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Palo Alto Online

Publication Date: Wednesday, March 05, 2003

The doctor is out The doctor is out (March 05, 2003)

Local physicians shun HMOs for new -- or some would say old -- ways to practice

by Jocelyn Dong

In the 1990s, California was heralded as a leader in the charge into managed healthcare. Today, California physicians are sounding a retreat.

Or so concludes Dr. Kevin Grumbach, a UCSF professor and director of the Center for California Health Workforce Studies. In December, he and a team of researchers polled California doctors that found that only 58 percent of them physicians interviewed would take a new patient who carried private HMO insurance, even though more than 90 percent were accepting new patients.

The study also revealed that 77 percent of primary-care doctors who worked in an office setting (that is, private practice) took patients with HMO insurance in 2001. And between 1996 and 2001, the percentage of those same doctors who participated in an IPA or Independent Practice Association (a mechanism for private-practice physicians to contract with HMOs) dropped from 73 percent to 62 percent.

In survey after survey, physicians cite the HMO climate, with its reimbursement rates and regulations, as compromising the care they are able to give their patients. They complain about having to see more patients for shorter amounts of time, getting their procedures authorized by non-medically trained insurance clerks, feeling bogged down by paperwork, and receiving such low reimbursements from insurance companies that doctors can lose money seeing patients.

In Santa Clara County, in fact, there are physicians subsidizing their practices by taking out second mortgages on their homes to keep their businesses afloat, according to Bill Parrish, CEO of the Santa Clara County Medical Association.

In Palo Alto and neighboring cities, another significant factor is leading physicians to leap from managed care to independent practices: patients' affluence. Plainly put, patients themselves have expressed interest in alternatives to the managed-care system, saying they are seeking better care or simply better access to care. Whatever it is they want, they are willing to open their wallets to get it.

The financial incentive is a powerful one to physicians, with the valley being one of the most expensive places to live and do business in the country.

Today, a prospective patient can call up doctors who've dropped insurance contracts and charge cash for their services, enabling them to spend more time with each patient, unfettered by HMO quotas. (In many cases, patients then work directly with their insurers to get reimbursed.) Or they can see doctors who've set up "boutique" practices, where patients pay the physician an annual fee for the privilege of being one of hundreds of patients under the doctor's care -- instead of thousands -- and for services that include house calls.

Are physicians acting out of desperation or merely seizing newfound opportunities? It depends on which doctor you ask, but Grumbach of UCSF says physicians are feeling a new sense of empowerment.

"Doctors have griped about HMOs since they first came on the scene," he said. "What has changed is that they're feeling emboldened" to leave the system. Doctors once thought that being part of an HMO was a financial necessity, the best way to attract and keep patients. But today, the alternatives are tempting them to leave, he said.

Even recent changes in the way HMOs operate -- easing the restrictions that doctors complained about -- haven't been enough to keep physicians in HMOs, he said.

Industry observers give the HMO exodus mixed reviews. Physicians who are opting out believe it is a positive strike for quality care and maintaining healthy patient-doctor relationships. Physicians' advocates see it as a natural -- and for the most part harmless -- result of a market economy, since different medical practices can address the needs of people in the whole economic spectrum. And there might even be a benefit, one advocate suggested: More options for practicing medicine may lure more students into becoming doctors, thus increasing the pool of healthcare providers.

Then, too, given doctors' financial straits, some healthcare professionals view opting out as the lesser of two evils: work on their own terms, or leave the profession.

On the other hand, consumer advocates bristle at what they call the widening gap between the haves and have-nots. They warn that as more healthcare professionals limit their patient loads to those who can afford their services, fewer doctors will be left to treat the majority of people who are less well-off.

For those who hold fast to the ideal that doctors are trained to treat everyone equally, the very idea of selecting patients is offensive.

"It's the unraveling of medicine as a service, as a public good," Grumbach said. "It's become just one more commodity."

Ironically, both sides argue that the move is about economics. Physicians who open their own non-insurance-based practices contend the HMOs' over-emphasis on financial efficiencies has turned medicine from a quality-driven profession into a volume-driven business. In order to run a practice that is financially viable and professionally satisfying, they argue, opting out is a respectable alternative.

Critics of the physician movement see it as yet another example of the callous disregard of the wealthy for those on lower economic rungs. And they view the future -- one with income-based levels of care -- as a dangerous and none-too-ethical mix of wealth and healthcare.

No one interviewed for this story believed that opting out was a way to solve the healthcare system's many problems. Rather they recognized new forms of practice as a solution that works for some doctors and some patients, especially those with the financial means. Furthermore, they agreed the phenomenon is clearly a symptom of how broken the healthcare system has become.
Breaking free

When Dr. Soa Yee Tsung worked in a managed-care system, she had a technique for signaling the end of appointments with her patients.

"I used to stand with one foot partially by the door," she said. "I knew I was running so late that I would be more than 20 minutes late for the next patient, and I'd be standing there trying to edge out the door as the patient would be saying, 'One more thing....'"

