more hospital stays, the higher the fees, the bigger the profits—and, in the process, turned us into a nation of medical junkies, hungry for any and all treatments, no matter how ridiculous or expensive. Managed care, then, restores sanity. HMO doctors must decide how to “manage” the fixed fee per patient that they receive, called a capitation. In addition, a portion of the doctor’s income may be held back until the end of the year as an incentive to keep costs down; doctors who overspend never see their “bonus” and risk being dropped from the plan. PPO docs have to keep their fees low to stay in the insurance company networks—that is, to hang on to their patients. Patients who don’t want to participate in managed care can, employer permitting, choose an indemnity plan, but they must pay higher deductibles, and the reimbursements are lower—60 percent to 70 percent and dropping, instead of the once-standard 80 percent. It is insurance industry doctrine that with managed care, everyone learns to be a responsible medical consumer, and costs go down. “Managed care works,” Cryer insists, not with fervor, but calmly and with complete assurance. “Quality medicine is cost-effective medicine,” Blanford declares. “You don’t overtreat or undertreat. You do the right thing.”

And, according to them, the benefits are enormous. Blanford and Cryer talk cheerfully of the “new environment,” of “seeking a balance of cost and quality.” Medicine is being practiced in a whole new way now, a near reversal of the way money was made just fifteen or so years ago, when doctors gave the orders. Medicine is now demystified. “You’re going to see a change in the way you receive care—and you’ll want it that way,” says Cryer. Hospital stays, once the gravy train of the medical system, are out. Not only are they expensive but, says Cryer, you can get sicker while you’re there. The new trend is toward cheaper—and far more comfortable—at-home care. No longer are patients at the mercy of gobbledygook-speaking specialists and their exorbitant fees; managed care has restored the generalist—the so-called primary-care physician—to power. In managed care, the insurance companies will approve no procedure unless the primary-care doc, who understands the whole patient, has signed on. (According to Cryer, too often the specialist knows his disease but not his patient. “Someone needs to be the coach,” he says.) For the patient, managed care also means an end to burdensome insurance forms and, even better, an end to out-of-pocket expenses. No matter what happens at the doctor’s office—a standard visit or minor surgery—the price is about $10. People can afford preventive care, such as immunizations, mammograms, and pap smears. “We want to take care of people, and we’re just doing it on a different avenue,” says Blanford.

Both men insist that their company wants to work with doctors. They are looking for ways to reduce the paperwork and approval procedures that physicians find so laborious; doctors fired from Aetna plans, they say, always have an appeals process through which they can contest the company’s decision. Cryer and Blanford do admit, with professional concern, that it’s “unfortunate” that firing doctors from plans sometimes disrupts the lives of the seriously ill, who, at a time of crisis, must then get used to a new doctor or revert to much costlier deductibles on indemnity plans. Cryer further believes that the public can’t always tell the difference between good and bad care. “What they perceive as high quality is not really quality at all,” he suggests. Aetna and its corporate cousins—such as MetLife, Sanus, PruCare, Cigna, Humana, and others—know best.

“It’s going to be managed care,” Blanford insists, ready to move on.

“You can’t go back from this,” Cryer declares, getting up to offer his hand, as if the new era had begun at that very moment.

The Pendulum

The certified letter arrived in the middle of last year. Opening the envelope and reading its contents, Dr.B. felt his face growing hot with shame. It was from the Great Beneficent Life Insurance Company (a pseudonym that further protects Dr. B.’s identity), informing him that he was being terminated from its health care plan. The company didn’t give a reason—and according to Dr. B.’s contract, it didn’t have to. What had happened? In the three years Dr B. had worked for Beneficent, he never saw any sign that the company had been unhappy with his performance—no finger wagging, no warning letters, no ominous phone calls. And yet now he was being told, in company parlance, that he had been “deselected.” He would be terminated by the end of the year, and the 350 patients he saw through Beneficent would have to find a new doctor. Though he still belonged to four other plans, the loss of his Beneficent patients would be devastating financially—he’s lose about a fifth of his practice—as well as emotionally. Over the years, many of his patients had been shifted to managed-care plans by their employers, which was why Dr. B. had signed on in the first place. To lose those on the Beneficent plan now meant losing patients who had become his friends.

But that was not Beneficent’s concern. The letter explained that Dr. B.’s termination had nothing to do with his skills as a practitioner. Nor did he believe that he was being fired for economic reasons: Though he found the monthly reports on his bottom line barely comprehensible, Dr. B. understood them well enough to know that he had been practicing well within the financial constraints the company specified. “So why?” he wondered, reading the letter again and again, as if he could force it to reveal all. What had he done wrong?

