Proceedings of the 1st National Conference on Community Health Center – Primary Care Residency Program Linkages "Managed Care, the Community Health Center and Residency Program Linkages" (Henley)

Last Updated on April 16, 2022 by Lee Burnett, DO, FAAFP

In preparation for the 25th National Conference on Primary Health Care Access, to be held April 14-16, 2014 at the Hyatt Regency San Francisco, we will be publishing a series of archival works of relating to educational linkages between community health centers and primary care physician residency programs, which will be one of the topics discussed at the 25th National  Conference. The following presentation, which took place during the National Conference’s joint session with the Western Regional Meeting of the Society of Teachers of Family Medicine, from October 17, 1993, regarding an early Medicaid managed care plan in Philadelphia, is by A. J. Henley.

We gratefully acknowledge the sponsorship of the Valley Consortium for Medical Education (Modesto. California) for funding the transcription and editing of this section of the Proceedings of the First National Conference on Community Health Center-Primary Care Residency Linkages (Lake Tahoe, Nevada, October 17, 1993):


Norman B. Kahn, MD, moderator: When I asked A. J. Henley how he wanted to be introduced, he thought for a brief moment and said that he had been in CHCs for a long time and dragged out the word ‘long.’

He speaks with the voice of experience having also been in the Federal Government.  He was the director of Region VII Office of the Public Health Service in Kansas City. He was Commissioner of the Department of Health for the City of Philadelphia

Currently he is CEO of a Medicaid-only managed program called Health Care Management Alternatives.  He has been in that position since 1989.  He’s going to talk to us on managed care, the CHC and residency program linkages. Hopefully he’ll answer Dr. Smilkstein’s question.  A. J. Henley.

A. J. Henley (Health Care Management Alternatives, Philadelphia, Pennsylvania):  As Darryl was speaking, I felt really old, because I was around when Jack Geiger tried to get away with writing prescriptions for food in Mount Bayou, Mississippi.  That was a long time ago.

A street mural in a lower income Philadelphia neighborhood
A street mural in a lower income Philadelphia neighborhood

Many of my friends say that I am an old socialist who is now a capitalist of sorts.  I think that is important because, if  you are going to survive and make a difference in American today, you will make that difference not just because you think people deserve something better or that society should be receptive to their needs.

That is not the reason responses are occurring.  It is towards that end that I want to direct many of my remarks on this whole issue of managed care.

I recently served as Chairman of the National Health Service Corps Advisory Council with Bill Burnett and Alan Strange.  I have managed to keep my hands in a lot of the facets of what is going on in health care.

CHCs, just like hospitals, will change or they will not survive what we are about to go through.  When the University of Pennsylvania announces that it is going to train family physicians in a graduate hospital run by an osteopathic hospital, when Harlem hospital gives up its pediatric program, when Jefferson Medical School links its program with DuPont in Delaware, then changes occur.

People are moving in ways to solidify their positions in response to these changes.  Darryl, I do not want to bring you bad news, but no one in America is going to continue to reimburse anyone based on what they consider to be their costs.

Cost-based reimbursement does not take into consideration any of the inefficiencies that are built into all systems.  Consequently, we are not likely to see a continuation of that reimbursement system.

The program I run has 80,000 Medicaid recipients.  They are all types of people – street people, substance abusers, people who are in shelters.  I suppose if you were going to go out and put together a managed care program, most of the people in our program would be people you would try to avoid.  Even so, the greatest criticism of our program, to date, is that we make too much money.

The reason is because our program is compared to fee-for-service Medicaid.  Medicaid HMOs, I am convinced, operate – certainly we operate – at least 40 percent cheaper than fee-for-service Medicaid.  There is no question in my mind that President Clinton is right about the excess money that exists in the health care system and the savings that can be made in it.

Whether he can get to that money is another matter.  But believe me, fee-for-service is that much out of control.  I have been CEO of this program now for four and a half years.  I am no genius at finding ways to save money.  There is just a lot of waste.  There is no question about it.

There are some basic realizations that we need to come to grips with in America as we look at Medicaid and Medicare.  If you look at Medicaid, people are recipients.  If you look at Medicare, they are beneficiaries.  I think from that difference in terms we began to draw some distinctions.

