Truth in Advertising: Physicians Question Insurers' Marketing Tactics

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Medical Economics -- April 2001  

By Walt Borges
Associate Editor

The leaders of the Austin physicians' group Preferred Independent Physicians of America (PIPA) aren't sure how the group's contract negotiations with PacifiCare of Texas went off track last year, but they are disturbed by the timing of the collapse of a deal they thought was in the bag.

It's not just that PIPA's negotiations with PacifiCare ended up in a frustrating "he said, she said" factual dispute over who agreed to what. PIPA President Al Lindsey, MD, and Executive Director Laura Kabay say they think the 450-physician group, which includes 70 primary care physicians, was dangled as bait to entice major Austin employers and their employees to sign up for PacifiCare health plans.

They say PIPA, working under a temporary letter of agreement while a permanent contract was negotiated, willingly cooperated with PacifiCare to recruit employers, including the giant Texas Employee Retirement System (ERS), which provides health care benefits for state workers and their families. Dr. Lindsey and Ms. Kabay also say they made unsuccessful overtures to St. David's Medical Center on PacifiCare's behalf to get the Austin hospital to sign a contract with the company.

"The marketing that was done by PacifiCare in Austin was much less than that done by their competitors in the market. That's because our doctors were doing their marketing for free," Ms. Kabay said.

"What have we learned? No. 1, don't sign interim agreements, and No. 2, insurance companies will say anything to get us to help them sell their products," she said.

What chafes the PIPA officials is that the negotiations collapsed as the summer enrollment period for some major health plans drew to an end, raising suspicions that PIPA's usefulness to PacifiCare terminated with the employee sign-up period. PacifiCare rejected what PIPA says was an agreed-upon capitation rate just eight days before the end of the enrollment period. PIPA responded by giving notice that the group was terminating its interim letter of agreement.

What irritates PacifiCare managers, who dispute PIPA's version of the events, is PIPA's refusal to compromise during 16 months of negotiations and its 11th-hour demand for what they call unreasonable changes to the contract's financial terms.

"Believe me, this was not a fun thing to do," said Phillip W. Solomon, executive director of PacifiCare of Texas. "It took us a whole lot of heartache and a lot of soul-searching before we just said, 'You know, guys, we have some major problems here.' A good question that may be asked is [whether] this is a matter of a marketing ploy or a matter of some people over there not negotiating contracts in good faith."

PIPA's perception that it was used as a marketing tool might be easy to dismiss, were it not for the fact that the experience resonates with familiarity among other doctors and physician group administrators.

"This is such a common problem that it's unreal," said one Central Texas practice administrator for a small-city physician group.

The administrator, who asked that he and his group not be identified, says health plans commonly represent to employers that the most popular physicians and groups will be serving their employees even when the groups and physicians have not firmly committed to contract with the plan.

"The plans do it to show that there are a lot of physicians in their network," the administrator said. "This is important for the plans because by listing our doctors, it shows that there is local access to the insurer's health care network."

Rich Johnson, director of Texas Medical Association's Division of Medical Economics, says TMA is monitoring situations such as PIPA's and has at times conducted dispute resolution meetings to help physician groups resolve differences with insurers.

Others also concerned  

Physicians aren't the only ones who are uneasy when looking at the listings in printed health plan directories and on health plan Web sites.

On Feb. 7, Richard D. Minker, owner of a commercial real estate firm in Fort Worth, wrote the president of Blue Cross Blue Shield of Texas (BCBS Texas) to complain about misleading physician listings. In the letter to Rogers Coleman, MD, Mr. Minker explained that he and his wife joined BCBS Texas' PPO Select Advantage in March 2000 because of the benefit coverage and the physician network, which included their primary care physicians and Ms. Minker's obstetrician-gynecologist.

In February 2001, none of the Minkers' doctors remained in the BCBS physician network, yet all were listed in its Northeast Texas Physician Referral Directory.

"According to our physicians, Blue Cross provides either slow pay, no pay, or under pay for services provided," Mr. Minker wrote. "Switching health care providers is not as simple as switching out a set of tires on a car. I feel your publication of your physician referral system is 'fraud in the inducement.' Changing health care providers is costly from both a time and effort standpoint and not without risks, with ever-increasing underwriting standards."