It seems incredible that almost overnight someone as independent as Dr.B. could go from entrepreneur to employee who could be laid off on a corporate whim. But his story resembles that of more and more doctors because of the rapid success of managed care. In the U.S., enrollment in the most popular form of managed care, HMOs, was 9.1 million in 1980. Thirteen years later, it had reached 45 million. The New York Times reported that as of 1994, 65 percent of the people insured through employers with two hundred or more employees were on managed-care plans. The change has been so broad and so swift that doctors who choose to avoid HMO participation may soon find themselves out of work.

In essence, the growth of managed care represents the shift of medicine from a cottage industry to one that is run like a giant corporation; the entrepreneurial aspect that is at the heart of the medical profession is vanishing. Certainly the high cost of medical care—attributable, in part, to the greed of some doctors—is responsible for this change. As large corporations began to provide greater and greater medical benefits as incentives to keep people on the job, doctors noticed that no matter what the cost, employers paid up. The money was in doing more: more office visits, more surgery, more tests. The late seventies also saw increased competition for patients: A doctor glut resulting from the expansion of medical schools in the sixties and seventies heralded the age of specialization. Patients didn’t just choose an orthopedist anymore, but an orthopedist who specialized in sports medicine.

All along, insurance companies, supported by bountiful employer premiums, provided generous reimbursements not just for serious illnesses but for less-dire procedures like breast reductions. Also, as the business of malpractice lawsuits grew, doctors ordered still more tests to protect themselves, thereby driving up the cost of care even more. “Someone came in with a headache, you did an MRI,” says George Rosenburg, a family practitioner in Houston.

During this time the stereotype of the rich arrogant doctor came of age, and it wasn’t far off the mark. Salaries continued to rise (by 1979 a cardiac surgeon’s average gross income could surpass $500,000 a year). Just as health care had become an entitlement with the creation of Medicare and Medicaid, enormous wealth had become the doctor’s right. Unchecked, costs continued to soar. By the mid-seventies medical care had become 8 percent of the gross national product and showed no signs of diminishing. In the eighties, as medical care was closing in on 10 percent of the GNP, employers slammed on the brakes.

Once corporate America began to balk at its medical bill, the pendulum of power swung swiftly and radically. With public sympathy for medical professionals almost nonexistent, private insurance companies moved in with ease, taking their cues from the Reagan administration, which had set caps on Medicare reimbursements. Even as costs continued to rise—the greediest docs found ways to subvert the government caps—private health care was turned inside out: The days of doing more and more for patients were over; now the money was in doing less. The way to control costs, the theory went, was to control doctors—by limiting their fees and their access to patients. Under managed care, insurance companies could withhold the bonus from doctors who performed too many tests, made too many referrals to specialists, or prescribed too many hospital stays. A doctor who didn’t tow the line could be dropped from the plan. That was no idle threat: As more employers rushed to managed care, the number of patients available to doctors who weren’t on such plans shrank. For doctors, the message was clear: Get with managed care or managed care will get you.

Like so many doctors, Dr. B. was not at all worried when patients began asking him to join their HMOs and PPOs in the mid-eighties. He was happy to oblige. “I didn’t want to lose my patients,” he says simply. Back then, it was easy to join managed-care organizations: The doctor requested an application from an insurance company, filled it out, and mailed it back. Though insurance companies went to great lengths to convince their clients that they painstakingly selected the doctors for their plans, this was not exactly the case. In those days they were building their networks of physicians, so they were willing to take almost any doctor in good standing. And because of the shrinking pool of desirable patients—those on reimbursement plans—most doctors were more than happy to join up. Once accepted into a plan, doctors signed a contract, their names appeared in the network directory, and the phones began to ring.

Whether through ignorance or arrogance, Dr. B., like many physicians, did not read the contracts carefully. He did not note the clause that stated he could be fired at any time for no reason. He paid even less mind to phrases like “Physician shall provide only that level of care which is Medically Necessary,” which, besides its ambiguity, might be considered at odds with the Hippocratic oath, as he understood it, to do all that is medically necessary. Like many physicians, Dr. B. saw the contracts as bureaucratese that didn’t apply to him. The idea that an insurance company would dare tell him how to practice medicine never crossed him mind.

The Gatekeeper

In the beginning, the insurance companies had wanted him to feel important. They had given Dr. B. a new title: gatekeeper. It made the corners of his mouth tighten every time he heard it. The age of the specialist had drawn to an expensive close, he was told. No longer would family practitioners be sneered at as medicine’s poor cousins; now they were needed to bring order and common sense to a chaotic system. Under managed care, the primary-care physician—the companies’ term, not his—is restored to primacy. This does not mean a return to the Norman Rockwell–style family doc who knew his patients so well he could sense whether they were really sick or simply in need of a sympathetic ear. In the new era of managed care, general practitioners, internists, pediatricians, and the like are the first line of defense in the war on cost. It is the gatekeeper’s mission to prevent what the insurance companies consider unnecessary care. This might mean discouraging access to specialists, tests (“Are the tests ordered needed,” posits one set of Aetna guidelines, “or are they a response to our legal friends?”), and sometimes the gatekeeper himself. It would take a while before Dr. B. understood his new role: He was no longer a healer; he was a traffic cop.