However, Medicaid has changed dramatically, because all of the people you know who are not working are now on Medicaid.  They are your new welfare recipients, your new Medicaid recipients.

The population has changed dramatically in the last five years.  In our program, which comprises some 80,000 individuals, large numbers of Afro-Americans, large numbers of Caucasians, there are 8,000 Southeast Asians and a variety of lesser groups.

CHCs have always been important to managed care.  To be quite honest with  you, any primary care organization that prevents individuals from getting to hospital-based practices is important to a managed care company because once you get there, you do lose control.

One of the things that concerns me greatly about CHCs is that, as we move towards individuals on Medicaid going into managed care and beyond and of the uninsured going into managed care, the question becomes one of who is a CHC?  Why would CHCs even receive federal funding?

Why would they not be simply a primary care organization operating in a community where everyone has the ability to pay? I think that is a fundamental issue that is facing CHCs.

I can tell you that as you raise the question in the industry, the arguments that CHCs do more or that their population is sicker or what have you, is not carrying the weight to try to get his essential community provider the status that children’s hospitals and others are trying to get established to enable them to receive higher reimbursements.

What I want to talk to you about today is something I am trying to do in Philadelphia today.  I live by Joseph Califano’s rule that states that any man who stays in a job more than five years needs to think about moving on, because either you learn to do it well enough that it’s boring or it is just time for a new experience anyway.

I have been in this job for four and a half years.  So, if this thing I am going to tell you does not work, it will not matter, because I think I am going to move on to the new frontier.  The new frontier is Medicare.

But, I think that the CHCs, managed care and family practice residency programs have a wonderful opportunity to form some linkages that will not only be educational but will tend to stimulate residents to want to become more involved with community programs.

I had the experience through all the years of talking to a lot of doctors who will tell you that they get somewhat bored with primary care, after years of doing it.  It gets routine and that all of the patients begin to look alike.  All diseases begin to look alike.

When I got into managed care, I began to see another side of medicine and what I thought could be.  There is nothing like managed care, because it provides you with information that heretofore was just unthinkable about people that you are dealing with every day.

You know almost everything.  You know everywhere they go, every patient they see, every prescription that was ever written for them.  You know all of their hospital experiences. All of this information in a modern day environment with good MIS systems is available.

We are able to provide to physicians, constantly, tapes that indicate to them everything that their members are doing relative to medications and services.  What we are seeing is just the beginning of what could be in this environment.

We are looking at therapeutic services our patients are receiving in emergency rooms, and at the unbelievable mix of medications that people are getting, when they go to their primary care physicians and then to the specialists, and then to the ER.  Nobody knows about the other visits that are taking place, other medications that are being prescribed.

We are working with the University of Pennsylvania on the elderly patients who are falling down the steps in their own houses (that is where the fractured hips are coming from).  And being able to have that information and to have it available all of the time.

We recently looked at the costs of covered services using methods that I think physicians in teaching should be exposed to.  We recently looked at 7600 hospital days that our members had at Children’s Hospital.  I was looking for the utilization of the hospital by crack-addicted babies and children with AIDS – difficult cases of that nature.

What I found was of the 7600 days at some $1400 a day, that 1,275 were for asthma, and that 875 were for sickle cell anemia.  Thus, 2000 of the 7600 days were attributable to two thinks in we could intervene.

Two things!  In talking to the physicians running the sickle cell anemia program at Children’s Hospital, they informed us that they were primarily involved in pain management for the kids appearing with sickle cell.

Further, in most incidents where they were hospitalizing overnight after stabilizing children for asthma, that they really would not stabilize them if we had good home health programs that were coordinated with them, and that they know that those children would get a nursing visit within eight hours or so after leaving the hospital.  Then they would not feel that they had to hospitalize.

We also found that of those 7600 days, only 129 were directly attributable to HIV-related conditions.  This was something totally different than what we were expecting when looking at why the children were in the hospital.

We began to look even further as to why the hospitalizations?  We looked at the so-called “social days.”  These are the days in which the systems broke down.

