The Confession of a Managed Care Medical Director

As heard by a Congressional Subcommittee, May 30, 1996*

Blame Congress for HMOs and Health Plan Power

My name is Linda Peeno, and although the witness list does not reflect this, I am a physician. I am a former medical director and medical reviewer. I did the job that was referred to repeatedly in the first panel as a physician manager for three health care organizations. I currently, though, primarily work in medical and health care ethics.

I am here primarily today to make a public confession. In the spring of 1987, as a physician, I denied a man a necessary operation that would have saved his life and thus caused his death.

No person and no group has held me accountable for this because, in fact, what I did was I saved the company a half a million dollars for this.

And furthermore, this particular act secured my reputation as a good medical director, and it ensured my advancement in the health care industry&emdash;in little more than a year, I went from making a few hundred dollars per week to an annual six-figure income.

In all my work, I had one primary duty and that was to use my medical expertise for the financial benefit of the organization for which I worked and according to the managed care industry... [In the managed care industry] it is not an ethical issue to sacrifice a human being for a savings, no matter how that savings occurs. And I was repeatedly told that I was not denying care. I was simply denying payment.

I am not an ethicist whose primary background has come from the books. For me, the ethical issues were born in the trenches and pit of the pain that I have come to realize that I cause. And if I am an expert here today, it is because I know how managed care maims and kills patients.

So I am here to tell you about the dirty work of managed care and this is the kind of straight talk that I wish Ms. Ignagni [President and CEO of the American Association of Health Plans] could hear now.

Now, let me explain to you the ways that I was a good medical director. I was regularly consulted by marketing on ways to change expensive benefits or change the language to give me loopholes to make denials when requests came.

For example in one plan, we were able to structure our investigational language exclusion so that I was often able to use it to deny almost anything that was expensive, and particularly out-of-network requests.

I turned preexisting exclusions into a game as I tried to connect almost any prior medical complaint or visit as a reason to deny payment.

There are many more thing that I could tell you about, but, ultimately I was only as good&emdash;and I put that in quotation marks&emdash;as the doctors in my network, for it was their numbers that I needed to prove that I was doing my job.

That meant that I did whatever it took to control them: intimidation, hassling, humiliation, I have done it all. I have used inadequate and inaccurate data to create reports to get doctors to make their numbers better, in other words, decrease their usage.

I have used "economic credentialling" to select the best inexpensive physicians and rarely correlated these with quality factors.

I have helped design contract provisions to ensure our payment and monitoring schemes got the results we wanted at the plan, and I have threatened deselection to numerous physicians who were especially difficult or costly.

However, there is one last activity that I think deserves a special place in this list. This is what I call the "smart bomb" of cost containment and that is medical necessity denials.

Let me take you to the heart of managed care.

Even if a plan denies using all the other things that I could list, it is impossible for them to deny their use of this practice because it is vital to managed care; that is making medical decisions about access, availability, and use.

And even when medical criteria is used, it is rarely developed in nay kind of standard traditional clinical processes. It is rarely standardized across the field. The criteria is rarely available for prior review by physicians or the members of the plan. So, even if a a plan has a clear benefit package and has all the perks, like free eye exams or free screening tests for cancer, other marketing ploys, the member's physician will never be the final authority on what his or her patient will get.

This might go unnoticed for simple needs, like a regular office visit or a bout of the flu, but I can tell you that when something unexpected or expensive happens, it is like a bucolic pasture turned battlefield. The land mines will start exploding everywhere.

And somewhere in every coverage booklet for every managed care plan is a claim that establishes the plan as the final authority for medical necessity. What that means is that there is some physician at some plan doing what I did.

That person rarely is continuing a clinical practice. They are sitting behind a desk making decisions about a patient they will never see or touch, completely removed from the consequence of their decisions. They are getting paid by someone to make decisions for the benefit of the plan and not for the benefit of the members.

I would like to conclude by saying, what kind of system have we created when a physician can receive a lucrative income for adding to the suffering of patients? I became a physician to care for, not bring harm to my patients, and I am haunted by the thousands of pieces of paper on which I have written that deadly word, "denial." Thank you.

In her prepared written testimony which was long and detailed, Dr. Peeno concluded with the following statement:

I contend that managed care, as it has become, can exist only through serious ethical transgressions against individuals and society. Furthermore, I contend that a health plan's resistance to ethical correctives is proportionate to its reliance on ethical transgressions for its "success." Disclosure and exposure would present serious disadvantages in competition for cost-cutting and profit making. In summary, it is a fair assessment to claim that managed care's "success" depends upon the following:
  • Use of non-medical agendas to drive medical policies and practice;
  • Collapsing of the rights of individuals for purported greater collectivist goals;
  • Supersession of the care of the individual by the care of the collective;
  • Creation of ill relations between professional ambitions and the absence of moral inhibitions;
  • Reliance upon righteous ideologies about reform and societal benefits coupled with cost-cutting policies;
  • Disparagement of the "weaker" (i.e. costly) groups within society;
  • Linkage of economic imperatives and professional self-interest;
  • Direction of medical professionals by parameters set by health care and financial administrators;
  • Establishment of quotas and internal processes for control with little regard for the physical and psychological cost of their effects;
  • Selection of professionals who are ideological converts and "good" practitioners of its goals;
  • Enticement of physicians as agents of an organization, such that organizational goals are supplied with medical validation;
  • Facilitation of unethical professional practice by financial rewards and bonuses, as well as job security and advancement;
  • Generation of moral void by use of propaganda;
  • Degradation of moral expressions of compassion and sympathy for persons who have been designated costly or needy;
  • Induction of guilt into those who are made to feel a drain on resources or a threat to the collectivist goals.

The list could go on, however, there is enough here to suggest drastic needs for change. Of course, each of these would be vehemently contested by the managed care industry. If they are inaccurate, then it seems that the industry should have no reservations about supporting transparent and publicly accountable activities.

We know, though, they do object to this. Why? Because control of patients and doctors depends upon unethical practices. To this, at least, we should object. Manipulation and exploitation for any reason, even beneficence, is unethical and destructive of social good.

We have enough experiences from history to demonstrate the consequences of secretive, unregulated systems which go awry. The list above is not new. In fact, it comes from a book detailing the characteristics of a dire period of recent history.3

The last time this combination of forces worked in concert, over 200,000 individuals lost their lives in Nazi Germany (even before the Final Solution). Most of these persons were German citizens sacrificed for medical reasons set by economic and social agendas. I find the parallels chilling. One can only wonder: how much pain, suffering and death will we have before we have the courage to change our course?

Personally, I have decided even one death is too much for me.

* Dr. Peeno delivered an oral statement along with written testimony for a Congressional hearing on "Contract Issues and Quality Standards for Managed Care." Her testimony was heard on May 30, 1996 by the Subcommittee on Health and Environment of the House of Representative's Committee on Commerce. Her entire testimony can be found at the National Coalition of Mental Health Professionals and Consumers." (