Tennessee's public health care system is breaking down at the level it matters most—patients and doctors. Will new MCOs be able to meet the demand?
by Joe Sullivan
Vicki Crofoot got on TennCare as a single parent in the mid-1990s when degenerative arthritis forced her to give up her work of many years as a waitress in Gatlinburg. Then, in the summer of 1998, "a guy jumped on my head in a swimming pool and ruptured two vertebrae in my neck," she recalls.
The plucky 42-year-old Sevierville woman says she's been in constant pain ever since. A narcotic painkiller, Oxycontin, provides some relief but has its own set of side effects including insomnia, constipation and fatigue. Her primary care doctor referred her to a neurosurgeon, but it took until the spring of 1999 to find one who would see her and that was at Meharry School of Medicine in Nashville.
There, Dr. William Bacon recommended diskectomy and fusion surgery. "At first I was thankful that I had finally found someone who said he could do something for me," Crofoot recalls. But then the prospect of numerous trips to and stays in Nashville for the surgery and post-operative follow ups began to weigh on her. "My teen-aged daughter is both learning-disabled and legally blind, and I just couldn't be away from her that much." Moreover, her primary care physician, Dr. Christopher Castle in Seymour, urged her to seek a second opinion before undergoing such radical surgery. More than a year later, she's still looking in vain for a neurosurgeon in the Knoxville area who will examine her.
Crofoot's plight is symptomatic of one of the many maladies that afflict TennCare. Along with a dearth of doctors willing to participate in some of the managed care organizations (MCOs) that administer the program on the state's behalf, TennCare also suffers from an inability to enlist new MCOs with stronger capabilities. Yet in the course of pumping several hundred million dollars of additional state funding into the program in an effort to shore it up, TennCare has become a scapegoat for all that ails the state financially. Questions abound about why 1,350,000 Tennesseans—a quarter of the state's population—are enrolled in what's widely perceived to be a medical welfare program for the indigent. But attempts by the state to restrict eligibility and to raise the premiums charged to higher-income individuals on the rolls have been thwarted by the courts and by the federal Health Care Finance Administration.
Part of Crofoot's misfortune was to be enrolled in one of the feeblest MCOs, Xantus Healthplan. Even as Crofoot was seeking a neurosurgeon, Xantus went into receivership in March 1999, with $90 million in unpaid claims and mass defections from its network of participating doctors.
Under the federal regulations that govern TennCare, the state is required to hold an annual election that permits all of the program's enrollees to select a new MCO. However, the state managed to duck this requirement a year ago on grounds that it would produce a mass exodus of Xantus' 150,000 enrollees plus an additional 350,000 from another deeply troubled MCO, Access Med Plus.
"There simply weren't any other MCOs with the capacity to pick these people up. It would have been a disaster to have re-enrollment at that time, " says Brian Lapps, who was TennCare's director for most of 1999.
On March 22, 2000, Crofoot's primary care physician, Dr. William Castle, appealed to the TennCare Bureau to transfer Crofoot to another MCO. "Vicki Crofoot is in need of urgent care by a neurosurgeon.... There is no neurosurgeon available on her current TennCare MCO (Xantus). It is therefore medically necessary that she be moved to another MCO, preferably PHP," he wrote. PHP is a much stronger MCO run by PHP/Cariten Healthcare. According to its director of sales and marketing, Angie Denton, it has seven neurosurgeons in its TennCare network in Knox County alone. But according to Crofoot, Dr. Castle's appeal to the TennCare Bureau went unheeded.
A TennCare reenrollment period that would allow Crofoot and others like her to escape from their entrapment is now scheduled for next January. But grave doubts remain about whether TennCare will have enough MCOs and doctors to handle the program's 1,350,000 enrollees. The capacity problem has been compounded by the prospective withdrawal from the program of by far the largest MCO, Blue Cross/Blue Shield of Tennessee. Blue Cross, which accounts for nearly half of that entire population, served notice of its intent to withdraw a year ago, citing unacceptable risk of losses. But the state has managed to extend its participation through next June 30 by invoking what's known as an exigency clause in its TennCare contract.
Xantus and Access Med Plus remain enfeebled, and none of the four other remaining MCOs are able or willing to add much to their enrollments, which presently total about 230,000. That leaves more than a million Tennesseans for whom a new TennCare home must be provided if the program is to survive in anything like its present form. So what's the state to do?
Rescue Efforts
In each of the past two fiscal years, the state has increased its TennCare funding by more than $200 million, pushing the total up to nearly $1.7 billion. Because each state dollar is matched nearly two-to-one by Washington, TennCare has become a $5 billion-a-year program, accounting for nearly a third of the entire state budget. The funding increases were intended to make the program viable for struggling MCOs and to stop the exodus of doctors from their networks. All the more important this year has been the need to attract new MCOs capable of picking up the enormous slack.
