December 1, 2000



HMO and Behavior Modification
More Money for Physicians
MD E-mail Payment
Patientís Bill of Rights
Payorís Guidelines
Sutter Closes Hospital and Gains One
Quality a World Wide Problem
Medical Group Solvency
Massachusetts Hospitals Making Less
PacifiCare to Freeze Enrollment
Medical Errors
Self Pay Practices
UCSF & Harvard Pay Clinicians
HMO Profits
HMO MD Bargaining
Angiography in Managed Care
Kaiser Expansion
AMA Database
MedUnite v WebMD
IPA Wins and Loses
St. Joseph Health v PacifiCare
Marin General Board
Ohio Physicians Needed
LA County is "Chernobyl of Health Care"
Hospital Adds Healing Arts to Medicine
Dutch Vote Yes on Euthanasia
USC Considering closure of Nursing School


HMOs Promise More than They Deliver in Behavior Modification

A report from the Washington D.C. Center for the Advancement of Health stated that managed care plans in spite of their preventive medicine spiel do not walk the walk. Many premature deaths can be prevented by the used of behavior modification to change unhealthy lifestyles. The managed care organizations as a whole usually only give out pamphlets and brochures, a technique proven to be fairly useless. According to the report most HMO medical directors believe in behavioral change but did not incorporate them into their system due to the unknown cost impact. Some health plans do offer behavior modification, but it is an out-of-pocket expense. Purchasers of health care also believe that behavior modification is important, but they believe they are already paying for this service. The purchasers would be smart to check and see what they are getting for their money.

More Money for Physicians

HCFA has announced a raise in physician fees due to inflation of 4.5% starting January 2001. The new conversion rate will go from $36.61 to $38.26. Donít go crazy and spend it all at once. This is an average. Some will get a 0% raise.

Pay MD for E- Mail

An article in the October 2000 healthcarebusiness raises the issue of E-mail responses to patients, and should the physician be paid. The capitated physicians thought it was good to keep the patient out of the office. The opposite conclusion came from the fee-for-service physicians. Only 27% of physicians surveyed believed that the Internet saved money and less than half thought it improves the physician patient relationship. The question of payment is due to the fact that E-mail takes more time and has more liability than the usual phone call. The physician usually does the E-mail responses, whereas office personnel may answer many phone questions. The article suggests that patients will demand and look for physicians that use the Internet. This assumes that the patient has a choice. One patient was really happy with her doctor who answered her E-mail question on a weekend. "He usually responds in a few hours or faster. This guy works 365 days a year." This may be a good reason not to start using E-mail.

On the flip side FirstHealth will begin paying physicians for E-mail office visits 1/1/01. This nationwide organization of 280,000 physicians will pay about $25 per visit. The patients in the trial program are 125,000 with chronic diseases. The visit would have to be initialized by the patient over FirstHealth servers, clinical information would need to be exchanged and the two parties must agree the visit is complete. In California a company called Healinx is setting up a program in which no payment goes to the physician if only canned material is sent to the patient, but there is reimbursement if an actual informational exchange is made or a prescription or referral is needed. It is now being used by Permanente physicians and is soon to be incorporated into Blue Shield, but without compensation. Wish them luck.

In a syndicated article, Reuters states that medical information was the number one reason to surf the net. It was over stock market quotes and shopping. There was no mention if it was greater or less than pornography sites.

The Patientís Bill of Rights vs. Employers

In the same October issue of healthcarebusiness there was an article regarding about an employer liability aspect in any Patientís Bill of Rights. Approximately 1/3 of those queried responded by stating they would drop health care coverage if this came to pass. This is usually not possible in todayís business environment so employers are considering other options. These include outsourcing the administration, which may place a barrier between the plan administrator and the employer in case of a lawsuit. Another option is to give a greater choice of medical plans and information regarding these plans to the employees, as opposed to one "company plan." A third option and one where many believe health care is headed is the "defined contribution plan." This will require a change in the tax law to allow the deduction of the amount of health care insurance. Even without any tax reform, it is possible to use this vehicle. The employer contract with an agency to offer a range of health plans, as they do now with 401 plans. The employer would fund a base amount and the employee would need to contribute if they wanted any more expensive options. This is currently being done by The Federal Employees health benefit Program, CALPERS and the Buyers Health Care Action Group in Minneapolis. In the words of an old Chinese curse "May you live in interesting times." We do!

