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P E R S P E C T I V E :
P G P S T A F F I N G
W E B E X C L U S I V E
4 February 2004
Physicians And Prepaid Group Practices
The U.S. health care system needs
to pick up some important lessons
from prepaid group practice, which is unlikely to proliferate in the twenty-first
century.
By Stephen C. Schoenbaum
ABSTRACT:
Prepaid group practices (PGPs) are complex organizations that directly combine
prepayment for health care with a comprehensive health care delivery system.
PGPs’ ability to manage their physician staffing efficiently must be placed
in context with the cost and quality of their care. It seems unlikely that PGPs
or their use of staff will proliferate. With increased integration of care through
disease management programs and use of clinical information technology, it should
be possible for the United States as a whole to come closer to achieving the
care delivery goals that PGPs have set in the past.
Prepaid group practices
(PGPs) are complex, tightly managed organizations. They conjoin a health care
delivery system that provides comprehensive clinical services with an insurance/prepayment
mechanism. Today, probably owing to the complexity of PGPs and to public perception
that they offer less choice of physicians, there are only four pure staff-model
and ten pure group-model organizations, serving fewer than 7.6 million enrollees,
compared with forty-two staff-model and fifty-six group-model organizations,
serving more than 11.8 million enrollees, a decade ago.1
An additional thirty-nine staff- or group-model components in “mixed-model”
organizations serve 2.8 million enrollees.2 More
efficient use of physicians is just one characteristic of PGPs (albeit an important
one), which should be put in context with others such as cost and quality of
care.
Cost Issues In PGPs
In the 1980s physicians in PGPs hospitalized patients less frequently than fee-for-service
physicians did, and discharge planners in PGPs were able to achieve shorter
lengths-of-stay for people who were hospitalized. This allowed PGPs to achieve
lower costs, offer a lower price versus indemnity insurance, and grow their
membership. In the 1990s independent practice association (IPA) and network-model
managed care organizations (MCOs) adopted appropriateness protocols and financial
incentives for physicians (such as capitation payments) and narrowed the gap
in hospitalization rates. They also provided discharge planning services, markedly
reducing differences in lengths-of-stay.
Furthermore, empirical evidence suggested that MCOs could, at least in some
markets, achieve ambulatory care costs similar to those of PGPs. This was related
in part to MCOs’ contracting for physician and other services at discounted
prices. But there were other factors, such as the overhead of nonphysician staffing.
PGPs employ not only physicians and other clinicians, but also large numbers
of managers. Also, full-time-equivalent (FTE) PGP physicians saw about 20 percent
fewer patients than fee-for-service physicians in group practices. To address
this, many PGPs had to introduce a productivity-related component of compensation.
Overall, most PGPs, despite having fewer FTE physicians, did not sustain a cost
advantage compared with the rest of health care in the United States.
Quality Issues In PGPs
Several national leaders in the field of quality improvement, including Don
Berwick, Ed Wagner, and Gail Warden, have worked in PGPs and have applied their
knowledge to other care settings. PGPs were pioneers in developing performance
measures (such as the Health Plan Employer Data and Information Set, or HEDIS)
and adopting clinical information systems—tools that many consider essential
for providing optimal care.3 The PGPs that Jonathan
Weiner studied are believed to provide excellent care. In the past, however,
PGP performance, as documented in formal studies, has not consistently been
better than that achieved in fee-for-service practice.4
Perhaps the most disturbing findings about care in PGPs come from the work of
Dana Safran and her colleagues.5 From patient survey
data, they have shown that PGPs consistently perform more poorly than IPA/network-model
health maintenance organization (HMOs) and indemnity plans on such measures
as visit-based continuity of care, integration of care, and clinical interactions
such as physical examinations and communication. Patients in PGPs report lower
levels of trust than those in indemnity plans do.
PGPs have had to struggle with “lack of ownership”—the tendency
of physicians to behave as employees, which they are, rather than owners of
their practices. This can contribute to long waiting times for appointments
and lack of continuity in care: Physicians in PGPs often think that because
large coverage groups and urgent care services ensure that someone is around
to see each patient when care is needed, it isn’t critical that each personally
attend to his or her own patients most of the time. In a PGP, the probability
of a patient’s seeing his or her own primary care physician of record for
a primary care visit may be as low as 40–50 percent (based on my own experience).
PGP Staffing
Many physician-staffing methods are available to PGPs, including direct employment,
hiring part time versus full time, and contracting on a basis such as time spent
or patients seen versus paying fee-for-service. In a marketplace in which PGP
staffing has accounted for a relatively small percentage of the overall physician
and physician-substitute workforce, PGPs have usually had the advantage of being
able to staff with the most efficient and effective mechanism for their population.