Effective July 1, MCOs are being paid an average of $173 per month per enrollee to manage care and pay all attendant doctor, hospital, pharmacy and other medical costs. That's up from $116 in fiscal 1999 and adheres to a level that consulting firm Pricewaterhouse Coopers deemed necessary to make the program sound. While the MCOs negotiate the fees paid to their health care providers, the state has been insistent that these be brought up commensurately.
With all of this additional funding in place, the state official responsible for overseeing TennCare, Deputy Commissioner of Finance and Administration John Tighe, exuded optimism. Eight managed care firms responded to a solicitation for new MCOs; but Blue Cross, which is serving out its time now operating on a different footing, was conspicuously missing from the list. In August, Tighe announced the selection of four of these firms, each of which was designated to cover a specific region of the state. The two designated for East Tennessee were Healthcare Solutions, based in Knoxville, and Better Health Plans, based in Monroeville, PA.
At a dinner meeting of the Knoxville area Health Care Professionals Association in September, Tighe voiced "every confidence that [the newly-named MCOs] will build provider networks with sufficient capacity to meet the needs of the region" (i.e. absorb enrollees either dropping out or dropped from others). He laid out a timetable calling for November completion of the network-building process followed by reenrollment balloting in January. And he added pointedly that "Blue Cross' name will not be on the ballot."
When Better Health envoys from Pennsylvania began calling on area doctors and hospitals in September, they described themselves as being on an "exploratory mission" to assess provider receptivity to contracting with the firm. By mid-October, however, Better Health's vice president for marketing and provider relations, Jennifer Adams, reported that "we've gotten a very positive reception, and it's full steam ahead." Contracts were in the process of being mailed, she said, and "Within two or three weeks we'll be bringing in a team of 10 to 12 people" to seek provider sign-ups and also to start hiring local managers. As of Nov. 10, none of the several providers with whom Metro Pulse has been keeping in contact had yet received a contract nor heard anything further from Better Health. Adams, for her part, has stopped returning our phone calls.
Healthcare Solutions is a start-up enterprise whose cadre of seven key operatives all hail from a quasi-MCO, Tennessee Health Partners, that folded in June. THP had been essentially a Blue Cross subcontractor in the Knoxville area but opted to shut down when Blue Cross ceased functioning as a full-fledged MCO.
As of Nov. 10, Healthcare Solutions did not yet have a telephone number obtainable from directory assistance. When reached on his cell phone, CEO Kerry McDonald acknowledges that "there's no doubt we've got a huge challenge facing us." But he claims that "we should be able to put a pretty comprehensive network together. Our strategy is to focus on primary care physicians (PCPs) first and then start working on specialists." Feedback from PCPs has been good, he claims, but he also acknowledges that, "we've got a lot of chicken and egg going on." By that, he meant that PCP groups want to be satisfied that an MCO has signed up a full complement of specialists before signing up themselves.
Disaffected Docs
To hear the doctors and their business managers tell it, the two prospective new MCOs have met with nothing but resistance.
"My sense of the medical community is that they're not going to welcome any new MCOs. There are too many grievances with the way the program has been conducted to take on any more," says Glen Sumner, practice administrator for Southeastern Orthopaedics. His counterpart at Urology Associates of Knoxville, Jim Scothorn, adds that "while reimbursement rates are becoming more palatable, there's a lot of wariness about joining somebody you don't know anything about, especially in light of all the hassle factors we're still encountering with the existing MCOs."
These hassle factors center on difficulties in getting paid, which Scothorn attributes to "dysfunctional systems" and "massive confusion" on the part of everyone involved. While he and others say there's been improvement on the part of PHP and Blue Cross in particular, they claim that TennCare reimbursement remains far more problematic than under commercial health insurance plans or Medicare. "While Medicare rates are well below commercial, Medicare is by far the best in terms of timely payment," Scothorn says.
M.D.s tend to be more outspoken than the M.B.A. types who manage their group practices when it comes to venting their agrievement with TennCare. "The state isn't seeing to it that the MCOs are meeting their responsibilities. I'm sick and tired of sending in claims that get rejected. I don't know of any other business that can say after the fact 'We're not going to pay you for authorized services rendered,'" grouses urologist William Muse. But Dr. Muse's problems run much deeper. "The general concept of extending TennCare to so many people is what bothers me more than anything else," he says. "I don't mind doing my fair share of indigent care at very low rates. But when you increase the people covered to 25 percent of the state's population, the higher that percentage, the more my business loses."