At first he had only a few patients on such plans, so his practice didn’t change much. The funny thing was, one of the first differences he noticed was in his wastebasket. It was always full. Every plan had a different system of procedures and a different set of hospital and lab affiliations, all of which seemed to generate a constant and ever-increasing paper flow—memos, forms, reminders, reports. Dr.B. found he needed more and more shelves and files to accommodate the change. Before, there had hardly been enough paperwork to occupy a receptionist-secretary. Now he had to hire a full-time administrator with more expertise in managed care than patient care. In five years his overhead doubled from 30 percent to 60 percent of his income. This is not cost savings, he joked to himself, but redistribution of wealth.

As he joined more and more plans, he began getting visits from insurance company “referral specialists,” who were paid to show him how to run his office according to the companies’ needs. They left little to chance. One company, for instance, went so far as to provide checklists for items that should be on hand in his office (as if he needed to be told to keep thermometers around) and ways to make office work easier (putting stickers on a patient’s chart when allergy symptoms are present). One handout even suggested what questions to ask a patient during a physical exam and how often to check blood pressure and cholesterol. “A high school student could do this,” Dr. B. thought to himself. “What do they need me for?”

Over the same period, he also began to notice a change in the patients who came to him. Before, his practice depended on his reputation; his patients had always been referred by another doctor or another patient. Now patients found him through “the book,” the provider directory they received at work. In cases where patients failed to choose a doctor themselves, companies often assigned one. This change in doctor selection was small but profound. The emotional power of the doctor-patient relationship was being diluted. If you didn’t know your doctor—and your doctor didn’t know you—one physician certainly would be as good as another.

Dr. B.’s patients were becoming strangers to him. Around midnight one Saturday, for instance, he received a call from a woman he had never met. Yet she insisted that he was her physician. The insurance company, she told him, had assigned him to be her doctor. She complained of dizziness. What should she do? Dr. B. listened and asked a few questions. He stared at the phone and sighed. “I think you should go to you nearest emergency room,” he told her. She could have had anything from the flu to a stroke—if he had been familiar with her medical history, he might have been able to make arrangements that would have been less costly and less time-consuming for the patient. As he hung up the phone, the woman’s voice returned to him. “What should I do? What should I do?”

“How the hell should I know?” he wanted to scream.

By 1990 the needs of employers to hold down health care costs had radically changed his practice: Three quarters of his patients were now affiliated with managed-care plans. It might as well have been 100 percent—like it or not, he had become an employee of the insurance companies. Dr. B.’s practice, once a mixture of science, art, and simple good sense, had become more and more standardized. After each patient visit, he submitted a bill to the company, showing what he had done. Long ago the forms had been formatted for the convenience of the insurance companies; every possible condition had a code that had no medical significance (460 was for the common cold; v65.5 was to be used to identify a “patient with feared complaint in whom no diagnosis was made”). More and more, a sense of paralysis would come over Dr. B. whenever he had to fill out the forms.

Ever so gradually he was beginning to weigh the needs of his patients against the money he was getting from the insurance companies. Dr. B. received a fixed amount per patient for those in some plans or a fixed amount per visit for patients in others. In either case, he was rewarded for what he didn’t do. Say he got $30 a month for a given patient. If the patient needed a gynecological referral or a complete blood workup, those costs were charged to Dr. B.’s “account” and were subtracted from the pool of money he was to receive at the end of the year. The less he saw a patient—and the less he did for him—the more of the original pool of money he received. In essence, the most valuable patient was the one who never showed up. Dr. B. practiced conservative medicine—he discouraged the use of antibiotics in his patients and was never afraid to prescribe old-fashioned home remedies—but what happened when a patient got AIDS or cancer? What was he supposed to do with the patients who had come to him in middle age and were now facing the more costly problems of the elderly? Giving too much attention to any of these people could result in what Dr. B. called “a bad report card”—monthly mailing that rated his economic status according to the insurance company’s expectations. If he was branded a “high utilizer”—insurance company parlance for “too expensive”—he risked being dropped from a plan. Did he do good work or bad work? Were his patients on the road to recovery after seeing him? There was no code for that at all.

Money was not the only problem. There was, for instance, privacy. One patient came in complaining of allergies, but in talking with her, Dr. B. could see that she was troubled. He probed a little and unleashed a flood of emotion. Sobbing, the woman explained that she was despondent over her breakup with a lover. She also hinted at a history of child abuse. Dr. B. knew the woman needed help for more than a runny nose, but to refer her to a psychiatrist meant not only that he might be penalized for a referral but also that Dr. B. would have to get on the phone and describe the woman’s past in detail to an insurance company clerk, who would then decide whether the insurance company would pay for the woman’s psychiatric help. Information that was once sacrosanct would then become part of some corporation’s records. Why was she depressed? The clerk would want to know. What was her sexual history? Her sexual preference? Dr. B. could not bring himself to make the call.