They can substitute nonphysicians for physicians, and they can substitute telephone
encounters with a primary care or specialty physician for face-to-face interactions
without concern about whether the services are going to be reimbursed by insurers.6
Lessons And Speculations
PGPs do provide an alternative, highly managed model of care delivery that works
best in densely populated areas. It is likely that the PGPs Weiner studied have
survived in their marketplaces because of a combination of excellent performance
and adaptation to the environment; that is, they represent “survival of
the fittest.” Ideally, one would demonstrate with comprehensive new studies
that these surviving, successful PGPs are providing as good or better care at
the same or lower cost with lower use of highly trained physicians. If so, it
would also be important to determine the factors most clearly related to performance—
for example, using nonphysicians creatively, being very large group practices,
having access to capital, or having a tight bond between a health care delivery
system and prepayment.
In the absence of such data, I have the following speculations: (1) To achieve
the staffing patterns and ratios that Weiner describes outside PGPs would require
a shift from solo practice and small groups of physicians to large multispecialty
groups and a concomitant change in the payment model.7
This is not likely to occur. In short, PGPs are not likely to proliferate in
the twenty-first century. (2) It should be possible to emulate PGPs’ standardization
of care by creating and implementing clinical guidelines and national standards
of performance.8 With the development of a national
health information infrastructure, it should become increasingly possible to
provide clinical management tools to physicians in small practices, to enable
them to have and transfer the information they need to perform to standard.9
(3) Clinical information systems should also connect patients, physicians, other
suppliers of care services, and insurers and facilitate effective management
of preventive, acute, chronic, and terminal care. (4) The surviving PGPs have
great organizational and financial strengths. In the twentieth century they
provided leadership in reducing unnecessary use of hospital services and improving
quality of care. In the twenty-first century they, and other health care organizations
with global budgets such as the Veterans Health Administration, are likely to
keep striving for excellence and efficiency and provide a challenge for the
rest of the U.S. health care system.
The views presented here are those of the author and should not be attributed
to the Commonwealth Fund, its directors, or its officers.
NOTES
1. Richard Hamer, InterStudy, personal communication, 8 December
2003
2. Ibid.
3. The development of HEDIS is described in S.C. Schoenbaum,
“What’s Ahead in Quality: The Managed Care Perspective,” Physician
Executive 19, no. 6 (1993): 40–42. Early adoption of an electronic
medical record system is described in S.C. Schoenbaum and G.O. Barnett, “Automated
Ambulatory Medical Records Systems: An Orphan Technology,” International
Journal of Technology Assessment in Health Care 8, no. 4 (1992): 598–609.
4. There are three key reviews of managed care versus fee-for-service
performance in the literature: R.H. Miller and H.S. Luft, “Managed Care
Plan Performance since 1980: A Literature Analysis,” Journal of the
American Medical Association 271, no. 19 (1994): 1512–1519; R.H. Miller
and H.S. Luft, “Does Managed Care Lead to Better or Worse Quality of Care?”
Health Affairs (Sep/Oct 1997): 7–25; and R.H. Miller and H.S. Luft,
“HMO Plan Performance Update: An Analysis of the Literature, 1997–2001,”
Health Affairs (July/Aug 2002): 63–86. Not all of the studies summarized
in these reviews clearly distinguish PGP performance from that of other forms
of managed care.
5. D.G. Safran et al., “Primary Care Quality in the Medicare
Program: Comparing the Performance of Medicare Health Maintenance Organizations
and Traditional Fee-for-Service Medicare,” Archives of Internal Medicine
162, no. 7 (2002: 757–765; and D.G. Safran et al., “Organizational
and Financial Characteristics of Health Plans: Are They Related to Primary Care
Performance?” Archives of Internal Medicine 160, no. 1 (2000): 69–76.
6. These methods are discussed in detail, with examples, in
S.C. Schoenbaum “Employment of Physicians at Harvard Community Health Plan,”
in From Physician Shortage to Patient Shortage: The Uncertain Future of Medical
Practice, ed. E. Ginzberg (Boulder and London: Westview Press, 1986), 95–117.
Available at www.cmwf.org/programs/quality/schoenbaum_employmentphysician5.pdf.
7. More than two-thirds of U.S. physicians practice in groups
of fewer than ten.
8. S.C. Schoenbaum, A.-M. Audet, and K. Davis, “Obtaining
Greater Value from Health Care: The Roles of the U.S. Government,” Health
Affairs (Sep/Oct 2003): 183–190.
9. D.E. Detmer, “Building the National Health Information
Infrastructure for Personal Health, Health Care Services, Public Health, and
Research,” BMC Medical Informatics and Decision Making 3, no. 1
(2003), www.biomedcentral.com/1472-6947/3/1
(9 January 2003).
Stephen Schoenbaum (scs{at}cmwf.org) is senior
vice president of the Commonwealth Fund in New York City.
Please click on the author's
names to read related papers by Jonathan
Weiner, Francis
Crosson, W.
Bruce Fye, David
C. Goodman,
Fitzhugh Mullan, and Edward
Salsberg and Gaetano Forte.
DOI: 10.1377/hlthaff.W4.76
©2004 Project HOPE–The People-to-People Health Foundation, Inc.
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