Typically, these involve kids who have been abused.  The pediatrician could not discharge the kids, because there was no place to which they could be discharged.  Sometimes, the kids stay in the hospital another 30 or 60 days while the Department of Human Services attempts to locate a foster home.

We began to look at targeted case management for our HIV patients who were going into the hospital, not because the hospital was going to do them any good, but because there was no system of care that would allow them to live at home – no one to buy their groceries, pay their electric bills, or do anything else for them.  Apparently, the most convenient thing for them was to be in the hospital.

So I began to think of all of that.  Not only as to ways we could intervene, but to ways in which we could develop a model of care that would allow for some teaching interventions.  I really do believe that these are the kinds of things that resident physicians could really get their teeth into, could really feel that they were making some meaningful contributions.  They would feel they were breaking some new ground if they were involved in programs of this nature.

I approached people in Philadelphia who have family practice residents, the College of Osteopathic Medicine.  We began to talk about how we could joint venture.

What could we do together that would be meaningful for a poor medical school with no money, but a willingness and a history of doing things with the community?  Now, for me, the most important thing in the world is access.  It is having services community-based so that when people need to see a provider, they can go to one in their neighborhood and they do not have to go to the hospital.

To a large extent that is the mission of the CHCs, and we do a lot with CHCs, which, in Philadelphia, are expanding rapidly.  But that is only a small segment of what is needed.

By July 1, 1994, 700,000 people in five counties around Philadelphia will be mandated into managed care.  Mandated in!  They will have to make a choice of a managed care provider.  In most of those communities in which most of those people live, there are no primary care providers.

They left long ago.  Consequently, my company and and the Osteopathic Medical School saw the opportunity for us to solve each others’ problems.

One thing we have is money and the ability to finance capital construction and the purchase of equipment.  And what they have is manpower.  12 to 15 or so new residents come out of the program every year.

Now for us, if those residents go into areas where we can assign our members – and I do not mean assign exclusively, other managed care programs will use them also – it will provide us with a network that will serve hundred of thousands of people.

Once the facilities are constructed, these facilities will be owned by the medical schools.  Those facilities, capitated by us, will have in them dentistry, pharmacy, optometry, laboratory and mental health services.  These will be profit centers, that, if nothing else, will pay rent.  Those rents will pay all of the people who will work in those centers.

What we will have is a good business opportunity for the medical school, a training program that will be available for the residents.  Some of the facilities will not be owned by the medical schools, but will be owned by some of the residency graduates.

Some of the residency graduates who go into private practice will own the facilities and will then associate themselves with other residents who will continue to be trained in the area.  We see this as a good business opportunity one in which the school is able to expand to meet its mission.

What many physicians simply are not thinking about is this:  if everyone chooses a primary care provider, and they do not choose you, where are you going to practice and whom are you going to treat?

To me, that gets to be fairly elementary.  If you have no sites in the community and all of the people in the community make a choice, and that choice of a primary care doctor is not you, who, or where, or what do you do with your residents or anything else?

That is how this universe is shrinking, that is the reality of why these community programs are essential.  I think they are far more essential than you simply saying you have a relationship with the CHC in which they train or allow you to have some training programs operating in their sites.

This environment in which we are now living, companies from all over America will compete in Philadelphia for those 700,000 Medicaid recipients.  Let me tell you that in Philadelphia, in addition to the local managed care companies that are based in Philadelphia, Blue Cross of South Carolina, Foundation Health Plan of California and Maxicare compete for those patients.

It is entirely possible that the winners may go to established HMOs in which they hire their own physicians and provide services to a group of people that many of you have felt would always be there for you.

That is not the way it is happening.  I realize and I congratulate you on the huge step you have made in your association of CHCs.  But let me tell you that the world has moved rapidly past that mark and that you are going to have to take a gigantic step forward to keep pace with what is happening in America today.

 One of the things that many people have looked at and said is that people are not making money in managed care.  Let me tell you that that is not true.  We do not assign more than 1600 individuals to a primary care physician.

That does not mean that that physician cannot accept people from another plan.  That is simply the maximum number we will assign to one primary care physician.