He billed the insurance company for a $29 office visit. Though he advised her to see a specialist, he did not give her a formal referral, and he did not code her bill for mental health care. He had to cover his tracks.

As a gatekeeper, he spent his days saying no. No to patients who wanted to see an ear, nose, and throat specialist for their sinuses (“I can prescribe for you,” he told them); no to women who wanted to see a gynecologist (“I’ll be doing your pap smears now”); no to people who wanted to see an orthopedist when they could not walk after a weekend accident (“Let’s give it a day and see what happens”). To a large extent, managed-care dictates are based on common sense: Most people don’t need specialists for routine procedures; most people who get sick get well on their own. But what about those who didn’t? Dr. B. felt that he was being asked to practice 1950’s medicine in the high-tech nineties. Every day new diagnoses, procedures, and medications were being developed. He couldn’t possibly keep up. Overburdened, he wondered what he was missing and which patient might suffer because of it. In his mind, the family practitioner was faced with the choice of making the patient happy or earning a living, and the two often appeared mutually exclusive. Like many people, he had a family to support and a mortgage. To lose his managed-care patients was to risk bankruptcy.

When he made referrals or used labs designated by insurance companies, he felt as though he had stepped through the looking glass. The old system of sending patients to doctors he knew and respected, or using labs he’d always trusted, no longer worked—they often weren’t on the same network as his patients—so he used only doctors and labs approved by the insurance companies and hoped for the best. And making any referral—to a doctor or a hospital—required getting approval from the insurance company, an act Dr. B. detested most of all. Along with mountains of paper, insurance companies seemed addicted to the telephone. If he wasn’t on the phone, his receptionist was, begging the insurance company clerk on the other end to approve a procedure. In the beginning he had spoken with nurses but not anymore. They had been too expensive, Dr. B. surmised. “And how much school have you had?” he had taken to asking, while the person on the other end of the line punched his diagnosis into a computer and waited for a yes or no answer. Most had never finished high school. This was the reality of modern medicine: a man with a medical degree getting permission to treat patients from someone getting a general equivalency diploma.

Foul-ups were inevitable. Once, a patient had come to him after cutting his arm in sewer water while cleaning out a gutter in front of his home. By the time he got to Dr. B.’s office, the gash was swollen with the red streaks indicative of infection. Fearing cellulitis, a dangerous infection of the tissue, Dr. B. called an infectious-disease expert, who advised an antibiotic that was very expensive but very strong. Dr. B. wrote the prescription. A few days later, he got a call from the patient: The insurance company wouldn’t authorize payment for the drug. Dr. B. called the company for him, working his way from clerk to supervisor, stressing the danger to the patient. A total of three days passed before the insurance company approved the prescription. By then the man’s entire arm was red and swollen. The guy could have lost his arm, Dr. B. knew.

He would come to work angry and leave work angry. He was spending an inordinate amount of time on things that had nothing to do with care of the sick—arguing with patients who wanted their old doctors back or battling with clerks who took their cost-control mission as seriously as he took his Hippocratic oath.

“You don’t have any regard for the patient’s health!” he had thundered during one particularly nasty encounter.

“Well, Dr. B.,” the clerk replied just as self-righteously, “you don’t have any regard for the patient’s financial health.”

Dr. B. wanted out, but there was nowhere to go.

The Truly Sick

As summer progressed, Dr. B. continued to see his Beneficent patients with the growing sense that he would soon be forced to give them up. It made him saddest to think of the patients who had been coming to him long before Beneficent had entered their lives. He wrote a letter of complaint to the company, asking it to reconsider. It was months before Beneficent responded; its answer was no.

Dr. B. was not the only one wrangling with the insurance companies. One morning a woman on a Sanus plan came weeping into his office. Her oncologist had been dropped from the plan, and she could not afford to pay him on her own. The man had been her doctor for a dozen years and had guided her through not only her own ongoing treatment but also the death of her husband from the same disease. “I cannot bear facing a recurrence without him,” she told Dr. B. But she would have to.

That same day an AIDS patient came in with similar news: The specialist treating his illness had requested admission to the patient’s Sanus plan and had been denied. The patient had the money to continue to pay the doctor on his own, but he could not afford the prohibitively expensive drugs the specialist would prescribe. What should he do?

Proponents of managed care often point to customer-satisfaction studies that show managed care equal if not superior to indemnity plans. It may be true that for ordinary problems, the differences are slight. Like so many other aspects of American culture, managed care rewards winners—stay healthy and you’re fine. But, eventually, most people get sick. And then the health care picture under managed care changes dramatically. “It’s therapeutic Darwinism” is the way one physician describes the insurance companies’ approach to the seriously ill.