Payorís use of Guidelines

Millman & Roberts (M&R), a Seattle actuarial firm has been publishing their "goals" for time in a hospital for various diagnosis. Most physicians have been criticizing these guidelines, including a statement by Howard Bauchner, MD, professor of pediatrics and public health at Boston University, who stated "Letís be clear about what the M&R guidelines are not. Itís not an evidence based guide about appropriate lengths of stay." He states they are based on a limited amount of data. He has refused to adjust his practice simply to meet M&R goals, even when receiving "reminders" from hospital administrators. Dr. Marion Sills, of the Childrenís hospital of Denver, states the "M&R guidelines bear little resemblance to reality." Health plans are rapidly going away from the M&R guidelines, especially after the Connecticut state attorney has filed suit against four plans for using arbitrary coverage guidelines to deny care, such as limiting hospital stays to pre-set terms. Texas physicians are also suing M&R over their goals.

Sutter to Close Memorial Hospital

Sutter Health is considering closing Memorial Hospital in Sacramento and building a Woman and Childrenís hospital across the street from Sutter General. The new hospital would be complete in about six years. This would be the third hospital in the area to close in the last decade. The other two were Mercy American River and Kaiser Sacramento Medical Center. Kaiser plans on building in Elk grove and Folsom. Sutter has also added to their stable the financially troubled St. Lukeís Hospital giving them $15 million now and an additional $40 million over time. Why?

AMA States Quality a Worldwide Problem

The AMA reported that four other English speaking countries and the United States are having quality of care problems in spite of increased spending and medical advances. Three quarters of physicians surveyed reported that the quality of care would increase if they were allowed to spend more time with patients. I hope that not a lot of money was spent to find out the obvious.

Physician Groups and Solvency

The LA Times reported on how IPAs or physician groups charge "management fees" and skim off more money that should be going to the physician. They do the same as HMOs by using financial incentives to ration care. Some of these physician groups are having significant financial difficulty. KPC in Southern California is the prototype for this. They just received a multi-million dollar bailout (loan?). Hill Physicianís Steve McDermott believes in the Darwinian theory where only the strongest groups survive and take over the weaker. The CMA CEO, Jack Lewin, believes that the state should make insurers pay physicians if the groups are not financially able. Aetna has started this by allowing individual physicians to sign contracts for HMO work ensuring the payment by the insurer. The new commission on medical group solvency will set financial limits of reserves and working capitol for physician groups. The HMOs will need look at the groups with whom they are signing contracts and be liable if they sign with unstable physician groups.

In an 11/8/00 story the LA Times printed that even after the $30M KPC received they are again in trouble. They are running out of supplies and not paying specialists. State regulators have launched an investigation of the organization. The problem is the State has no authority over KPC or any other medical group. The State is therefore using a point of law that allows the investigation of medical groups if the groups contract with HMOs. Even if something is found in the investigation, the State has no authority to do anything about it. Instead the State is contacting HMOs to ask about their plans to move patients should KPC falter or provide substandard care due to lack of money.

Later, KPC Management reported the large medical group would close its clinics. Several Health plans recently pulled out of KPC. KPC and the CMA believe the demise is due to health plans not paying the medical group what is owed and in a timely manner. The Department of Managed Care does not have the authority to regulate financial interactions between medical groups and health plans.

On November 24, 2000 KPC filed for bankruptcy. The end!

Another IPA, Health Source IPA, is filing for bankruptcy. This is another Southern California (west LA) IPA that covers 50,000 managed care "lives."

A story in the 11/9/00 Washington Post stated that the head of a company that rates the financial conditions of HMOs urged Medicare HMO recipients that get dropped to return to standard Medicare. This will reduce anxiety when their new HMO becomes vulnerable and drops Medicare. The company stated that of a survey of 237 insurers, 147 will have either fully or partially dropped their Medicare plan by the end 2000. Of the 90 plans remaining, 37 are losing money. The Health Insurance Association of America, who stated that HMOs still have a place in the decision process, disputed this conclusion. However, the Association did state that many plans could no longer be as competitive due to federal funding.

The two largest Buffalo New York HMOs are bumping rates 14-18% starting January 1, 2001.

The Chicago Tribune reported that enrollment in Illinois HMOs was flat, but the bottom line increased due to an 11.8% raise in premiums.

In Baltimore another medical group is closing at the end of the year. They have 6300 members. The two largest medical groups in the area closed within the past year. These groups are owned by hospitals and have cost the institutions millions of dollars in their investments.

The Phoenix Bizjounal reported on November 24 that Phoenix hospitals were beginning to unload physician practices due to the expense of running the practices.

