Playing The HMO Game

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Ultimately, the real power rests with the employers, and there are signs that at least a few are paying more attention to the quality of the health care they are subsidizing. The Pacific Business Group on Health, an association of 35 companies that collectively buys $3 billion in health insurance each year, has begun paying for studies comparing health outcomes among various managed-care plans with respect to asthma care and bypass surgery. "It's shameful that people not in the [health care] business have to initiate these studies," says Patricia Powers, the group's executive director. "But we don't see the health-care industry taking on these kinds of projects."

The good news is that focusing on quality pays off, as heart surgeons at the Dartmouth-Hitchcock Medical Center in Lebanon, N.H., have demonstrated. They started by surveying all their colleagues in the surrounding area and following up with their patients. Then they developed procedural standards that cut mortality from cardiac operations 24% from 1991 to 1996. Moreover, they cut costs 20% and boosted both patient and doctor satisfaction. A home run by anyone's measure.

Even some managed-care companies have begun to see the light. After Harvard Pilgrim Health Care in Boston initiated a quality-control program for pediatric asthma, hospital admissions for critical asthma episodes plummeted more than 80%. The health plan teamed nurses and doctors to show kids how to use a device that measures lung capacity and lets patients regulate their own dosage. Properly informed and prepared, the children and their parents were able to head off life-threatening asthma crises that would otherwise have required hospitalization.

Even with improved quality control, there will still be times when financial considerations prevail. Kaiser's decision on Viagra is a case in point. From the moment the impotence pill was approved, Kaiser's top executives knew they had a high-visibility issue on their hands. They turned it over to a committee of 40 doctors, nurses, pharmacists and other experts, who took the position that Viagra is not, strictly speaking, a medical necessity. Then the committee calculated the cost of providing Viagra to Kaiser's members at $100 million a year, significantly dwarfing, for example, the HMO's $59 million budget for all its antiviral medications, including HIV drugs. Rather than increase premiums to cover the added costs, Kaiser decided to let its members pay for the potency pill out of their own pocket.

Whether Kaiser's policy will stand is another question. Last week officials from California's department of corporations, which licenses the state's HMOs, announced that they are investigating Kaiser's decision on Viagra. At issue: a state law that requires health plans to cover all treatments that are medically necessary. Believe it or not, there are situations in which Viagra could qualify as a medical necessity. For example, many men refuse medical treatments, such as prostate surgery, for fear they might be rendered impotent. Viagra could allow them to proceed with a life-saving operation without diminishing their quality of life.