AIDS is the most glaring example. Even though the disease is terminal, the right doctor can make an enormous difference in the quality and length of time a patient has left. But ask an AIDS doctor about managed care and you get horror stories in return: stories of moderately innovative drugs that are denied, of patients turned away from emergency rooms and directed to insurance company-affiliated day clinics, of doctors fired from plans because they fought back. Many of the problems stem from the gatekeeper concept: Very few primary-care physicians can keep up with the latest AIDS treatments; it is hard enough for the infectious disease docs who have made the disease their specialty.

The situation familiar to many AIDS doctors in Houston is that of Joseph Gathe, Jr., a prominent infectious-disease specialist. A significant part of Gathe’s practice was devoted to AIDS treatment, which meant that his costs eventually caused him to run afoul of insurance companies. So, no doubt, did his attitude: In an effort to keep his patients alive, he often fought bitterly with the insurance companies over treatments and procedures. The result: One company, Cigna, dropped him from its plan in August 1993, citing the provision of their agreement that allowed termination without cause. A few days later, Gathe filed suit, alleging that he was wrongfully terminated, that Cigna had dropped him because he was a “high utilizer.” During a hearing in which Gathe sought a temporary injunction that would allow him to keep his patients until the litigation was resolved, testimony showed just how far an insurance company will go to control costs.

There were six patients in question. Gathe, who declined to be interviewed for this article because his case in on appeal, testified at the time that he was trying to offer his patients the best, most current treatments available in Houston, and he had the success rate to prove it. After two years under his care, most of his full-blown AIDS patients were still alive and still working. Gathe told the court of his professional associations and his ties to drug-testing programs. He tried to make the case that to transfer his patients to other doctors did the patients a disservice. He also chronicled his difficulties with Cigna; he contended that the insurance company frequently interfered with the quality of care he was trying to deliver.

Gathe also testified that Cigna had denied hospital admission to a patient who appeared at his office with active pneumonia, including a high fever and respiratory rate. After Gathe put the patient in the hospital anyway, the company allowed only a one-day stay—far less, expert testimony revealed, than is considered common and acceptable treatment for such a serious condition. In another case, Gathe tried to order a special bed that would have kept a patient out of the hospital, but Cigna refused to pay. But most chilling was the case of a registered nurse named James D. Bland, who was in the final stages of AIDS. Bland knew that the end was coming, and he had requested that no extreme measures be taken, but he also had asked that he not be taken off a respirator—he dreaded suffocating to death. Bland discussed his wishes with Gathe and, soon after, lapsed into a coma. Gathe outlined the treatment plan to the family—Bland would remain on the respirator until he died, but he would not suffocate.

About this time a representative of Cigna became interested in the case. Why was this patient still in a hospital when he could be moved to a less expensive facility? The answer was that it would require that Bland be taken off the respirator, which would immediately result in death. Gathe, meanwhile, signed off the case because there was nothing more to be done.

Within a few days, the medical director for the insurance company contacted the head of the ethics committee at the hospital, a pulmonary specialist who coincidentally had just applied for membership in the Cigna plan: Why was this patient receiving further treatment when Dr. Gathe had put him under a Do Not Resuscitate order? Subsequently, that doctor removed Bland’s respirator in preparation for moving him to a hospice. He did so without consulting Gathe, the patient’s family, or the attending physician on the case. Once off the machine, Bland struggled for breath—and died of suffocation. In court, the judge pressed Gathe to say under oath whether the doctor who removed the respirator had killed the patient. “I am saying that—yes” was his answer.

Bland’s case makes a perfect target for critics of treatment at any cost: He was a very sick man with very high bills, kept alive artificially at a high cost with no hope of recovery. In the coldest light, it could be argued that the doctor who turned off the respirator was doing the rest of us a favor. But Bland’s case also evokes the messy moral dilemma of weighing the sanctity of life against the cost of prolonging it. Now insurance companies are involved in what were once intensely private and highly emotional decisions. Clearly insurance company health plan administrators are ready to make the hard choices for us.

In the end, the court too was unswayed by any moral or ethical arguments raised in the hearing. The judge ruled only that Cigna’s contract allowed the company to take Gathe’s patients away at any time; whether his patients wanted to remain with his was irrelevant. Gathe’s suit against Cigna is on appeal. The family of James Bland has also sued the insurance company, and that case is set for trial later this year.

AIDS is not the only condition that brings out the worst in the insurance companies. Any long-term, life-threatening illness represents a threat to their bottom line. “When we started seeing insurance companies trying to shaft these guys,” says one physician who has been treating AIDS patients for more than a decade, “we knew they were going to extrapolate that to cancer patients or heart patients. They’d do it to anybody.”