Mr. Minker said he was asking Texas Insurance Commissioner José Montemayor to investigate and correct BCBS Texas' practices relating to the physician listings.

In a Feb. 15 letter in response to Mr. Minker, Darren Rodgers, BCBS Texas vice president and chief operating officer of geographic business units, explained that the company is required to publish its network directories once a year and that the most up-to-date information on network physicians can be found in the insurer's online physician directory at .

BCBS Texas said the three physicians mentioned by Mr. Minker terminated their contracts in the summer and fall of 2000 and were not listed in the October 2000 directory. Moreover, BCBS Texas says the incident Mr. Minker refers to does represent the state of the insurer's physician network, which actually grew last year by nearly 3,000 physicians.

Mr. Minker responded to the BCBS letter on Feb. 20. In it, he said what the company didn't say in its letter to him "is more indicative of the problem than what it does say. While you attempt to address my accusation of 'fraud in the inducement," you don't even begin to attempt to address the issue of why physicians are pulling out of the Blue Cross Blue Shield network."

He asked the company to send him a list of physicians who have dropped out of its network and a list of those who have joined since the 1999 directory was published. "That would help me understand if my feelings about the problems that may exist between Blue Cross Blue Shield and its physician network are real or imagined."

He also suggested that BCBS print a monthly update of additions or deletions to its directory because not all of its subscribers use a computer and have Internet access.

In a follow-up discussion with Texas Medicine , Mr. Minker said he has since learned that the anesthesiology group that he and his family have used in the past is no longer accepting BCBS patients even though it is listed in the October 2000 directory. Mr. Minker, however, did not know at what point the anesthesiology group had dropped out of the BCBC provider system.

"TDI has seen few complaints that HMOs or insurers have intentionally listed physicians with whom they don't have contracts in their provider directories," said Commissioner Montemayor. "Our rules require HMOs to update their directories quarterly. We would investigate thoroughly if complaints led us to suspect that an HMO or insurer was deliberately deceiving the public by padding its list of network physicians. Physicians and others who believe this is happening can report it to our HMO Division or, in the case of insurance companies, to our Consumer Protection Division."

TDI has acted on at least one incident that it found violated state insurance law. In October 1994, then-Insurance Commissioner J. Robert Hunter ordered Sanus Health Plan Inc. of Houston to pay the state $100,000 and obligated the insurer to take corrective action for providing state employees with advertising that listed nonparticipating doctors as part of the Sanus physician network. Sanus consented to the order without admitting a violation of the state law.

The insurer was required to place ads in an Austin newspaper before the closing of the state employee enrollment period informing state workers that two physician groups Sanus had mistakenly claimed were in its network were in fact not available to them if they chose a Sanus plan. State employees who selected Sanus plans could petition ERS to allow a change of health plans, designate another primary care physician from the Sanus network, or continue with the original out-of-network physician choice, with the physician paid the usual and customary charges instead of the discounted in-network rates.

A difference of opinion  

Leslie Kjellstrand, director for communications for ERS, says the state agency has not complained to health insurers about outdated physician lists because it understands the difficulties of maintaining such current lists.

"We are very clear with participants that the providers contract with the plans and that provider lists can change frequently," Ms. Kjellstrand said. "We urge [state employees] to look on the Internet to check whether doctors participate in a plan. It's a fact of life that providers there at one point in time won't be there a year or a few months later."

James Sarver, insurance program design manager for The University of Texas (UT) at Austin, believes that physician listings -- inflated with the names of doctors who have terminated contracts or who are in negotiations -- can be used to bolster a plan's attractiveness to employers.

"Does it happen frequently? No. Does it happen? Yes," said Mr. Sarver, who previously held a similar position with ERS.

"It's disconcerting for an employee to sign up because a particular doctor is listed, then discover that the physician is no longer part of the plan," he said. At UT, which contracts for administrative or network services from the health plans, complaints about physician listings are referred directly to the individual plans, he says.