The average capitation rate, and we are talking about a no-risk situation here, for  primary care physicians is somewhere in the vicinity of 10 to 12 bucks per member per month.

The rate for children will be more, for adults less, but it will average out.  That equates to about $16,000 a month or roughly $192,000 a year.  Add EPST? And other additional cost factors in and the average physician has roughly $224,000 or so associated with 1600 members and these are real numbers.

We have fought hard to get to two and a half visits per member per year, because poor people have a lot of problems.  Contrary to what most people think about poor people driving you out of your office, we spent a lot of time trying to get poor people to got o physicians.

If you take 1600 patients times two and a half visits a year, or 4000 visits, and look at about 50 weeks, you come up with about 16 patient visits per day for that $224,000.  In a group kind of setting, the reality is that primary care physicians have come to the realization that managed care is pretty good when it comes to bucks.

CHCs figured that out some time ago.  What I want to say is that I believe that when you look at family practice training, that it is time for you now to look past family practice.

Look to the whole issue of community needs.  Take on and recognize that you are now living in a business environment which in the next two years people and faces that you have never seen before will be in your community competing for this multi-billion dollar industry that is here.

When we look at Pennsylvania and look at the 1.5 million people who are on Medicaid and recognize that there are an additional 1.5 million people who are under-insured or uninsured, we see three million people who previously have not been receiving health care services.  And, there are no real organized systems of care out there to take care of them.

This is big business.  That is exactly what it is, it is just big business.

I think that everyone is going to have to make the decision of doing what the hospital, the University of Pennsylvania has decided.  That is either we are going to play in the game or our game is going to go past us and wipe us out.  Begin to really, really look at the future.

We encourage in Philadelphia, linkage relationships between family practice residencies and CHCs.  In Philadelphia the Osteopathic Hospital is the only program with family practice residents of such a nature or number that they are available to CHCs.  I think that those are great relationships and that they do facilitate good training opportunities.

But you look at 700,000 people on Medicaid in the five county area surrounding Philadelphia and think that a CHC is going to meet their needs.  It is unreal.  It is just too much.  What I am saying is that those same kinds of situations, maybe different numbers, but the situations, I guarantee you, are no different than whatever community you are from.

You need to begin to think in terms of looking at CHCs as something more than a place in which you can establish training relationships.  I think you are going to have to look at actually developing primary care sites of your own.  And I guarantee that if you approach any managed care program with the idea of establishing a community-based primary care site that you want them to provide the upfront capital for, and that, in exchange, you are going to accept their members and provide primary care services in that site.  They will listen.  Thank you.  (Applause)

Dr Kahn:  Thank you very much Mr. Henley.  I think we will take the same amount of time that we took with Dr. Leong with questions and again, while  you are lining up to the microphone,

I will take the opportunity to ask the first question.  One of my experiences as a training program director in working with managed care delivery systems is that some of them had experience with, success with and comfort with, having residents take care of the patients; but some of them did not.

There are some managed care delivery systems which would not permit residents to manage the care of those patients.  How are we going to overcome that type of obstacle in linking or forming a partnership between managed care delivery systems and residency programs?

Mr Henley: We have not experienced that problem to any degree in Philadelphia.  Once of the things that we do when our members choose a physician is we tell them if they choose a hospital-based practice, or if they choose a group practice, that they may not go see the same physician every time they go.

We tell them in doing so, that they will see a competent physician but in making the choice of a practice site, that is one of the things they should expect.  Consequently, they know they may see a different physician.  We simply have not experienced a problem of individuals not wanting to see residents.  I know that’s an old CHC problem, but in our managed care environment we have not seen it.

John Bishop, MD, (Snohomish Family Medical Center, University of Washington, Snohomish, Washington):  I have a couple of questions. First a practical one. In your calculations of reimbursement of capitation of 10 to 12 dollars, is that only the physician’s salary costs that you are quoting?

Mr Henley:  No, what I’m saying is that usually when a managed care plan assigns a member to you, there is a flat number called capitation that they pay you per month whether that individual ever comes in for care or not.  That $10 is that amount.