In the other direction is the Minneapolis Choice Plus system, a system where physicians directly contract with employers, is enlarging into several surrounding states. They are also adding physicians and employers. One of the main pluses is the physicians create their own utilization review protocols, giving them more belief, as opposed to UR protocols by HMOs, where one size fits all. Since incentives are aligned, the next year premium hike is about 50% of the HMO hike and administrative costs are $12 pr member per month versus $20 for local non-profit HMOs. Choice Plus is expecting an Oregon and Colorado group to sign up within the next year.

Massachusetts Hospitals Making Less

A survey of approximately 80% of the Massachusetts hospitals showed a decrease in operating income 2.3% for the first three quarter of fiscal 2000 versus 1.6% for the same time last year.

Secure Horizons to Freeze Membership

The LA Times reported that Secure Horizons (PacifiCare) will freeze membership in 41 counties nationwide, 24 in California. This would go with premium hikes between 10% to 25% for its non-Medicare clients. This is because the third quarter reports showed a projected income of $1.90 and an actual income of .04 per share. The CEO abruptly resigned last month. The counties frozen are Alameda, Butte, Contra Costa, El Dorado, Fresno, Kern, Madera, Marin, Napa, Placer, Riverside, Sacramento, San Bernadino, San Francisco, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, and Tulare.

The University of Alabama Birmingham is dropping UnitedHealthcare Medicare HMO due to low payment.

Medical Errors

On November 16, 2000 it was widely reported that the large United States companies have formed a group called Leapfrog. This group is to encourage their employees to utilize hospitals that have in place error prevention techniques. The mainstay of these techniques is the use of computers to help prevent medication errors, the use of intensivists to supervise the units and sending cancer patients to hospitals with high success rates. The computer programs cost over $1 million each, but according to Brigham and Womanís Hospital in Boston the system has saved over $5 million each year by preventing drug allergies, injury do to drug interactions and steering physicians to "cost-effective drugs and tests." It should be noted that the Pacific Business Group on Health is part of Leapfrog and offers financial rewards to health plans that contract with high-performance hospitals. The AHA is not happy with the plan since it requires a high expenditure of money at a time when hospitals are not doing well as well as not taking into account geographical preference. The answer from Leapfrog is that they are only rewarding hospitals that meet it standards, not penalizing those that donít.

In response the AHA has stated a word of cautions to its member hospitals. They state that "they (computer systems) are not a panacea for patient safety concerns; indeed, any new system also carries with it the capability of introducing new sources of error." The AHA does have a guide for helping hospitals make computer investment decisions.

Self-Pay Medical Practices

The Atlanta Business Chronicle reported on physicians dropping out of insurance based medical care in favor of the patient self-paying for all services. The patient is then responsible to collect from the insurer, if any. Does this sound familiar? Itís what always was done. Dr. Peck, head of physicians and managed care services for Arthur Anderson LLP and a former medical director of Aetna, thinks this is bad as it creates a multitiered health care system and divides patients into haves and have-nots. Dr. Lanzilotta, CEO of National Healthcare Network, states that "managed care in its truest form is all about accountability and oversight and doctors should no longer expect to have unquestionable authority." He believes the problem is in managing costs and physicians should be paid on time, rewarded on time and that physicians that do not meet good standards should not be accepted. He also stated that "health care is a human right regardless of the ability to pay." He doesnít state whether itís a Bentley or VW.

The article centered on Dr. Fryhofer, the president of the American Society of Internal Medicine. She stated the patients were happier. They were seen on time and had all issues addressed in an unhurried manner. The front office staff was less so overhead was less and the staff was happier.

Another physician, an Orthopedic Surgeon, opted out two years ago. He collects at the time of service for all but Medicare patients. He bills insurance for any surgical procedures required. He states that he is collecting 85-90 % of billed charges against the typical orthopedic 40%.

UCSF & Harvard Pay Clinicians

These prestigious universities have begun paying clinicians to teach. The clinicians have been dropping their teaching due to monetary constraints. The universities have recognized this and are now supplementing income for classroom time, not just research.

HMO Profits

The AMA states large HMOs are earning strong profits due to premium increases that outpaced the financial growth of medical care. Although Aetnaís same quarter EPS decreased $.05, their revenue went up $1 billion or 14% for the quarter. UnitedHealthís bottom line increased 20% from a year earlier on revenues that went up from $4.9 billion to $5.4 billion. Cignaís revenues increase 7% to $5 billion. Humanaís profits were up 4.5% on $2.62 billion of revenue.

The article went on to state the increases were due to increasing premiums by 10%-15% and decreasing coverage by raising co-pays and multitiered drug coverage.