Mr. Sarver says UT is trying to curb employee confusion by urging the plans it deals with to notify members in writing when a physician group or network terminates its contract.

Deception in three acts?  

Norman H. Chenven, MD, executive vice president of the Austin Regional Clinic, agrees with Mr. Sarver that physician listings can be misleading, whether by inadvertence, incompetence, or intentional misdirection.

Dr. Chenven says the misleading nature of physician networks associated and contracted with health plans arises from three scenarios.

In the first, a new health plan will come to a city or town where it has no established network of contracted physicians.

"There's a double sell going on," Dr. Chenven explained. "New plans are coming in and they are simultaneously selling the doctors on the plan and the employers and members on the plan."

That situation creates an opening -- or maybe a necessity -- for health plans to promise the participation of doctors who haven't yet signed contracts.

"I'm amazed at how the health plans represent to employers that they are in the final stages of negotiations," Dr. Chenven said. "They will say, 'We are 100 percent sure we have [this group] on board.' Sometimes it's an honest representation, but it generally happens in a setting of plausible deniability."

The second scenario involves a plan's failure to maintain and update directories of physicians and other health care professionals. Dr. Chenven chalks that up to incompetence.

Printed directories will always be a problem, he points out. "With printed directories, there is a big lead time for the occasional printings of the directory, and there is at least three months lead time because of the notice that physicians must give before withdrawing from the plan," he said.

Online physician directories are another matter. Insurers should update the listings promptly each month to reflect new additions and withdrawals, Dr. Chenven says. A week or two is too much lag time for listing updates, he says, particularly when physicians or groups have given notice of a contract termination months or weeks before.

"If I tell a plan I'm leaving in six months, then once notice has been given, there ought to be a termination date with the online directory listing," he said.

Dr. Chenven's third scenario occurs when a physician group is negotiating with a plan to renew its contract and an enrollment period is approaching.

"Health plans sometimes leave the [group's physicians] in its list, and there's dual maliciousness in that," Dr. Chenven said. "Not only is [the plan] not informing the members that some physicians will not be part of the plan, but [the plan] is hoping for a large patient sign-up that will pressure physicians to re-sign with the plan."

Dr. Chenven points out that large employers who notice the misleading listings have more options than do employers with a small workforce. "Some of the larger employers can effectively register their displeasure to the plans," Dr. Chenven noted, "but all that smaller employers can do is yell at the plan salesperson."

Signing up the stragglers  

Mr. Solomon of PacifiCare says that manipulating physician lists and negotiations makes no sense for health plans.

"You have to turn around and tell people that these physicians are not part of the plan," he said. "You have extreme member dissatisfaction and you get a black eye from having to notify your membership. You lose credibility in the marketplace. And if we have a large provider disruption, we are subject to review by TDI."

Mr. Solomon says the PIPA situation was extremely frustrating for both sides, but he points to PacifiCare's success in signing PIPA physicians to individual contracts as evidence that PIPA acted unreasonably.

"If there is extreme dissatisfaction with [PacifiCare], and that organization [PIPA] does indeed believe that, then why in the world is an extremely high percentage of [its] physicians willing to continue with us in the direct contracting mode?" Mr. Solomon asked.

Paul Handel, MD, chair of the TMA Council on Socioeconomics, offers one explanation: "In this case, local physicians knew that PacifiCare would have a substantial presence in the marketplace, especially if large employers chose that plan's products. If the physicians are to continue serving their patients, they have little choice."

"Did PacifiCare use local physicians for marketing purposes before backing away from the negotiating table to pick them off individually? It would certainly appear so," Dr. Handel said.

Mr. Solomon estimates that 90 percent of the PIPA physicians signed individual contracts with PacifiCare. "We had to scramble to get the doctors signed up," he said. "We sent out a lot of agreements, and we're still getting them back."

Dr. Lindsey, the PIPA president, suggests another reason. He says he signed an individual contract with PacifiCare, but not because he likes PacifiCare or the contract terms.

"I personally told my patients to join the plan, and a testimonial from a physician is the No. 1 reason a patient switches plans," Dr. Lindsey said. "So I'm still a PacifiCare provider because I didn't want to abandon my patients."

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