Hospital administrators are generally more circumspect in their posture toward the new MCOs. "We're prepared to evaluate their contracts and capabilities," is the recurrent refrain. But it's usually coupled with the caveat that the hospitals will be guided by the disposition of the doctors who practice there. And Dale Collins, president and CEO of Baptist Health System, wells up in frustration on their behalf when he says, "We're dealing with providers who've been burned and abused by TennCare for six years and are now worn out with the program."
In a recent newsletter, Dr. Mark Gaylord, professor of pediatrics at the UT Medical Center wrote, "Though good reforms have been instituted, I am concerned that the beginning of four new MCOs (with no previous experience in Tennessee) and the possibility of Blue Cross leaving the system by 2001 will lead to similar chaos that engulfed the onset of TennCare."
Blue Crossed
If there's a Hamlet in this unfolding TennCare drama, Blue Cross could fit the part. Seemingly wracked with doubt about its own course of action, Blue Cross is managing to wreak havoc among the other players with potentially tragic consequences.
From TennCare's inception in 1994, Blue Cross has been by far its biggest player, covering nearly half of all enrollees. Moreover, to the extent that MCO financial data can be believed, Blue Cross is the only one that's ever been profitable—and that at state payment levels far lower than at present. Thus, it came as a huge jolt to the state administration when Blue Cross served notice last November of its intent to quit the program. While Blue Cross is no longer acting as a full-fledged MCO, the state has managed to extend its participation until next June 30, but no longer. Instead of assuming the risk of loss that's supposed to be a big part of the incentive for holding down costs, it gets paid a flat 8 percent management fee for performing on what's termed an Administrative Services Only (ASO) basis. That leaves the state itself bearing all the risk.
Yet for a player that's opted out, Blue Cross seems mightily determined to stay in the game. Even though Better Health and Healthcare Solutions have letters from the state declaring them Blue Cross' designated successors in East Tennessee, Blue Cross is far more aggressively and effectively pursuing new contracts with providers here than either of the newcomers. And why?
"We have a contractual obligation to the state to assure network adequacy, and we are particularly concerned about that in the Knoxville area," says Blue Cross spokesman Ron Harr. That concern arises because Tennessee Health Partners, which had been Blue Cross' quasi-MCO subcontractor in the Knoxville area, called it quits on June 30, leaving Blue Cross without provider contracts of its own.
Perhaps inadvertently, Blue Cross' showing of the flag has made it all the more difficult for the newcomers to get their flags planted. "The problems for these new MCOs creating networks is much greater than if Blue Cross weren't still here. Providers are viewing them as a contingency if Blue Cross went away," says Tim Young, CEO of the Summit Medical Group.
Harr acknowledges that Blue Cross would like to continue on an administrative-services-only basis and says it "isn't ruling out forever the possibility of taking some risk again." Its aversion to accepting risk at present, he says, is "because TennCare is no longer an insurance program; it's become a social program that's not subject to the principles of insurance risk management that we know." While he doesn't use the analogy often cited by TennCare critics of letting people get fire insurance after their house has burned, the swelling population of uninsurables who've gotten on the rolls after incurring catastrophic illnesses is clearly part of what he has in mind. Blue Cross also remains fixated on the potential costs of a consent decree under which the state agreed that TennCare enrollees could continue receiving medication, therapy or whatever, while appealing an MCO decision that such treatment is no longer necessary.
For now, though, Harr boasts that Blue Cross is making the state a profit—he won't say how much. And he naturally rejects contentions that an ASO won't be as vigilant in controlling costs as an MCO at risk of loss. "We want people to understand that we can do just as effective a job of managing this program efficiently on our present footing. Our frontline employees don't know whether it's the company or the state at risk," he asserts.
The assertion is roundly denounced by divergent TennCare stakeholders who agree on little else. From advocates for the program's indigent enrollees to the heads of other MCOs, there's concurrence that letting Blue Cross remain on an ASO footing would undermine any semblance of cost control that managed care has brought to the program.
"ASO is tantamount to collapsing the program," contends Gordon Bonnyman, executive director of the Tennessee Justice Center, an advocacy group that's obtained numerous court protections for enrollees. "Everyone whose view I respect says there's no longer any reason to manage the cost and that means loss of the fiscal discipline that managed care provides to cover other people beyond the Medicaid population." (Of TennCare's 1,350,000 enrollees, about 800,000 meet federally-set Medicaid eligibility standards while the rest are otherwise uninsured and uninsurable individuals).
From his vantage point as president and CEO of Covenant Health and its PHP/Cariten subsidiary, Tony Spezia contends that "ASO is fraught with tremendous pitfalls. We had an ASO model in this state before 1994 called Medicaid, and it was totally out of control." Spezia also predicts if Blue Cross is allowed to stay on an ASO basis, that will be the end of any MCOs at risk. "Why should we be at risk when someone else is not at risk? There's no way that's sustainable."
