A California group practice model of eschewing insurance may take seed nationwide. Read a DOTmed News interview with Kent Holtorf, MD, the Holtorf Medical Group, Torrance, CA.

As the health care reform debate intensifies in Washington and across the country, the President has focused like a laser beam on health insurance. Insurance is the crux of the matter, driving up costs rather than containing them, according to Kent Holtorf, MD, of the Holtorf Medical Group, Torrance, CA. The group practice of six doctors, with another location in San Francisco, specializes in complex endocrine dysfunction. Many patients receive their primary care at the practice. But quite apart from their clinical model is their radical approach to payment -- the group does not accept insurance. Dr. Holtorf wants to take this approach to medicine nationwide with centers across the country.

DOTmed News (DM): Tell us about how you went "off-grid"--you don't accept health insurance at your practice?

Kent Holtorf, MD (KH): We went away from the insurance model about 10 years ago. You don't use insurance for services that you use on a routine basis, it just doesn't work. Insurance is for emergencies.

We found, in family practice, that we were just working for the insurance company. Doctors are no longer doctors now, they are "providers." Instead of doing what's right for the patient they work for the insurance company. So we wanted to get back to doing what's right for the patient.

DM: What's wrong with the way insurance works in health care?

KH: With insurance, the patient pays their premium. They want everything they can get. Then the doctor tries to bill as much as they can and see as many patients as they can. They know they are going to get denied a lot of the service by the insurance company. The insurance company just tries to deny everything and no one is working together to do the best medicine--what's most cost effective. So we said, what is the most effective way to sit down and be with the patient?

DM: So do you favor medical savings accounts?

KH: Medical savings accounts are great except one fatal flaw: There is no one negotiating rates. So what we did is we sat down and negotiated rates with all the labs and services and it works very well.

The reason medical savings accounts didn't take off was the lab charges five times as much [as a negotiated cash rate]; the hospital charges ten times as much. The doctors charge three times as much.

DM: Do patients pay out of pocket?

KH: Patients pay out of pocket, but we give them a superbill that they can submit for reimbursement.

Here is a typical case; we see this 50 times each day. Let's look at how it normally works: The patient comes in; we do 21 lab tests on her. In a conventional model she has insurance, so we would bill the insurance. The lab then bills the insurance for $1,200. The insurer pays $800 and bills her for $400. She is thinking, good thing I have insurance, otherwise I would have paid $1,200. But the fact is we could have gotten the labwork for just $285.

We see a lot of heart scans, which are ultrafast CT scans to detect early heart disease. The imaging center will charge the insurance company about $2,500. The insurance company will usually pay about $2,000 and bill the patient $500. But we negotiated it down to $300 for cash.

There is so much waste in insurance where doctors just overbill and then the insurance company denies it and it goes back and forth.

DM: I am sure that many of your patients require medication as well.

KH: Often we'll have a medication that is needed and life changing but insurance won't cover it. So you appeal. And they ask, please send over every medication the patient was on for the last seven years with doses and why they stopped them. It goes back and forth and round and round. They think this is the medical history for the patient but how do they know?

The doctor may say it is life changing and the insurance company will say it doesn't matter, it's not medically necessary according to our criteria. Often if a patient is on a particular [costly] medication it may keep them out of the hospital and not use other medications but [the insurance company] doesn't see that.

DM: How do your patients pay for their drugs?

KH: Many are covered by insurance for medication, but we usually will find a cheaper drug that we negotiate down or we have a couple of pharmacies that will take less for cash. That is something the government could negotiate. It is ridiculous to get them cheaper in Canada.

DM: Your approach seems in keeping with preventive care.

KH: Patients are much more empowered, educated and involved with their care because they can decide with their health care dollars what they want to spend.

DM: Do you think your approach is only good for your specialty since endocrinology in particular requires an understanding of the whole patient? Or does it apply more broadly?

KH: I think if you want to solve the health care crisis, all you need to do is have all routine care on a cash basis. Every doctor, every hospital, every lab, has to post their rates and cash has to be the cheapest. Then, however you fund it, it will be about one-third of the cost of doing insurance billing or single-payer billing. Doctors will take much much less. Patients would just need an inexpensive catastrophic plan.

We specialize in chronic illnesses that are poorly treated in the insurance model now, in western medicine--chronic fatigue syndrome, fibromyalgia, diabetes, MS, thyroid dysfunction. If you look at thyroid dysfunction, people go to their doctor, the doctor runs a simple TSH test because it is very easy. You can do it in minutes. But it misses 80 percent of people. But if you do a 20 to 30 minute clinical evaluation you can diagnose so many more people with thyroid problems. People are running around with depression, can't lose weight, fatigue; the endocrinologist says you are fine. But if you do a more thorough exam and evaluation, they will determine that more patients are low in thyroid function. You treat the thyroid and their whole life is changed. But doctors say, "but I can't spend 30 minutes with a patient."

