When to ‘Walk Away’ from a Managed Care Contract

ARLINGTON, Va--When Arizona Oncology Associates (AOA), a 25-member group, "walked away" from a "bad" contract with a major local managed care organization (MCO), the practice prospered and the "majority of the patients we were caring for found ways to stay with us," Robert J. Brooks, MD, a medical oncologist in the group, said at the 24th Annual National Meeting of the Association of Community Cancer Centers (ACCC).

Practicing in the "managed care Mecca" of Tucson where more than 70% of the population is covered by managed care plans, Dr. Brooks noted that "the new environment hasn’t helped us manage our patients any better."

When HPPN Health Partners, an MCO with whom Arizona Oncology Associates had a contract, suddenly changed to capitation, the practice found the relationship "untenable," Dr. Brooks explained.

HPPN based its new reimbursement system on the percentage of premiums that each specialty had historically represented, a system that emphasizes the number of encounters and procedures rather than cost effectiveness. "The more efficient you were, the smaller the capitation payment would be," he said.

Realizing that this contract accounted for 14% of AOA’s patient volume, but only 5% of the practice’s revenue and 3% of physician compensation, the group requested a carve-out for cancer, which the company refused. Arizona Oncology Associates then decided it must leave HPPN, and in March, 1996, it sent letters to 1,002 patients explaining the move and the reasons for it.

Most Patients Managed to Stay

The group lost 91 patients immediately, but most of the rest tried to stay on, whether by changing plans or asking their employers to change plans. The decision had "no financial impact" on the practice, Dr. Brooks said. Indeed, as members of other specialties have begun to follow their example, the number of referrals to AOA has increased.

Recently AOA signed a capitated contract with another MCO when this "long-established group found itself without any oncology coverage." This group approached AOA with a capitation proposal, but had no data on what it was actually spending on cancer care.

Eventually, after a long negotiation, AOA and the managed care company arrived at a satisfactory agreement that excludes from capitation some drugs, inpatient ancillary services, transplantations, hospital costs, routine general care, home care, and certain other services.

Why do physicians find it hard to "say no" to managed care contracts? Dr. Brooks asked. The reasons, he said, include the difficulty of knowing the exact costs of each contract, the fear of losing market share, the physician’s reluctance to break ties with established patients, the hope that things will improve, and lack of confidence that physicians can influence payers’ decisions.

But he urged his colleagues to refuse unfavorable contracts because declining reimbursements hurt patients’ access to care and quality of care. In addition, physicians must remain patients’ advocates, and MCOs are "testing the waters" to see how low they can go.

Dr. Brooks sees loss of professional autonomy, interference with clinical decision-making, increasing financial risk, conflicting incentives, and the decline of clinical trials as major issues facing oncologists under managed care. In addition, he added, many find themselves "working harder for less."

But Dr. Brooks urged physicians not to give in to these pressures and, if necessary, to refuse or leave untenable managed care contracts because, among other important reasons, "our patients are a lot smarter and more supportive than we may think!"