Eventually, of course, Tsung would see her next patient, but not without feeling that, perhaps, the prior patient had more health concerns than they'd covered in the visit. The hurried pace of seeing anywhere from 16 to 25 patients a day is one reason Tsung and fellow internist Jaya Virmani decided to leave their former workplace and open their own practice in Menlo Park in December 2002.

These days, Tsung said, "I've never been standing by the door. The patient gets up at the same time I do."

Virmani agreed. "Time is no longer a rare commodity for us."

The physicians, both 34, had grown up with the idea that doctors would care for their patients by giving them the time and attention necessary. After doing residencies at Stanford Medical Center, the two worked for the Palo Alto Medical Foundation -- Tsung for six years and Virmani for four. They say it was a good place to start their careers, since the organization handled the business aspects of medical practice and because of the availability of specialists within the same complex.

But neither lost sight of the dream to one day care for patients in a small practice. So they researched their options, boned up on how to start their own business, and within six months struck out on their own.

The timing seemed right. The sluggish economy helped them secure office space at probably a quarter of what it would have cost a few years ago, Virmani estimated. And both doctors were free of large financial burdens.

The pair do not take insurance; instead, they charge patients per visit, usually at a higher rate than an HMO would remit for the service but comparable to what other HMO-free doctors in the area charge.

To help patients get reimbursed by their insurance companies, the doctors give patients a complete, standardized form they can mail in themselves. Depending on the kind of insurance the person has, patients may recoup between 30 to 90 percent of the cost. The doctors do accept Medicare and handle the paperwork for those patients.

"It's definitely a financial risk to come out like this," Tsung said. But, she contended, "It's increasingly the main way to go, not to accept insurance, especially for this area."

It was not a foregone conclusion that they would go without insurance contracts. It became apparent in the planning stages, however, after Virmani said she called nearly every insurance plan regarding their reimbursement rates and never could get a straight answer. Some even refused to discuss reimbursements until Virmani signed a contract with them.

That kind of hassle, she said, was not for her or Tsung.

"We wanted to not be focused on insurances at our office. We wanted to be focused on patient care," Virmani said.

In their new practice, they expect to have about half the number of patients as many HMO doctors do -- about 1200 patients maximum, or 10-12 a day. They have designed their daily schedules so there is time to conduct about four or five hour-long annual physicals, plus allow other patients 20-40 minute appointments and see those seeking same-day care.

"Soa and I wanted to focus on more of an old-fashioned doctor-patient type of relationship, the way it used to be -- a more personal relationship," Virmani said.

While Tsung and Virmani are among the latest to leap into independent practice, Dr. Julie Wissink has not accepted private insurance for a year and a half. She and her partners at Medical Associates on Welch Road originally contracted with insurance agencies, but soon found the system untenable.

"The time pressures were too great to make it financially for our office," Wissink said, noting they could see patients for no longer than 15 minutes each. Not only that, but one full-time staff person was needed just to deal with HMO paperwork -- billing, collection, approvals and more. When they dropped insurance, they also cut that staff position, trimming their operating expenses.

Wissink had only been practicing two years before she started feeling burned out. Now she sees about a third fewer patients and said it's been professionally satisfying.

"The benefit is that by spending more time with people, I don't feel like I'm potentially missing things. I can go through everything. I can evaluate as thoroughly as needed. Before, that wasn't happening. I was doing it the best I could," she said. Today she has time to address both the urgent as well as the preventative-care needs of her patients.

Along with Tsung and Virmani, Wissink counts visits to her hospitalized patients as one of the things she enjoys, now that she's HMO-free. At the hospital, she's able to talk with specialists so they are aware of her patient's medical history. If she remained in a private insurance contract, she couldn't afford the time to track hospitalized patients -- or the loss of money, she said.

Virmani enthuses over her hospital visits: "Being able to see my patients -- I can't say enough about it. I feel it gives them such as service, and for me, it's also my relationship with my patient. I don't necessarily want someone else taking care of my patient. I want to be doing it myself."

The patients also seem to appreciate the attention, Tsung said. She recalled how an elderly woman recently reacted with relief when she saw Tsung: "She was like, 'Oh, it's my doctor coming to see me.' She just wanted to grab my hand and say, 'Oh, it's you.'"

While Tsung and Virmani are still accepting new patients, they say business is going well. They're receiving a number of referrals from patients and other doctors. In spite of the higher out-of-pocket cost, Tsung and Virmani said people acknowledge the value in the type of service they offer. When the two announced their intention to start their own practice, some of their clinic patients quickly called to reserve a spot. The patients said they didn't want the practice filling up without them.
Healthcare or 'wealth care'?

With the passion of an evangelist, Dr. Kathy Hallsten throws back her head, pumps her fists into the air and declares, "I love it!"

"It" is boutique medicine, a small-scale but hotly debated type of medical practice where primary-care doctors charge patients a monthly retainer fee in exchange for care. The going rate for a retainer -- about $3,000 a year. For that amount, the patient becomes one of only a few hundred under the doctor's care and is given 24-hour-a-day access. The doctor's cell phone number, pager, and e-mail address are all part of the package.

