Family physicians rightly argue that managed care as we know it is more about cutting costs than about managing care. While the debate over the euphemism rages on, one California multispecialty practice has achieved success by managing its managed care organizations.

Prairie Medical Group, which operates seven practice sites in Southern California, has taken back ownership of its patients by assuming a significant amount of financial risk, instituting disease state management programs and setting up a performance-based compensation system. Prairie was one of the earliest groups to work under capitation, and today, 34,000 of their patients are capitated.

The group's family physician champion and chief financial officer is Len Fromer, MD, who joined Prairie 20 years ago after the completion of his residency. Because Fromer, who sees patients several days a week, is involved both as a clinician and a leader, his perspective has helped to create a progressive, patient-centered, profitable practice.

Taking on risk

Fromer and his colleagues set out early to devise a philosophy for their group's relationship with managed care organizations. “Think about risk the way you would if you invest money,” says Fromer, who also is a member of Prairie's board of directors. “You know the stock market adage: ‘If you want more rewards, you take more risks.’ They go hand in hand. Risk is not always a four-letter word. It can be good, and you'll be rewarded, if you do it right. That's the big caveat.”

For Prairie, doing it right means securing all the risk possible in order to gain control of the quality of care that patients receive. “The more risk we take on, the more control of patient care we keep. That's the reward. We decide when a patient needs what they need — so that we can control, maintain and assure quality of care,” Fromer says. “It's not up to a plan to decide.”

Many physicians have experienced managed care's encroachment on their clinical decisions. And nowhere has this drive been more evident than in California, where 43 percent of the health care plans use capitation to compensate some of their participating primary care groups, according to 1998 statistics from the California Association of Health Plans.

Fromer admits that the concept of risk-sharing isn't always easy to buy into, especially when dealing with everyday administrative burdens and headaches, but he looks to the ultimate goal — control of patient care. “We never wanted to put ourselves in a position where we took capitated risk for only primary care,” he says. “If we didn't take capitated risk for other specialty or secondary care, we could end up in a position where a patient would need a service but the health plan could deny the care.”

The physicians at Prairie have never signed a contract that does not give them control of the care their patients receive. This means acquiring financial risk for primary care, secondary care and ancillary services. About half of the group's capitated patients are enrolled in global risk programs — that is, contracts that include risk for hospital care, skilled nursing facility care, home health care, outpatient durable medical equipment and hospice care.

Three requirements must be met for risk-sharing to succeed, says Fromer. First, the organization must be integrated enough to provide effective quality care. Second, the area must be supported by a large enough population base. Third, the referral specialists must be willing to work within capitated contracts or be amenable to cost-effective fee-for-service contracts.

Fromer recognizes that not every practice can assume such comprehensive risk; the realities of their marketplace may not allow it, or the practice may not be up to managing the risk. A practice that can control only the delivery of primary care, for instance, can't afford to take risk for other services — and a practice that cannot provide care cost-effectively can't afford to take any risk. In assuming so much risk, Prairie does end up managing risk for care it does not deliver directly. For example, Prairie does not provide bone marrow transplant services, but Prairie assumes risk for this highly specialized care by allowing patients who need transplants to receive care through Prairie's network-affiliated transplant specialists at the nearby City of Hope Medical Center.

Developing disease state management

Assuming risk would be courting disaster without Prairie's efforts to lower costs while ensuring quality care. Prairie looked to the 80-20 rule to help them determine where to focus their efforts. “How you approach the 20 percent that's generating 80 percent of the costs is to think about those patients as chronic and try to keep them from becoming more acutely ill — what I call keeping them healthy at their chronic states,” says Fromer. “This is what disease state management is all about.”

Fromer's group initiated a disease state management program that concentrates on three prevalent chronic diseases — asthma, diabetes and hypercholesterolemia — and on the management of anticoagulant therapy. They developed a five-person disease state management team to work proactively with each patient. Two members of the team — a pharmacist and a health educator — are assigned to all of Prairie's sites, but, because the team is patient-specific, the remainder of the team varies at each site. The other three team members are the patient's physician, a medical assistant and a physician assistant. Programs for patients with congestive heart failure and patients with hypertension will be added within the next year.

As an example of how the program works, patients with asthma who experienced at least two hospital admissions, two emergency room visits or both are enrolled in Prairie's asthma-prevention program, which began two years ago. The team teaches patients how to use inhalers and peak flow meters, how to adjust their medications in various situations and how to recognize the need for immediate intervention by a physician. Fromer says their approach is “prevention, prevention, prevention,” and one of the group's mantras, “A patient who's hospitalized is considered a treatment failure,” exemplifies their efforts to keep patients healthy.

After the program's first year, Prairie examined patient satisfaction, hospital bed days, emergency visits and a number of other factors for patients with asthma. Hospital bed days dropped 40 percent. Emergency and urgent care visits went down 35 percent. The results of their average daily peak flow rates rose 25 percent. Morbid days — days when patients reported missing school or work —declined by 30 percent to 40 percent. And in the most recent 12-month period, these patients experienced no hospital bed days.

“This approach brings tremendously better outcomes,” says Fromer. “They felt much better, more active, more satisfied with their care and more in control of their illnesses. And happier patients reduce costs substantially. Across the board, their bills were reduced a whopping 72 percent. This data is astounding, and the savings pay for the disease state management program over and over again.”

