EXTREME RISK—THE NEW CORPORATE PROPOSITION FOR PHYSICIANS
Our own contracts with one health maintenance organization (HMO) state: "Physician shall agree not to take any action or make any communication which undermines or could undermine the confidence of enrollees, potential enrollees, their employers, their unions, or the public in U.S. Healthcare or the quality of U.S. Healthcare coverage," and "Physician shall keep the Proprietary Information [payment rates, utilization-review procedures, etc] and this Agreement strictly confidential."
This 2.4 million-member plan spends only 74.4% of its revenues on medical care; $1 million a day goes to profits, adding to its $1.2-billion cash reserve. Its chief executive officer pocketed $20 million in a single year and holds $534 million in company stock.
One secret to this success is a payment formula that binds primary care physicians' interests to the firm's. The base capitation payment barely covers the office overhead. An internist with 1500 of the plan's patients might take home more than $150,000 from bonuses and incentives, or nearly nothing. Although some of the bonuses and penalties target quality, most reward limiting care and boosting the HMO's image and enrollment. For instance, for each dollar of emergency care, the plan penalizes the doctor up to fifty cents.
The new risk-sharing arrangements are not simply the inverse of fee-for-service. Instead, they are the inverse of fee-splitting. Just as fee-splitting allows doctors paid on a fee-for-service basis to profit from referring patients, so doctors under the new arrangements can profit from not referring patients.