To Hallsten, the practice represents freedom: Freedom to care for patients as she sees fit, unencumbered by HMO paperwork, questions, time constraints and regulations.

If a practice that doesn't take insurance is championed for harkening back to the ways of Marcus Welby, boutique medicine is Marcus Welby on steroids. As Hallsten practices it, the rigid office-visit model is out; personalized care is in. The annual physicals she gives have been known to last four hours. She's also no stranger to making house calls -- either at the patient's home or hers -- and is even available during her leisure time, recounting the time a patient approached her at a Stanford basketball game and she diagnosed his rash on the spot, calling in the prescription on her cell phone.

She says she's served patients while in Italy, London and Molokai, Hawaii.

"The line between my life and my work is not very well-defined," admitted Hallsten, who has worked as an internist for 14 years, two-and-a-half of those as a boutique doctor.

Only a handful of physicians offer the service in the Palo Alto area. Hallsten currently shares a Welch Road office with Dr. Michael Jacobs, who joined the boutique practice in December 2002 after years at the Stanford Medical Center. In April, the two plan to move to an office on Burgess Drive in Menlo Park, where they will practice with Dr. Scott Wood -- the first doctor to practice boutique medicine locally, reportedly at the request of some of his patients -- and Dr. Sadick Alsadir.

Like other doctors who opted out, Jacobs reached the end of his professional rope before considering a change. Had it not been for boutique medicine, he might have taken an early retirement.

"More and more at the end of the day, huffing and puffing in my race to the finish line, I'd leave (the office) feeling less in control of my practice," he said. So Jacobs took a 16-month break, entertained an offer from Hallsten to join forces, and then returned to medicine three months ago.

"Now I'm happy to be back. I have regained what I came into the profession for," Jacobs said. "It's fun again."

His days now, he said, are "decompressed." Instead of working 7 a.m. to 7 p.m., he clocks in from about 9 a.m. to 5:30 p.m. In addition to having more time with patients, he's able to take care of behind-the-scenes work that used to suffer in the crunch: reviewing charts, touching base with other physicians who are treating his patients, and consulting with the latest medical literature.

Jacobs is also able to speak directly to patients when they phone in, rather than delegating the work to his nurses. Before, he said, he would get 20-30 calls a day, speaking to two or three of them. Now, he has the chance to field questions himself and sometimes avoid unnecessary visits.

But the greatest value of boutique medicine, Jacobs said, is the chance to develop trusting relationships between the physician and patients. Under the time pressure of managed care, he said, communication can break down, trust can be lost and patients' compliance with doctors' recommendations goes down. Although he acknowledges there haven't been studies showing empirically a link between boutique medicine and better patient health, he said it is intuitive that patient satisfaction leads there.

Boutique medicine is not for everyone. Tsung and Virmani considered opening that type of practice, but decided the limited number of patients would not be enough to keep their professional skills well-honed. Other doctors are averse to restricting their practice on the basis of patient income.

But Jacobs dismisses the connotation that how he practices is anything other than doing what's right. "We don't call it 'boutique' medicine," he said. "We call it good medicine."

Likewise, Hallsten puts off notions of her practice as a luxury for the "worried (and wealthy) well." Since last summer, she's diagnosed five patients with breast cancer and treated many people with significant medical conditions, she said.

Both doctors and medical groups continue to explore the option. The Palo Alto Medical Foundation has considered starting a boutique-like service for months, in part due to patient demand. Surprisingly, in spite of the potential financial boon to physicians, apparently few have jumped at the chance to enter into the practice. If the clinic does start such a service, CEO Dr. David Druker said a group of three physicians would likely be involved.

Druker, too, disagrees with the idea that boutique medicine takes resources away from the clinic's general population. "One of the reasons I even considered doing this is exactly the opposite. We're a not-for-profit 501(c )3 community organization, and in my view we're here to take care of the whole community -- all sides of the spectrum," he said. "We plan to use funds (from the service) to support the whole spectrum of medical care. It's not going to take away, it's going to add."

Druker considers the clinic's loss of revenue when treating Medicare and MediCal patients as a prime reason for trying new programs that could bring in additional funds.

In the end, debate over the ethics of stratifying healthcare will only continue. But Hallsten, points out that -- when viewed through a historical lens -- what is happening in medicine now is at the very least, a positive sign of a dynamic profession.

Quoting John Gardener, former secretary of Health, Education, and Welfare for President Lyndon B. Johnson, she said: "Every generation has its challenges brought about by the solutions of the generation before them. That's what this is. Managed care came about because of skyrocketing healthcare costs, and then the problems with managed care became bigger than the solutions it offered. Now we're coming up with other solutions."

On the other hand, many policy analysts and medical professionals believe the healthcare system's ills will not be cured by the actions of individual doctors. Some, like UCSF's Grumbach, are calling for a collaborative solution: a national healthcare system.

"It's a fundamental question of value -- is medicine a commodity or a public good?" he asked rhetorically. "Until Americans decide, it'll just be more of the same. Everything else is just tinkering."

Jocelyn Dong can be e-mailed at


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