The article did not state that PacifiCare reported a 92% drop in profit for the third quarter, from $1.54 per share a year ago to $0.15 now. This was on a 14% revenue increase to $2.9 billion.

HMOs are not the only bleeders around. CHW announced it lost $90 million in fiscal 2000. It lost $318 million on operations and made the rest on investments. They have been placed on a credit watch and it seems probable that CHW bond rating will go down, costing the organization more interest if and when they borrow money.

In other parts of the country, Colorado HMOs are losing money, except for Kaiser with their own medical group and a long-term exclusive contract with one hospital. They also plan an 8% premium hike for 2001.

In the Tampa, Florida area employers are finding a large increase in premiums, some as much as 17%. It is a tight job market so the employers can not pass the costs to the employees or steer them to the cheapest alternative. Because of the high cost many employers are switching to the self-insured market with minimum premium increases. There is also some thought for higher deductibles as with homeowners insurance. This may lead back to indemnity insurance that kicks in after the high deductible is met.

HMO and MD Bargaining

A story in the AMA News discusses how physicians are willing to decline major HMO contracts rather than take non-financially sound contracts. Once the physicians have found that they are willing to walk away, they have also found that they have clout in the bargaining process. The ability to walk away from losing contracts assumes the physicians know the cost of seeing a patient. If the physicians are losing money on a contract, they can make money by dropping the contract. When the physicians leave an HMO they may stay as an out of network provider which would require larger payments from patients. Most groups that have left reported using consultants and media to advertise other carriers that would do business with the medical groups. Some employers, including Boeing, threatened to switch. This allowed concessions from the HMO to keep the physicians.

In Tallahassee, Florida an anesthesia group dropped a Blue Cross contract that was 15% of their practice. They continue to treat these patients but bill the patients directly and for their full charge. The group stated they are doing better financially this way than prior. The insurer has launched a national recruitment for anesthesiologists for the area. This is a sure way to win back physicians! This article is a great lesson for knowing physician costs going into negotiations and saying "no" to those contracts that do nothing for your bottom line.

Decreased Coronary Angiography in Managed Care

The New England Journal of Medicine reporting on 51,000 Medicare patients in seven states stated that patients enrolled in managed care were 20% less likely to receive angiography versus fee-for-service plans. Approximately 18% of Medicare patients are in managed care plans. The chief author from Harvard stated that this was a significant difference in health care quality. The study first determined whether angiography was indicated under the American Heart Association guidelines. In this study 37% of managed care patients who needed angiography got it compared to 46% of fee-for-service patients. In the reverse, those patients that should not have received angiography under the guidelines, the test was performed in 13% of the patients regardless of insurance coverage. Neither of these numbers is sterling and shows that the treatment of the elderly may be improved.

Kaiser Permanente to Expand and Spin Off Home Health

Kaiserís financial turnaround of $107 million net on revenues of $4.3 in the 3rd quarter has allowed the HMO to consider increasing facilities. Kaiserís population has continued to grow and is up 7% in Sonoma County and 17% in Sacramento. They are planning to increase hiring and build facilities in these areas. They are planning new office buildings in Elk Grove, Roseville and Folsom as will as renovation or seismic retrofit of hospitals in Vallejo, Los Angeles, Panoramic City and Sacramento. Kaiser is also leasing 60,000 feet of office space in downtown Oakland.

Kaiser has put $14 million in seed money in CareTouch, a Concord, California home health company. This company comes out of Kaiser and is to do disease management for Northern California Kaiser now and for all Kaiser in the near future. CareTouch has also received $ 5 million from IBM and will also take care of their employees.

AMA HealthcarePro Connect

The AMA has partnered with Acxiom to provide tailored data collection and dissemination about each physician to marketers. The AMA promises that physicians will have the ability to control the information on the database as well as what type and method of information they receive. There is no mention how much the AMA or the new combined company will receive. Anybody remember Sunbeam?

MedUnite versus WebMD

Seven of the largest managed care organizations have joined to form MedUnite, a clearinghouse for claims, referrals and other transactions between the companies and physicians. The members are Cigna, Aetna, Anthem Blue Cross and Blue Shield, Health Net, Oxford, PacifiCare and Wellpoint. This is to decrease the hassle factor by all using the same forms. There will be fees on a per transaction basis for the insurers and on a flat monthly charge for physicians and providers. Testing is to start in February 2001, with full operation by June 2000. This venture will go head to head with WebMD but has the advantage of a built-in clientele.

A new Gallup survey showed most Americans do not trust the storing of their medical information on the Internet. Only 7% stated they would store or transmit their data on the Internet. In contrast, 90% trusted their physician to keep information private, 60% trusted a hospital, 42% trust insurance companies and 35% trust managed care companies.