Oncologists, who also treat sick and expensive patient populations, have almost the same complaints as AIDS doctors. (Woe to the cancer doctor who treats both kinds of patients—one or two AIDS victims can easily mean a failing grade on his economic report card.) Often an insurance company will only pay for treatments in its own approved clinics, even if another treatment center is closer to the patient’s home but isn’t on its plan. Patients who have spent several months under the care of one oncologist must give the doctor up if he is dropped from the managed-care plan—unless, of course, the patient can come up with the money to pay the doctor himself. Every time a patient wants to see his oncologist, he must get permission from the primary-care physician (who, you’ll recall, could suffer financially for approving the referral). The same procedure must be followed each time an oncologist orders a lab test or an x-ray. “They’re micromanaging the care and have created a whole layer of middle management to control what you do,” says one Houston oncologist. Delays can run into days—small eternities for sick people. In what is becoming standard procedure, an insurance company representative will call the patient or the patient’s family, ostensibly out of concern for the patient’s progress. If the representative learns the patient is terminal, he begins pressuring the doctor to transfer the patient to a hospice. “They call the family, and then they hard-ball the doctor,” explains an oncologist with twenty years of experience.

The most disturbing effect is felt at the institutions devoted to medical research, like Houston’s M. D. Anderson Cancer Center, long an international innovator in cancer treatment. From 1993 to 1994 the hospital’s revenue from patient care dropped 6 percent, or $27 million, a decline hospital administrators ascribe largely to managed care. As a rule, managed-care companies do not reimburse for experimental treatments. They only want to meet the community standard—the average level of care in a given locale. Hence, a place devoted to experimentation is put at risk—fewer patients available for research, less money from paying patients—even though it is the place likely to come up with new treatments that save lives. “The managed-care plans show an increasing reluctance to pay for anything that isn’t standard medicine—even if it’s cheaper,” says Dr. Martin Raber, the physician in chief at M. D. Anderson. “They would rather pay for care that has proven to be ineffective than for a promising experimental therapy that would cost the same amount of money. Where is the incentive to innovate? We don’t want in the year 2005 to be stuck with 1995 medicine.

The Investigation

At the end of the summer, Beneficent representatives finally told Dr. B. that the reason he was being dropped from the plan was “patient complaints.” After numerous requests, Dr. B. received copies of the forms that made up the case against him. There were a handful of them—out of his 350 Beneficent patients—spanning the three and a half years he had been with Beneficent. Dr. B. was not surprised to find that the bulk of the accusations came not from longtime patients but from those who had found his name in the company provider book.

Some of the complaints were a matter of style. Several people griped about reaching an answering machine instead of a person when they called his office at particular times of the day. Another woman simply wanted to change doctors but couldn’t without filing a complaint with Beneficent. When badgered on the phone to come up with a complaint she finally noted that Dr. B.’s office furniture was not up to date.

Two patients complained after he refused to give them the drugs they wanted. One had been angered when Dr. B. refused to prescribe an antibiotic over the phone on a weekend because the patient had previously suffered an allergic reaction. Another was furious when Dr. B., who had not seen the patient for at least a year, would not call in a prescription after her roommate described her symptoms. A third complained after Dr. B., concerned about the patient’s heavy and erratic use of steroids, wanted to try a different kind of allergy therapy. All of these requests went against Dr. B.’s best instincts as a physician—in his view, to grant them would have been bad medicine.

Other cases had less to do with patients care than with corporate culture. Because he argued with Beneficent’s clerks, he got a reputation for rudeness. They lobbied for his firing. In one case, while trying to get treatment approved for a patient’s enlarged prostate, Dr. B. had refused to go into detail with the clerk on the phone; the elderly man was standing next to him, and Dr. B. thought it would embarrass him to hear his symptoms discussed extensively with a stranger when the clerk could just as easily read treatment notes that were already in his file. (A person with a medical background would have known that the symptoms were obvious from the diagnosis.) In another case, Dr. B. referred a patient to a doctor who was not part of the Beneficent network. “Met with office for re-education” was the way a staffer described resolution of that problem.

The complaint that angered Dr. B. most of all had to do with a patient who had ocme to him complaining of exhaustion. He was a single parent who was trying to survive on three hours of sleep a night after his workweek had been increased from forty to sixty hours. He asked Dr. B. for a letter to his employer, requesting a cutback in his work load. Dr. B. obliged. Subsequently, the employer called to verify the letter, but Dr. B. was not comfortable discussing the patient’s condition with his employer and kept his conversation brief. The employer called the insurance company to complain that Dr. B. had been rude on the phone. Dr. B. saw the complaint as punishment for siding with his patient and against his employer, who was, after all, the insurance company’s client. The episode served as one more reminder that to the insurance companies running modern medicine, doctors and patients are less important than clients and costs. As best Dr. B. could tell, he was being fired for practicing medicine the way he’d been taught.