To which the Tennessee Medical Association, as lobbyist for doctors, would say good riddance. "Every layer of management that is included in the program takes out money that should be used for patient care," asserts TMA spokesman Russ Miller. "Right now, 15 to 20 percent of the funding is going to the MCOs, whereas the state could pay a vendor 5 percent to manage claims, and patients would get more rapid care with fewer hassles to providers." (Not to mention more money in their pockets.)
Back to the Future
The man in the eye of all these storms is TennCare's overseer, John Tighe. A former hospital administrator himself, Tighe at least has an understanding of health care's complexities that other top state officials lack. But whether he can steer TennCare towards any sort of safe—let alone sound—harbor is very much in doubt.
The confidence he displayed in September about the ability of new MCOs to take over from Blue Cross and provide a way out for entrapped enrollees now seems to be eroding. His prize catch, United Healthcare, which was supposed to take up the slack in Middle Tennessee has, by all reports, pulled out. And an end-of-October meeting with the two new East Tennessee designees presumably made him aware of the difficulties they are encountering.
In an interview last week, Tighe said, "I have to rely on the process that will go forward for the next six weeks and will hopefully lead to an open enrollment ballot in January. But we're not going to put them on a ballot if they don't have adequate networks... If we get to a place where it's not there, then the state has no other choice but to say we don't have a program. If providers and the public want to go back to Medicaid, that's it."
By going back to Medicaid, Tighe means cutting off the 550,000 TennCare enrollees who are not Medicaid eligible. These include more than 400,000 individuals—half of them children—who are otherwise uninsured plus another 138,000 who are classified as uninsurable because of the severity of their health problems. But it's unclear where the MCO capacity would come from to support even the 800,000 Medicaid eligibles for whom coverage is federally mandated. (And that's before getting to the grave question of what would happen to the 550,000 who'd be stricken from the rolls.)
As Tighe defines it, going back to Medicaid does not mean abandoning managed care and reverting to the fee-for-service basis on which providers were paid for treating these indigents prior to TennCare's advent in 1994. "Most state Medicaid programs have gone to managed care in some form, and if Tennessee moves away from managed care with risk sharing, we'll never be able to go back." While managed care has been vilified nationally for restricting patient treatment options, Tighe cites the recent report of a gubernatorily appointed Commission on the Future of TennCare that concludes:
"Managed care is the most cost-effective approach to the delivery of health care. When properly executed, the MCO concept is fundamentally sound. For the most part, providers' frustrations with TennCare have not been with managed care, but are the consequence of managed care not having had the opportunity to perform optimally due to:
* Inadequately prepared MCOs
* Lack of adequate funding and oversight
* Inadequate information systems
* Inconsistent leadership
* Inadequate policies and rules."
The commission report also concludes that, "TennCare should be a health insurance program of last resort to help those most in need." And it goes on to recommend that enrollees not eligible for Medicaid should be placed on a different footing. For those who have access to employer health insurance plans, the commission recommends channeling them in that direction with premium assistance (i.e. subsidies) from the state to make coverage affordable for those with very low incomes. For enrollees who don't have such access, the commission recommends a state-sponsored insurance plan with more limited benefits than TennCare and premiums on an income-based sliding scale.
But these recommendations could take years to implement given the need for federal approvals, which have been sticky to obtain, in order to retain essential federal matching funds. Moreover, there's likely to be a lot of employer resistance to letting their health insurance plans get entangled with all of the red tape associated with a governmental premium assistance program.
So the burning question becomes what would happen to those 550,000 people in the meantime. Even in the eyes of many of TennCare's critics, abruptly dumping them from the rolls is unthinkable. "There's got to be a transition period," says Sen. Ben Atchley, who has long contended that the program in its present form is going to drive the state bankrupt. Yet wholesale dumping could well drive many of the state's hospitals bankrupt, given the fact that they are required to treat anyone who comes into their emergency rooms, regardless of their ability to pay.
Tighe declines to be drawn into what he terms "hypothetical conjecture" about the state's recourse under dire contingencies. But for all the consternation that Blue Cross' posture has caused at the state capitol, Tighe says, "I'd be a fool not to be talking with Blue Cross, and with Aetna and Cigna also." (Aetna and Cigna, along with United, are the nation's largest health insurance companies, none of which has ever participated in TennCare.)
Meanwhile, time is marching on, and entrapped TennCare enrollees like Vicki Crofoot don't appear to be getting any closer to a solution to their dire medical problems.
November 16, 2000 * Vol. 10, No. 46
© 2000 Metro Pulse
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