How an IPA Won and Lost

In Dallas the Heritage Southwest Medical Group had contracts with PacifiCare (Secure Horizons) and Texas Health Choice HMO. A rival group had a contract with Aetna. Aetna is pulling out of the Medicare market in Dallas and the Heritage group courted the rival physicians so the continuum of care would continue. The standard credentialing of the new physicians would be performed. However, on the same day as the above report the Dallas Morning News reported that PacifiCare has been placed on administrative oversight by the State. This was due to concerns over quality of care, late payments to physicians and inadequate access to physicians. This means the State will monitor PacifiCare on site. PacifiCare will also have to file weekly progress reports, submit a business plan including budget projections. This needs to be in to the State by December 22.

St. Joseph Health System vs. PacifiCare

On March 31,2001 approximately 20,000 seniors insured by Secure Horizons will lose their ability to utilize St. Joseph Health Systems physicians. An additional 90,000 regular PacifiCare patients will do likewise on June 31, 2001. The disagreement is over the lack of enough money to take care of the patients.

Marin General Hospital Board

In what should make for a most interesting several years, the voters of Marin County elected three critics of Sutter Health. These people have called for an end of Sutterís lease of the hospital. Sutter states that "Marin General needs us. We donít need them."

Southern Ohio Physicians Needed

The physician specialists in this area are working long hours due to a shortage of recruits. The physicians state that the physicians are being paid less here than in nearby cities. In one vascular surgery practice they are so strapped for time that they have cancelled all contracts that do not pay at least as much as Medicare. The first one to be cancelled was Anthem. Anthem states their consumers will not be affected since there are other vascular surgery groups. The group has also consolidated their hospital practices and satellite offices. An oncology group is also cutting back on their contracts. They state they are at times working from 6 a. m. to midnight. Some insurers are paying attention with some higher reimbursement, almost to the national average.

LA is "Chernobyl of Health Care"

The LA Times reported the county is looking at a $500 million deficit in the next five years. Also are problems with severe nursing shortages. Much of the problem is due to the fact that about 1/3 of the non-elderly have no insurance as opposed to 15% nationally and approximately Ĺ are in the "volatile" HMO sector. For those with no insurance the wait for a cholecystectomy at the county hospital may now be close to one year. The state spending for MediCal is among the lowest nationally. The article told a litany of horror stories of long waits and the inability to see physicians. At the end of the article of the problems Walter Zelman, president of the CAHP stated that the overall problem of physician groups has been exaggerated. He went on to state that managed care has kept premiums in California, and LA county, low while offering among the highest quality of care anywhere. There seems to be a disconnect somewhere.

Hospital Adds Healing Arts to Medicine

A Colorado hospital, Longmont United, has added healing arts for those in need. This includes a Nordstrom-like piano and a warm crackling fireplace in the lobby of a new $20 million wing built for holistic health for patients with cancer and other chronic diseases. The therapies include massage, acupuncture, herbal medicine, vitamins and prayer. The new wing was needed and the alternative aspect added very little to the cost. Some insurance companies and/or private pay are covering the costs.

Dutch Vote Yes on Euthanasia

The Dutch parliament approved both euthanasia and direct physician-assisted suicide by a 104-40 vote. The Senate is expected to agree thereby making it go into effect next year. The bill allows physicians who follow the guidelines not be prosecuted. The law states the patient must have irremediable and unbearable suffering, be aware of alternatives and have a second opinion. The patient must also request voluntarily, repeatedly and independently while of sound mind. The law also allows written requests for euthanasia for those who have become incompetent in the later stages of their disease. In 1999, 2216 people in the Netherlands were recorded as having died from assisted suicide. Euthanasia is illegal in the US, but Oregon allows physician-assisted suicide by giving the patient the means to do it. So far, 43 Oregonians have died with physician-assisted suicide. Congress has passed a law to restrict this but the law may also potentially restricts pain relief that may cause death. President Clinton has stated he will veto the law.

USC Considering Closure of Nursing School

USC is being urged not to curtail or eliminate its Nursing School. An internal audit has found the "overall performance of the school wasnít satisfactory". The school graduates both bachelor and masters of nursing. Associate Degree nurse programs have a 40% drop rate. California ranks last in the US in the per capita nursing number.

DISCLAIMER: Although this article is updated periodically, it reflects the author's point of view at the time of publication. Nothing in this article constitutes legal advice. Readers should consult with their own legal counsel before acting on any of the information presented.