Survey Shows HMOs Returning to Old Cost Control Methods

HMOs are bringing back some tried-and-true but highly unpopular methods to stem crushing medical costs, a nationwide survey of executives and officials released on Wednesday found.

Employers turned to health maintenance organizations in the early 1990s to get a handle on rapidly rising health care costs. HMOs used unpopular methods like restricting choices of doctors and limiting hospital stays, and had some success in curbing medical cost growth.

But a backlash by patients, doctors and hospitals led to an easing in most restrictions. HMOs gave way to preferred provider organizations (search), or PPOs, with greater access to doctors and fewer restrictions on care.

Now, with health care costs rising at least twice the rate of inflation, HMOs are again tightening controls on patient care, according to 260 interviews with HMO and hospital executives, employers and regulators in 12 nationally-representative communities published in the journal Health Affairs (search).

"They are trying to target high cost services and those where they see a spike in use," said Glen Mays, a health policy professor at the University of Arkansas, and study author.

Sluggish economic growth is also putting pressure on HMOs to step up cost containment efforts, the survey found.

Interviews took place during 2002 and 2003 in cities including Boston; Cleveland, Ohio; Miami; Indianapolis; Seattle and Syracuse, N.Y.

Some of the biggest health plans in the U.S., including Aetna Inc. (AET) and UnitedHealth Group Inc.(UNH), are among those reinstating restrictions, the authors said.

For example, a New Jersey Aetna plan in 2000 had eliminated so-called prior authorization — an administrative hurdle doctors must go through to get a hospital test or procedure approved by an HMO.

The Aetna plan brought the method back in many cases in 2002 — in response to a sharp spike in use of expensive services.

Extreme examples like giving new mothers a day or less in the hospital to recover garnered headlines, feeding unpopularity of the old approach in the 1990s.

HMOs are taking more cautionary approach this time, the study found.

For example, not returning is the so-called doctor-as- gatekeeper approach, where a patient must go through a primary care physician to get access to a specialist.

Techniques coming back include tighter reviews on hospital lengths-of-stays and cutting off payment once a patient has hit a certain threshold of use, such as a third MRI, or magnetic resonance imaging, scan.

It is too early to tell whether these changes are really taking a bite out of costs, the authors said. Systematic changes including government controls on costs are more likely to contain costs over the long haul.

"The solutions need to move beyond individual employer solutions to be more effective," Mays said.