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Key Strategy by HMOs to Limit Drug Costs Failing
Doctors ignore penalties for exceeding drug budgets
Sept. 15,2005 - With rising concern over the cost
of the new Medicare prescription drug benefit program – going into
effect January, 2006 and estimated to cost $593 billion over the next
decade – a new UCSF study reveals that a key cost-cutting strategy
employed by HMOs for 15 years is simply not working.
Health insurance companies have increasingly sought
to limit the amount of expensive drugs doctors prescribe to patients in
order to keep drug costs form spiraling, according to the study authors.
A major strategy has been to restrain drug costs by assuring that a
medical group will make money if member doctors prescribe within the
drug budget set by the insurance company, and will lose money if member
doctors over-prescribe.
The underlying assumption is that placing doctors
at financial risk for their drug prescribing practices will lead them to
adopt new practices to control drug costs, the authors explain. These
practices include hiring pharmacists for expert advice, using "physician
profiling" to compare doctors' prescribing patterns, and adhering to
professional protocols that specify what each drug should be prescribed
for, at what dose and for how long.
The new study shows that providing financial
incentives for doctors to rein in their prescription practices has not
led to cost-cutting innovations.
The study is being published in the August issue of
the Journal of Health Policy, Politics and the Law, available
mid-September. It is based on a survey of executives in more than three
dozen physician groups and HMOs in four large U.S. cities.
The survey found widespread dissatisfaction with
the HMO strategy of making doctors financially liable for prescription
drug costs above a certain limit. It also found doctors were often
confused or unaware of the incentives, either because of unclear
contracts with HMOs or failure of HMOs to share drug cost information
with doctors appropriately. In addition, frequent changes in the
contract made it hard for physicians to know if an investment in
innovation made under today's deal would still pay off under tomorrow's,
the survey shows.
"The problem lies in the contract terms and
information-sharing between the HMO and doctors. Fix that, and you'll go
a long way to controlling drug costs," says study co-author R. Adams
Dudley, MD, UCSF associate professor of medicine and health policy.
HMOs negotiated their own prices for drugs with the
manufacturers via pharmacy benefit managers but typically failed to
disclose that information to physicians, the survey revealed.
"Profitably managing something as complex as
prescription drug risk requires accurate, timely information, but most
of the surveyed physician groups couldn't even calculate their total
drug costs," says Jonathan D. Agnew, PhD, a study co-author and senior
policy consultant at the British Columbia Medical Association.
Even when HMOs were willing to share price
information, the study found that the data usually got to the doctors
too late for them to determine if they were over or under budget.
"On the one hand, doctors get too much information
from working with so many HMOs, each with its own array of prescription
drug benefits and policies. On the other hand, the information they do
get from the HMO is often incomplete or not timely enough to help them
make good management decisions," says Helene Levens Lipton, PhD,
professor of health policy and pharmacy at UCSF and lead author of the
study.
The survey also found that HMO contracts with
physician groups focused far more on efforts to contain costs than to
maintain or improve the quality of care, Dudley said.
The researchers propose three major changes:
Contracts between physician groups and HMOs should
be clearer and more accurate, and information about changing drug-cost
incentives should be provided to physicians in a more timely way.
Doctors should not be held liable for the costs of
doing the "right thing": If giving a prescription is the right thing to
do, the costs should not be included in a budget target. Rather, the
expenditure targets should be limited to situations in which medication
use is more discretionary, such as whether or not a patient needs to
continue on anti-ulcer drugs after an ulcer has healed.
When HMOs evaluate a group's performance, the
assessment should be fair. For example, in the late 1990s, doctors
should not have been penalized for rising prescription costs related to
the introduction of new drug therapies they could not have budgeted for,
such as the first drug therapies for attention deficit disorder.
As another example of a drug-risk contract
considered unfair by physician groups, the authors report that one
physician group was penalized for not controlling its costs as well as
another group in the HMO's network, even though the other group was in a
different health care market.
Under the new Medicare drug benefit, reimbursement
for HMOs depends, in part, on their establishing sound drug use
management programs to contain drug costs, the authors point out.
"As HMOs establish and modify these programs, we
hope the data presented here can help them avoid some of the major
pitfalls we found in several large cities across the country," says
study co-author Marilyn Stebbins, PharmD, UCSF professor of clinical
pharmacy. "And doctors can learn to request fairer contracts and better
information sharing."
About the study:
Angela Kuo, MS, a former research associate with
Lipton, was also a co-author on the paper.
The study was supported by the Robert Wood Johnson
Foundation's Changes in Health Care Financing and Organization
initiative.
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