The Mayo Clinic has cancelled its first contract with a national insurer. Mayo cancelled due to chronic late and wrong payments.
The LA Times reported that the HMOs are removing the global component from the physician payment. Physicians will no longer need to pay if a patient is hospitalized. Aetna has also done away with all all-or-none contracts as well as pre-approval for many surgeries. At the same time Aetna stated it would increase premiums by an average of 17% and cut 5000 jobs. Blue Shield states it will now help pay for office injections that cost over $10,000 per year.
PhyCor’s NAMM leaves its main market, Houston. It is closing its 22 IPAs of about 2/3 of the physicians in the Houston area. They were all with professional or global capitation. The Texas Department of Insurance has put them on supervision. The problems were multiple in nature. Their information system did not perform adequately. They switched to global capitation, which further overloaded the information systems. At the same time hospitals raised their per diem rate putting financial pressure on the IPAs and removing the bonus pools. A new company called NewQuest has now come into the Houston market and is picking up the IPAs dropped by NAMM. NewQuest hopes to form these smaller IPAs into a large IPA, Renaissance, covering the entire Houston area. They will continue to use the QuadraMed utilization software. NewQuest is attempting to get capitation agreements with PacifiCare, HMOBlue and AmCare. The negotiation includes a 10-15% provider increase.
PhyCor has sold the largest medical clinic in north Florida back to its physicians. In the past nine months the clinic had lost 27 of 136 physicians, 12 of which had a planned retirement.
Not to be outdone 240 Denver physicians have dropped Aetna for low rates, too much interference with physician decisions and Aetna’s all or none provision. The doctors are encouraging their patients to switch to other health plans that they belong to. Aetna has driven hard bargains in Colorado since they lost $12 million in the first 9 months of 2000.
Aetna is also reducing its workforce by 5000 jobs and taking a large charge on the recent quarter for benefit restructuring, and getting out of the Medicare HMO business. They have also agreed that consumers with chronic diseases may choose specialists as their PCPs. Aetna has also dropped their all-or-none provision.
A private physician, Bill Davis, in rural Winters, California has left his position at Sutter West Medical Group to start a not for profit medical practice. The townspeople backed him with $50,000 and an attorney and accountant donated their services. He will be treating all comers. The residents called the new clinic a revolt against "doc in the box". Davis’ ex-partners have not contacted him since he left. Sutter West states that Davis did not honor his contract and do the necessary paperwork nor see the requisite number of patients. The CMA president has stated that some doctors that have dropped out of managed cost value their integrity over money.
CalPERS has lost $100 million in their own plans. Part of the problem is of their own making by deliberately underpricing premiums in the past two years. The other causes are increased membership and rising drug prices. In order to make up the shortfall they are planning a 19% premium increase. Along with this, CalPERS is doubling annual deductibles and scaling back drug benefits.
The last Kentucky Medicaid managed care company, Passport, states it needs more money than the 3% increase it has received the past several years. It states it needs at least a 10% increase. Passport takes care of 112,000 Louisville Medicaid recipients.
The New York Times published an article that states HMOs will need to reinvent themselves or perish. Most of new money is needed for improved information systems, especially to web enable their consumers, payors and providers. They don’t have physicians and patients.
Wisconsin attempted to allow small businesses to combine into a health insurance pool. The problem is that no insurance company wanted the companies.
Hospitals and Managed Care
In Massachusetts hospitals utilizing capitation for primary care are laying off employed physicians. In one case Emerson Hospital in Concord laid off Dr. Latham, the president of the Massachusetts Medical Society and 18 others, who were earning $100,000 per year. The hospital has been losing $2 million per year on their purchased medical group due to managed care not restricting choice enough. Beth Israel Deaconess Medical Center in Boston is also laying off physicians in several satellite clinics. The same is true of Lahey Clinic that lost $10 million in 1999 and an unreleased amount in 2000. The laid off physicians are all primary care. The hospitals thought primary physicians would act as true gatekeepers and ration care. The employers and employees wanted choice of hospitals and would not go along. Other hospitals without the closeness of competition are using compensation based productivity for primary care payment. These practices are profitable. When Dr. Latham leaves she will take her only possession, her chair.
A Modern Healthcare article discussed how PHO are thriving in some communities across the country. About 2/3 of PHOs are in 15 states, with none in the Pacific or Mountain areas. Texas and Illinois have the most, with 86 and 63 respectively. The reason for the lack in California is the use of capitation and the large medical groups that have formed to obtain those monies.
In Baton Rouge, LA the largest hospital has been dropped by three health plans for having rates that the insurers deemed too expensive.
Massachusetts’ hospitals need more money. Twenty hospitals have stated they will need to close money losing services. These include physician practices and obstetrics. They have requested more than $35 million from a state relief fund. The fund only has $10 million so some will get money while others will not and be forced to omit services.
At Cape Fear Medical Center in Fayetteville, NC the elective surgical cases are being postponed or cancelled due to lack of anesthesiologists. The employed physicians are seeking $1 million per year more than a consultant recommended. The doctors are still working at the hospital but without a contract and on a limited basis.
Congratulations to Mercy Healthcare Sacramento that has gone from $25 million in the red to the black. Mercy is a division of CHW that lost a huge amount of money and is on a credit watch. CHW’s main losses came from Nevada, Bakersfield and a failed medical practice management company. Mercy’s turnaround came from laying off employees, better contracts with removal of risk, severing relations with doctor groups and hospital consolidation.
In Wichita, Kansas a medical center and its employed physicians continued the trend by splitting with their employed medical group.
