Retainer Practices and HMO Patients

by G.J. Warth, MD, FACP
(Virginia)

Most of the time, in the world of PPO insurance and government-based insurance (Medicare and Medicaid), when a patient needs a referral to a specialist or needs a test to be done, the physician just orders the referral, paperwork is done, and the deed is accomplished, except in the ever increasing cases where some things get denied and/or require special authorization by the insurance company through a peer review.

HMOs operate differently in that they control physician and patient behavior by reducing payments to doctors if one of the insurance company's clerks determines that "too many" tests have been ordered by those particular doctors; and they pay more to doctors who don't ever order any tests, or very few.

The difference is even more extreme when direct patient care (retainer-based) doctors try to take care of HMO patients. Amazingly, the doctors and patients in that situation are penalized because the doctors don't charge anything for the office visits! On the other hand, those concierge doctors who charge the retainer fee PLUS bill for their office services are able to get around that.

Direct Pay (strictly retainer-based) medical practices are definitely at a disadvantage compared to those concierge practices that not only charge a retainer fee, but also charge the insurance company for office visits. My group practice of three physicians is strictly retainer-based. We do not bill for any office services that we do for our patients. There is just the flat fee the patient pays with no other out of pocket expenses for them, which in most cases, makes it easier for us, and cheaper for them because they don't have to pay a copay. However, as a result, we are not considered primary care physicians, or "gatekeepers", by HMO insurance companies, and we cannot be signed up in any of their networks primarily because we don't bill for insurance (and therefore cannot be controlled by them).

At first glance this doesn't make sense, because it seems the HMO would have a lot to gain if their patients are seeing a doctor that is not billing the insurance company. Think of all the money they would save. The problem with that for the HMO is that their ability to save money is more related to the fact that they can control the ordering of tests by the network physicians. They do this by withholding a portion of payments for physician services if a particular physician orders "too many tests" that are "medically unnecessary", by a one-size-fits-all standard. So, if the strictly retainer-based physician is not charging for seeing the HMO patients, then the HMO cannot control the physician's ordering practices by withholding payments.

Thus we cannot order referrals to other consultants or even refer for any significant testing for our HMO patients, which is a major problem if they have a symptom that really needs to be evaluated. We have to explain this to patients before we take them into our practice, which discourages us from wanting to take them because our "hands are tied" if we need to do testing or make a referral, and it discourages the patient from joining the practice for the same reason.

So, even though direct patient care physicians are trying to help patients save money by not charging for office visits, HMO insurance companies, in their goal to "reign in" medical expenses, effectively eliminates physician and patient autonomy in making their own guided decisions regarding appropriate patient care. There can be no referrals made or tests done in that setting. This effectively prevents direct care doctors from taking on any HMO patients, and prevents those patients who may wish to join such a practice, not to be able to do so.

And has there been any real savings in the cost of medical care since the advent of HMOs? No one knows, because there are too many variables to consider, but I seriously doubt it. Medical costs have continued to rise during the years after HMOs were implemented. Most of the money is just being shifted from patient care to administrator costs. And yet they continue to go on charging higher premiums, practicing medicine without licenses by preventing or incentivizing against necessary referrals or tests, restricting free trade in medical practice (i.e., inability to see one's chosen doctor), increasing medical liability for doctors and preventing good patient care for no plausible reason.

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This page was last updated on March 3, 2013.