DM: What is your view of the health care reform effort?

KH: In a word, it will be a disaster. They tried a public option in Hawaii and they disbanded. Costs spiraled out of control. Massachusetts has a public plan and it's the worst health care in the country. You have to wait three times as long for a specialist. Doctors are leaving there.

You look at Medicare and how they plan to save money by decreasing reimbursement. Right now, Medicare pays [only] 80 percent of what it costs doctors to do a procedure. How much more can you cut? The waste, fraud and bureaucracy is where all the money goes.

DM: Do you have Medicare patients?

KH: We have opted out.

DM: So tell us how your model works for a typical older lady with a thyroid problem.

KH: The patient pays the office visit up front and the labs [blood tests] can either be billed to insurance or billed in cash, as well. But you are giving a good service. With the non-insurance model, we have to get the patient better. We have to give the best care, where the patient says, this is worth it for me. The insurance model is great for bad doctors who don't care. They just try to see as many patients as they can. They don't care, so they spend only five minutes with the patient. Doctors who can and want to spend time with their patients and do what is right get very frustrated with that model.

DM: You mentioned that doctors are thought of as "providers." Similarly they are sometimes called "prescribers."

KH: All the insurance companies have done that, delegated them to providers and prescribers for their plans. There is a big disconnect because the doctor does not work for the patient. The doctor works for the insurance company [in the conventional model]. And he knows he is going to get more patients from the insurance company, especially if he is a cost-effective doctor, rated high by the insurance company, meaning he doesn't do anything and basically makes the insurance company a lot of money.

DM: What happens if a patient become acutely ill and needs hospitalization?

KH: Good question. THAT is what insurance if for, an emergency, a surgery. Let's say someone is spending $500 per month on insurance premiums with $100 a month for a good catastrophic [health coverage] plan. Now you have $400 a month to use as you see fit. Whether it's for visits or medications or supplements. The patient becomes empowered, much more educated and involved in their care. Most of the time they have left over money to roll over, or give it back and give the patient a big incentive to save money. It is a really good system but medical savings [plans] have a big fatal flaw as I said since cash should be worth five times as much in buying power but is not.

DM: Let's say we get rid of the middleman, the insurers, from health care delivery and we go purely from patient to provider, could there be a role for government as a clearing house in cutting out insurers?

KH: You have a lot more options that way. The key is bringing it back to the doctor-patient relationship. I would think they would need regulations saying cash is the cheapest.

Many places don't understand cash. What if we had food insurance? What if you went to a store and said how much is that carton of milk? Well I don't know, let's see how much we can bill insurance. So you bill $100. Well okay, we got back $35 and you owe $65. So you can see it's crazy and, unlike food, no one knows the cost of health care. And you don't care because you have insurance.

DM: What about indigent patients? How would they be served under a cash model?

KH: It's the same thing. Instead of giving them premiums and writing health insurance, you provide this fund for them to use and if they don't use it, they get some back. For any person it works, whether high income or low income, you are going to really drive down costs.

When you talk about preventive medicine and people need to be healthier, this is the way to do it, get them involved in their care. With insurance they are not. If you are paying for it, you make sure you get the best value.

DM: Are other doctors doing this?

KH: Many, many doctors are going to the non-insurance model because many of the good ones have gotten really frustrated. They know they can provide better care. So it's competition among doctors. Competition among insurers is not competition. You have to compete among doctors, among labs, among hospitals, that is how you bring the costs down and the quality up.

DM: You would think that chronic disease management would be something that a health care system or HMO would be good at.

KH: No, it's terrible. We have a lot of patients that come from Canada or large U.S. plans.

If you break your arm, that is something simple [to understand and treat]. With complex multi-system [health problems] patients don't fit into a box so ... they just get terrible care. Doctors are becoming technicians [in an HMO or public health model].... What happens is they have these narrowly defined objective measures that are so-called preventive, like lowering cholesterol. So all the doctors are trying to do is lower cholesterol with inappropriately used statin drugs. And they say look how much healthier these patients are. No, they are getting all these drugs inappropriately so that doctors can meet these narrowly defined criteria. It actually hurts care, it doesn't help.

Few patients fit into that [pigeon-hole]. A patient is not the diagnosis. They are a patient. Each is different.

DM: How is your practice doing financially?

In this downturn, we are increasing. We get 35 new patients a day. We are expanding where everyone is hurting. The worse health care gets, the better we do. But I would rather have everyone get good health care.