It has been difficult for most physicians to grasp their new, much reduced status in the world of managed care. Insurance companies do what all companies do: run their businesses according to profits and losses, making decisions accordingly. If it is easier for them to hire a certain kind of doctor—one who is cost efficient, to be sure, but also one who is compliant, in agreement with their methods—then that is what they are going to do. And if there comes a time when there are more doctors than necessary on a single plan in a given part of town or too many specialists on a given plan, the company will simply lay some of them off. The company’s only obligation is to provide a doctor, not a particular doctor. Skill is irrelevant. One man who had been chosen by Aetna as doctor of the month in Houston was fired two months later—and reinstated only after the doctor found computer errors in the company’s cost calculations.

Most doctors are too frightened and/or financially burdened to fight back. Paul Farek, a general surgeon in Corpus Christi on a Humana plan, was one who did. On call in the emergency room at Bay Area Medical Center one night in 1994, he admitted a youth who had been in an automobile accident and had been taken to the nearest hospital. It was Farek’s medical judgment that the patient should be kept there for observation, rather than moved immediately to a facility run by Humana, through whom the man was insured. When the patient submitted his bills, Humana refused to pay. “Transfer of this patient to another facility would have been inappropriate and not in the best interest of this patient’s care,” Farek wrote Humana, helping the patient appeal the decision. When the company again refused to pay, Farek recommended to the family that they write a letter reporting the incident to the Texas Department of Insurance. Subsequently, Humana informed him that his contract would be terminated. It was only after Farek talked to the director of the plan that the company backed off.

But the vast resources and power of the insurance companies allow them to win most fights. In Houston, 5 doctors in a group of 37 filed suit against Aetna in 1993 after being dropped from its plan; a similar suit was filed against Prudential. The Texas Medical Association and the Harris County Medical Society joined both suits, the goal of which was to force the insurance companies to institute a fair hearing process and to stop firing doctors without cause. (The appeals process of most companies that claim to provide due process is woefully inadequate.) So far, the plaintiffs have made little progress. Prudential’s attorneys stonewalled to such an extent that those plaintiffs gave up and threw their energies behind the Aetna suit. But that case was thrown out on a jurisdictional technicality—the court passed the buck to the Texas Department of Insurance—and an appeal is pending.

When patients tried to go to bat for their doctors who had been “deselected,” the insurance companies occasionally misled them. Patients of Harold Fields, a Houston family practitioner, who called Aetna asking for the reasons behind his termination were told alternately that he had resigned from the plan or that he had moved out of town, neither of which was true. When the representatives of the Communications Workers of America tried to investigate Prudential’s deselection procedures—which had affected about 2,500 people, including those with pregnancies and serious illnesses—they were initially told that no deselected doctors should have been surprised by their terminations; all had been repeatedly notified that their performance ratings were low. When the CWA produced evidence to the contrary—letters from doctors showing they had never been contacted by the company, letters from doctors who had learned of their firings from their patients—Prudential representatives changed their story. “There wasn’t anything we could identify in any way that was wrong with any way that was wrong with any of the doctors,” says Jeff Bartlett, who then headed the CWA bargaining group.

It seems to be the insurance companies’ belief that a few doctors lost in the shuffle aren’t of much importance, and for their purposes, that’s probably true. “Thirty-seven doctors fired out of two thousand seven hundred isn’t very many,” Joseph Blanford, the Aetna vice president, had said of the mass deselection that led to the physicians’ lawsuit against his company. But thousands of patients were displaced, a fact that seemed to concern Aetna very little. Patients wrote in begging to keep their doctors, with little response—usually a form letter—and to no avail. Aetna isn’t the sole offender, of course. The Texas Medical Association has collected letters of complaint naming almost every insurance company involved in managed care in the state. Asians and Spanish speakers beg to keep the only doctors on plans who speak their languages; elderly couples beg to be saved from long car trips for frequent doctor visits. One of the most poignant letters went to Kaiser Permanente, from a man whose wife would have to give up her job to take him to dialysis. Couldn’t he please be allowed to go to dialysis in Denton, where he lived, rather than in Dallas, forty miles away? But why should the insurance company bother? Indeed, the more difficult care is to acquire, the more the insurance company benefits. If no one goes to the doctor, the company doesn’t have to pay.

If the insurance companies were actually improving—rather than simply changing—the way health care is delivered, maybe the chaos they’ve created could be excused. But many cases resemble that of Peter Benjamin, a highly regarded Pasadena pediatrician dropped from the Aetna plan after eight years—eight years during which Benjamin never heard a word of complaint or praise from Aetna or received a single visit from a company representative. Benjamin’s patients complained to the company and asked for his reinstatement but got nowhere. “They didn’t care at all about the doctor-patient relationship,” says Benjamin. Finally Benjamin learned from Aetna executives that he was being dropped from the plan because he didn’t have enough Aetna patients in his practice: One hundred and fifty families were not enough to make Benjamin worth Aetna’s while. Insurance companies place a premium on corporate loyalty and controlling the largest possible volume of patients. (A primary-care physician may have as many as two-thousand patients.) Of the three Aetna-plan pediatricians in the immediate area, Benjamin guessed that the insurer may have considered his practice the most expensive. Benjamin did lab work in his office instead of sending it out and passed on that cost to his patients. But, he believed, this saved money; having his own lab meant faster results, so he caught illnesses earlier, preventing hospital stays.

