Houston physicians form own insurance company

No gatekeeper, no preauthorization for care

Frustrated with the loss of control over patient care caused by managed care, Houston-area physicians formed Physicians Inc., a physician-owned integrated health care delivery system with its own insurance company.

"Our primary purpose was to provide the community with a solid alternative to the cookie-cutter approach to medical care and insurance plans," says Paul Handel, MD, outgoing president of the Harris County Medical Association and a founder and stockholder in Physicians Inc., the umbrella company for the health insurance firm and its network of physicians, hospitals, and ancillary service providers.

When insured patients need health care, all the decisions for their care are made by the physician and the patient. There is no gatekeeper, no requirement for referral authorization or preauthorization of care, and no retroactive denial of coverage.

The physician-owned insurance company doesn’t have a medical director. Instead, more than 150 volunteer physicians serve on the medical management team, reviewing admissions, diagnostic studies, and treatment plans to make sure each patient gets the best possible treatment.

Components of the company, which is owned by more than 1,400 physician investors, are Med ical Community Insurance Company (MCIC), which offers Physicians Health Plan, a fully insured group health plan to businesses; and Gulf Coast Independent Practice Association, a network of more than 4,500 physicians, most of whom are in independent practice or small groups. MCIC started marketing and insuring people on Jan. 1, 1998.

With a year of experience under its belt, the company is growing steadily, with more 3,000 insured lives and a network of 4,500 physicians, 70 or more hospitals, and more than 375 pharmacy locations, as well as other ancillary services. The company’s long-term goal is to cover 15% to 20% of the Houston market.

"With a new company, it takes time to establish credibility. We spent a good deal of time in the first year getting ourselves known," says Michael Manley, president and chief executive officer.

Houston physicians have been eager to sign up with MCIC because of the company’s philosophy of putting decisions for care back into the hands of the doctor, Manley says.

"MCIC is set up so that we do not second-guess the doctor. We feel the patient and the doctor together can make appropriate decisions as far as care is concerned," Handel adds. The staff and shareholders of the company say it is in the best interest of the patients, the physicians, and the company’s bottom line to pay for the care the physicians feel the patients need, he says.

"Medical literature is replete with studies that show the appropriate intervention at an appropriate time is the least expensive method of treatment. You can’t make money by withholding treatment," Handel says.

Physicians’ reimbursement is based on the Medicare Resource-Based Relative Value Scale. The reimbursement schedule puts Houston physicians toward the low end of reimbursement for PPOs, but HMOs in the area typically reimburse physicians at lower rates, Manley says.

"We believe our reimbursement schedule is equitable. I don’t think that physicians are going to get wealthy, but they will be able to maintain their practices, and that is critical," Handel says.

He points out that physicians may suffer heavy losses if they accept some managed care contracts that put them in a position of treating patients at a rate lower than their costs. "We are trying to tell our doctors that they have to examine their contracts all the time and study the reimbursement rates. If they aren’t adequate, they should reject the contract. You can’t make up for low reimbursement with a high volume of patients. You’re just losing more money on more patients."

As of the first of the year, the plan has had about 30 admissions with an average length of stay of 2.5 days. A volunteer medical management team made up of physicians who practice at each hospital reviews all admissions. If the panel finds a physician hasn’t delivered appropriate treatment, the doctor and hospital still are paid, but the physician is counseled on how to render more appropriate treatment, Handel says.

The second time it happens, the doctor is warned in writing. If it happens a third time, the records of the three incidents are sent to an independent review organization. If it finds the treatment was inappropriate, the physician is out of the network, Handel says.

The physicians on the medical management team have developed best-practice treatments for some common chronic conditions such as hypertension, asthma, and diabetes. The guidelines, which are distributed to network members and available on the firm’s Web site, offer a summary of the latest in medical breakthroughs.