Dr Bishop:  In my practice I have to take out my overhead.

Mr Henley:  How much is that?

Dr Bishop:  65 percent.

Mr Henley:  You have a 65 percent overhead?

Dr Bishop:  Right! 

Mr Henley: Ha, we should talk!  (General laughter)

Dr Bishop:  I would be delighted to.  The other question is more general.  In speaking about linking with the training program, which obviously is less efficient and more cost expensive, what are the incentives for a managed care to link with a training program as opposed to a private practice that is not linked with a training program?

Mr Henley:  I think that we recognize that we need a constant source of physician manpower and that the development of family practice physicians is the most ideal source of that manpower. I mean it really is just looking at future needs.

You have to support those kinds of things, just as we support programs that curtail violence or substance abuse or things of that nature.  It is a good business investment.

Dr Bishop:  Once that investment is made and there are family practice physicians out there practicing, it would be cheaper to connect with them than it would be with physicians who are based in the training program. That is my perspective.

Mr Henley:  That may be the case.  But from my perspective, if I looked at, say, the Jefferson Family Practice Program, in which few if any of the residents stay in Philadelphia, and most come from outside the area, envisioning a point in which I see the kind of saturation you describe, I do now know when that will be.

Marc Babitz, MD, (U.S. Public Health Service, Denver Region):  You know, it’s exciting to think that people will be fighting over the 700,000 under-served patients surrounding Philadelphia.  I come from that part of the country where we have states that do not have that many people in it. (Laughter)

So I really respect what you have done and your comments, because I know you have had experience in rural areas.  I would like to have your crystal ball thoughts on how this is really going to work in very sparsely populated and rural communities.

Mr Henley:  Rural America, of course, is very different.  I think that managed care will see a bumpier road in rural America than it will in urban areas.  I started a number of health centers in Iowa, Kansas, Missouri, and Nebraska.  There the issue was not money.  The issue was simply that there were no physicians there.

I think that managed care will probably fare poorly in those areas.  In other areas in which there are CHCs and much more population than in those rural areas, you will probably see things take off a lot quicker.

I do not profess that managed care is the answer to the health care problems in America.  My real feeling is that managed care came along at a time when the country did not want to deal with national health insurance (laughter) and it gave them a marvelous opportunity to go to something less than ideal.  So I think that is why we have it.

I think we will see a lot of it, but is will be primarily in urban areas.

Dr Kahn:  One last question.

Dorothy Vera-Weis, MD, (Department of Family Medicine, Loma Linda University, Loma Linda, California):  How do you see the philosophy of community-oriented primary care with communities defining services that they want interacting with the Medicaid managed care program, where you have yet another competing layer of interests of the intermediary managed care company?

Mr Henley:  The Clintons have said this first shot of managed care is designed to save money.  I think we have to come to grips with that.  I raised some questions to Health and Human Services Secretary Donna Shalala about it, and she said, “Well, after we save the money, we will come back and we will do some other things with the money that we know we need to do.”

Managed care, and some of the managed care programs that I have seen are brutal.  Brutal in their marketing techniques. Brutal in many of the unfair tactics that they use on a vulnerable population, a population that reads at a fifth grade level.

There is no secret in Philadelphia –  and from what I’m told, John Hopkins University discovered it long before we found it out in Philadelphia – that if you wanted to recruit AFDC recipients, the best people to market were young black males in suits and ties, because Afro-American women would not keep walking and would certainly stop to talk to anyone who met that description.

We see these kinds of things because it is business.  As we see more and more mainstream businesses getting into the Medicaid managed care business and we see more poor people – black, white, Southeast Asian, it does not matter – if we do not build in some safeguards for people, we are likely to see some things that we do not like.

So when you hear people say, “when we sign somebody up, let’s make them stay for a year because of blah, blah, blah,” you have to consider that they may have been lied to in the beginning.  Many have been promised something that is not there.

What really needs to be retained in the managed care system is the ability of that person to leave and to go and get something they do want.  So there are some real dangers in this whole business of managed care.  It is not as pretty as people try to draw the pictures to be.  (Applause)

Dr Kahn:  Thank you again, both of you.




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