Once Benjamin was fired, the other two pediatricians’ practices were thrown into disarray. The physician closest to Benjamin’s office began receiving calls from Benjamin’s former patients, but he was too busy to see them immediately, as Benjamin had. Sometimes they faced a wait of two to three weeks. Naturally, the patients on the Aetna plan complained, so a company representative contacted Benjamin’s colleague and wanted to know who his backup physician was. “Well, it was Dr. Benjamin until you fired him,” he replied. Eventually, Benjamin was reinstated in the plan. “It would appear that a boo-boo was made,” he says. “If a company is in a profit mode, you try to cut costs, and I can commiserate with that. But really and truly, how did they save money by knocking me out and giving my patients to other doctors?”

Since rejoining the plan last April, Benjamin has tried to have a more active relationship with the company. When he received a new progress report, he called to ask a company representative to come out and interpret it for him. It was months before help arrived. Shortly after he filled out his new contract, he received a letter. One question had asked if he had ever been fired from a plan before, and he answered yes, by Aetna. He got a letter back from Aetna asking him to explain the details. The company that had also been so quick to notify Benjamin’s patients of his deselection shrugged its shoulders when he asked it to send out notices of his reinstatement; Benjamin was told the list of his patients’ names had been lost. “This is idiocy,” he says. “It didn’t serve me or my patients well, and it didn’t serve Aetna well.”

Out of Business

By late fall, Dr. B.’s anger had turned to grief. As the date of his firing drew near, he considered suing, but his friends advised him against fighting back. “They want you out,” said a friend who had once worked as a managed-care administrator. Beneficent had overcommitted, she explained. It already had too many doctors on its plan; Dr. B. was another doctor whose patient load didn’t generate enough income for Beneficent, and besides, he didn’t play the game. “Even if they let you back in for a while,” she added, “they’ll find another way to get rid of you later.”

The fight had gone out of him anyway. Beneficent was a large corporation; the pride he took in the small practice he had built over decades was utterly lost on the big company. “I cannot go and beg to see my own patients,” he said at the time. And something else had come up: He had been offered a spot in a group practice that would help him absorb the financial loss of Beneficent’s patients. “The more anonymity I can maintain . . .” he began, his voice trailing off.

There are two things that Texas physicians and insurance companies seem able to agree on. The first is that our state is in its turbulent early adolescence as far as managed care is concerned. The second is that we will all grow old with managed care. The only fight left to fight—for doctors and their patients—is to reform that system. Two upcoming legislative initiatives could help. The first is what is known as an “any willing provider” law, which prevents insurance companies from arbitrarily closing plan memberships to qualified doctors. The Patient Protection Act goes further, calling for an end to “termination without cause” contract clauses and requiring due process appeal procedures for doctors dropped from plans. The adoption of both would reduce the power of insurance companies to dictate health care. Patients can pressure their employers—who, after all, are the power behind the insurance companies—to have a voice in the plans that are selected. The most-optimistic physicians believe that as competition increases insurance companies will be forced to deliver a higher quality product. Doctor-run HMOS, like Scott and White Health Plan in Temple, for instance, are already developing a reputation for high-quality, low-cost care. Competition, insurance companies might learn, is good for everyone.

Sometimes, goes an old adage, things that appear to be 180 degrees apart are actually identical. No one really knows whether managed care, having evolved into the polar opposite of the indemnity system, will prove to be an improvement upon it. No one really knows whether managed care actually saves money or just shifts it from doctors’ pockets to the insurance companies’. As has often been noted, the CEOs of such plans draw multimillion-dollar salaries and bonuses. (Leonard Abramson, the head of U.S. Healthcare, reportedly made about $10 million in salary and stock options in 1993.) Meanwhile, the profits of drug companies continue to soar and the giant for-profit hospital chains continue to expand unchecked, though reform of both could have an enormous effect on the cost of care. So, too, could tort reform, which will be before the state legislature this session.

And what will become of the doctors? Is it socially beneficial that doctors who treat the very ill are being driven out of business? Who benefits when medical innovation is deemed a luxury we can no longer afford? As the institutional memory of older physicians—and older patients—fades from the present system, so will the relevancy of such question. The next generation of patients and professional will know only one norm, and it will be managed care.

Dr. B.’s last patient of the day, a man on the Beneficent plan, was leaving. He had come in with his wife and child, a dark-haired little girl who had darted about the office while her father was being examined. “I counseled them when they got married. I was there within hours after their little girl was born,” Dr. B. said as they left, closing the door behind them. “Now they can’t come anymore.”