When HMOs put Profits Over Patients

By: Theodore J. Leopold

Managed care executives often base decision about medical services on how they affect the company’s finances. You must thoroughly understand the managed care industry to right the wrongs that put patient’s lives on the line.

In today’s health care system, patients suffer not only from their diseases, but also from the management of their diseases. When medicine was a cottage industry, “negligence” meant physician negligence, and physician negligence had an immediate and evident relationship to patient harm. Now patients can experience unprecedented harms through long, and often subtle, casual threads that connect them to corporate decisions.

When corporate decisions put profits over patients, the consequences of increased suffering and death are played out in the lives of real people, families, and communities. For better or worse, every decision in health care, from delivery to payment, results in some physical or emotional impact on an individual or group in society.

Health care as a business

In 1995, the regional vice president of Humana Health Insurance Co. faced a typical management problem: how to turn around an unprofitable sector of his company. Unlike other businesses, in which profits rise in proportion to an increase in products or services, a health insurance company defines success by how much its product – payment for medical claims – can be reduced.

Like any good executive, the VP looked at his company’s different sectors, evaluated performance, and then shifted resources from an area of low profitability to one of higher potential. That these company sectors represented the different types of patients – not widgets on a manufacturing belt – seemed to make little difference. The VP’s solution called for his employees – company nurses – to terminate services to chronically ill children first. This savvy business decision resulted in serious adverse consequences to more than 100 sick children, including a Florida girl named Caitlyn Chipps.

Discovery also established that in August of 1995, Humana Executives, in conjunction with its utilization department, made the unilateral decision to terminate not only Caitlyn but also more than 100 other catastrophically ill or injured children from its MCM program. According to Humana, the other children were similar to Caitlyn in that they were allegedly “static” or had reached “plateaus” in costs and care.

Humana made decisions about Caitlyn’s needs without regard for its contractual representations and obligations or the requirements of her medical condition. Its decisions regarding Caitlyn and hundreds of other patients were based on market strategies designed to reduce costs, increase savings, and increase profitability. Humana’s polices were aimed not at the health of patients, but at the health of the corporation. It rationed medical care without disclosure and on a fiscal basis – an unconscionable ethical violation.

Beyond HMOs

It is important to understand that the concept of managed care is not limited to HMO medicine. “Managed care,” as defined by one health care expert, is a method of organizing health care payment and delivery to alter “the decision-making of physicians and hospitals (and other health care organizations) by interjecting a complex system of financial incentives, penalties, and administrative procedures into the doctor-patient relationship. Within years of the HMO Act’s passage, an entire industry emerged that has “succeeded” to the extent that it avoids sick people and the payment for their medical needs.

Now the managed care industry includes an endless group of health care businesses: HMOs, preferred provider organizations, third-party administrators, utilization review companies, disease management companies, companies that specialize in specific services or conditions such as radiology or mental health, hospitals, other inpatient treatment facilities, and professional organizations of doctors and other practitioners – to name just a few on a rapidly lengthening list. Each of these entities hungers for its own slice of the growing health industry pie, which in turn affects the care of patients in some way that has the potential for harm.

Most aspects of medical practice are affected in one way or another by corporate interest and practices of all entities. From actuarial companies’ designs of sophisticated software for redefining medical diagnoses to cleverly constructed benefit structures designed to drive patients to less costly care, corporate influences or controls can be found all along the continuum of care.

Beyond denial of care

As corporate health care continues to evolve, the term “managed care” no longer describes only the restriction or denial of care. It includes the organizational practices of any health care entity using business strategies to influence or control access to and availability of medical services for economic gain.

In 1907, sociologist Edward Ross observed that “wider interdependencies breed new treacheries, [and] fresh opportunities for illicit gain are continually appearing [and seized upon] by the unscrupulous.”

His words have eerie timeliness for our 21^st-century U.S. health care system. The types and number of health care functions and businesses multiply steadily, creating increasing sophisticated ways for companies to profit from managing medical care. Patients may be harmed by systems that result in too much as well too little care.

During a period of rapid market changes, health care regulation is often too general, too slow, misinformed, or too labor-intensive to induce good corporate behavior or punish misconduct. We cannot rely on professional responsibility and ethics – as we know from recent scandals in corporate America – to consistently produce appropriate decisions and actions.

This often leaves litigation as a first or last resort. Our justice system, with its power to unravel and expose dangerous connections between boardrooms and bedsides, has the potential to encourage more thoughtful, careful systems, as well as to change practices, punish offenders and rectify harms.