While he acknowledges that it took a great deal of work from a number of physicians and staff to develop the program, he says the effort proves teamwork can bring immeasurable satisfaction, and family physicians can realize their role as team leaders. “Let me tell you how beautiful it is to be a family doctor, to see a patient with asthma, do patient education and turn them loose on the rest of the team — to work with people who have more time to do what's necessary for the patient,” he says. “How can a physician seeing 25 patients a day, complete with phone calls, massive paperwork and hassle factors from insurance companies, have time, especially when the team can do better for the patient?

“Well-intentioned, smart physicians cannot do this as well by themselves. Physicians have to come to realize that. Sure, we have the skills, but we don't have the time, so we're not the best people in the system to perform these tasks.”

Rewarding quality

Three years ago, Prairie took another big step in response to changes in the marketplace when it instituted a physician-driven, peer-review system that links compensation to performance. “We needed to reward quality, and we needed to reward it at every level,” Fromer says. “We wanted the compensation structure to encourage our doctors to do as much as they are capable of doing — to make it rewarding to our patients and financially beneficial to the group and the physicians.”

The peer-review system has four basic criteria: quality outcomes, patient satisfaction, citizenship and work output. Physicians' scores and their performance relative to other Prairie physicians in their specialty determine physician bonuses. Twenty-five percent of each physician's yearly compensation package is potentially discretionary. “We expect that virtually 90 percent of everyone will get 25 percent. It's not a stick. It's a carrot,” Fromer says.

Quality outcomes scores are based on monthly chart reviews completed by a peer-review committee. They use an audit tool that helps them determine what a physician has done to fulfill the HEDIS (Health Plan Employer Data and Information Set) performance measures that are tracked for National Committee for Quality Assurance accreditation. They measure rates of immunizations, Pap smears and mammograms, to name a few, for each physician's panel of patients. They also track quality indicators for patients with chronic diseases — foot exams and eye exams for patients with diabetes, for instance. In determining outcomes scores, patient non-compliance is factored out: If a recommendation was documented, the physician is not penalized for the patient's failure to follow through.

Since the chart reviews have been in place, physician performance scores have improved. What's even more pleasing to Fromer is that the physicians are performing at equally high levels.

Patient satisfaction scores measure the physician's ability to meet patient expectations. As part of measuring patient satisfaction, one program rates satisfaction regarding access, visit length and communication skills. This program centers on an automated phone system into which Prairie has incorporated AAFP's Vital Signs Patient Satisfaction Surveys.¹ The day after a patient sees a physician, the automated system calls the patient with several patient satisfaction questions. Using a touch-tone phone, the patient can respond on a scale of 1 (very dissatisfied) to 5 (very satisfied).

Just knowing that they would be scored on patient satisfaction increased the physicians' efforts to elevate patient satisfaction. In fact, patient satisfaction began to rise when physicians were first made aware of the effort just before it was put into place. Two years later, the group's patient satisfaction scores have improved 40 percent, according to Prairie's health plans.

An added bonus is that Prairie can differentiate itself in the highly competitive Los Angeles County market, where, Fromer says, 85 percent of patients are capitated. “It's impossible to differentiate ourselves on price, but we can build on patient satisfaction,” he says.

Citizenship scores rate the physician's behavior in a number of areas, including cooperation with the team, meeting attendance and participation, cooperation with call schedules and volunteer efforts within the community. For example, Fromer speaks on memory loss to local elderly groups. He admits that citizenship is the most subjective part of the evaluation system, but Prairie believes it's necessary not just to the smooth functioning of the group but to marketing it. “We want to encourage our physicians to participate in the practice and our community,” Fromer says.

Work output scores reflect the physicians' ability to provide needed services to their assigned panels of patients, including the continuity and comprehensiveness of the care they provide. “In a capitated environment, we're not only focusing on how many people you see in a given day; we're trying to motivate people to see their own patients,” says Fromer.

Physicians are first scored in all four areas at their six-month employment anniversary. Those who pass are audited again six months later and, if they pass once more, are audited every two years thereafter. Those who fail the initial audit are audited three months later. If they fail again, they work with the physician medical director on a plan of action in preparation for another audit three months later. If they fail once more, they meet with the board of directors to discuss their situation and to initiate solutions for remediation. Only one physician has had to go before the board of directors, and Prairie is working with the physician to correct the problem.

Initially, physicians were somewhat leery of this change to the system, but Fromer says physicians have now bought into the program. “It's not bad that physicians worried about the system,” he says. “We want them to pay attention because we want to motivate behaviors that bring quality and cost-effective care.”

Doing it right

Prairie family physician, Mark Chin, MD, thinks Prairie's overall strategy is successful. “We're trying to look at outcomes, we have quality control and we've brought in disease state management,” he says. “I think Prairie has been very progressive, and we're working on pushing onward from this.”

The entire group has benefited from Prairie's ability to take on more capitated risk, institute a disease state management program and implement a physician-based, peer-review system. For every dollar put into the program, Fromer estimates the group saves $5.

“We are capitated and at risk for the patient's cost of care for the totality of services — professional, ancillary and institutional,” he says. “By doing this, we see better patient outcomes, we have more satisfied patients, physicians and staff, and we save money. What's wrong with this picture? Nothing. Everybody should be doing it. It's a no-brain-er. If you do it right, your patients and your group can win big.”