California Blue Cross and Sutter are at it again. Two years ago they played hard ball on rates and Blue Cross blinked. The game is afoot again with the deadline December 31. Blue Cross has already has said the patients assigned to Sutter physicians will be re-assigned. If a settlement is reached in the near future the consumers may ask to return to their primary care doctors, but there will be no automatic re-switch. The consumers will need to change plans to avoid the change of physicians. Sutter only made in 1999 on day to day operations $4 million. Currently Sutter gets approximately $227 million from Blue Cross.
Mission of Mercy to California?
There is to be two missions of mercy not to Guatemala, but to Redding, California. The first one December 2000 by the a team of physicians from Orange County St. Joseph’s Children’s Hospital and the second in February, 2001 from UCD. These physicians will be utilizing four operating rooms to operate on 40 MediCal children for routine ENT procedures. The two ENT physicians in town have not been able to deal with the large MediCal population on the small amount paid per procedure. UCD has stopped taking the referrals as they also are losing money. I guess California now qualifies as a third world country. Maybe we could ask for foreign aid.
Telemedicine is alive and well. UC Davis expects to do about 3000 consultations this year in 30 different specialties. There will be about 200,000 performed nationwide this year.
The Ohio General Assembly has passed and is awaiting the governor’s signature a measure making it illegal for out of state physicians to diagnose or treat Ohioans on line. The web is okay for on going doctor patient relationships and for physicians only giving medical advice.
Joseph McMenamin, MD JD in HealthLeaders.com nicely lays out the potential legal risks for healthcare websites. He included the known potential problem of malpractice by treating a patient without an exam. He also includes privacy, especially with the new HIPAA law and product liability where a x-ray would not be sent with enough clarity and a lesion missed. He talks about telemarketing and how this may lead to liability by stating an avid claim about a procedure or provider and something goes afoul. This could be a contract breach and not a tort liability. It is possible that malpractice coverage may not be available for this type of contract liability. Also no malpractice caps or expert witnesses may be needed in a contract claim. His conclusion states one must be aware of the potential legal problems and take steps to minimize them.
The US Pharmacopoeia in a yearlong study of 56 hospitals found 6,224 medical error reports from 56 hospitals. Of the total number 181 caused temporary patient harm, 5 caused permanent patient harm and 1 caused a patient death. Of the total 23% of the erroneous medications never reached the patient and in 55% the medication reached the patient but caused no harm. Most of the errors were in the administration of medicines (40%) and 11% were from prescribing errors. The report stated that hospitals are still using medication errors as a punitive measure and not a performance improvement mode.
The Charlotte NC Business Times ran an article on hand held devices and the changes they are making in the practice of medicine. It is estimated that about 15-25% of physicians are currently using these devices for patient care. The major drawbacks are confidentiality if the device is lost and has patient information in its operating system and the problem of focusing too much on the device instead of the patient.
Santa Clara Valley Medical Center is consolidating its outpatient medical services into a new single facility. In good news an existing administrative building will be torn down for the new facility. The new facility will allow an additional 50,000 outpatient visits a year, thereby increasing profits.
Eisenhower Hospital in Palm Desert is purchasing its across the street competition for cardiac surgery, the for-profit 12 bed Heart Institute and heart Hospital of the Desert. It will be made into a cancer treatment center. The physician owner of the Heart Institute was planning a heart shaped addition. Must have been a great buy out.
PacifiCare is cutting 6% of its workforce and taking a $16 million restructuring charge due to benefits and severance pay to those cut.
LA County is eliminating 153 now vacant positions in preparation for deeper reductions in the next year.
The San Jose Mercury News reports the failed 29-month merger of Stanford and UCSF cost $178 million. Each shared the loss equally. One of the main causes of the failure was the inability of the physicians to agree how to combine their practices and how to share future profits and losses.
Provence Healthcare has agreed to sell General Hospital in Eureka, CA to St. Joseph’s Health Systems of Orange, CA. The total sales price is $26.5 million and an additional $5 million for working capitol. Provence had previously sold Ojai Valley Hospital, which has since closed.
East Bay Business Times Medical Series
In the first of several articles in the December 1, 2000 East Bay Business Times the Willie Sutton problem (where’s the money) was discussed. The HMOs state the hospitals are getting less because the drug costs have increased 18% in the past year. Health plan employees are getting a 5.4% raise while health care providers are only getting a 3.6% raise. Dr. Phillip Lee said the lack of money is due to a lack of the state and federal governments not spending enough and the lack of a cohesive policy between them. The CMA believes physicians should get part of the $9 billion state surplus since California ranks 47th in Medicaid spending. The ACCMA believes managed care organizations are taking the money for profits and not returning the money to the physicians. The CMA currently is suing three HMOs for this reason.
The second article is about how much more small business is paying for health care in spite of the 1993 California law easing restrictions to entry into the market. A Washington D.C. think tank predicts that large business health care premiums will increase between 5-10% per year. They also predict small business premiums will increase 15-25% per year. The bottom line is that many small businesses will not fund any employee benefits or may use part-timers.
A related story states the small unemployment number make benefits a must for hiring and keeping qualified employees.
The next article is about the use of Employee Assistance Programs (EAP) for mental health coverage. The employer funded programs are for short term therapy for employees and their dependants. The EAP is relatively affordable costing about $300 per month for approximately 50 people.
Albany N.Y. Business Times Health Series
The first article is really strange. The title is " Medical practice must be treated like business". At first medicine was an art, then a science and now a business. The article states the practices should have a business plan. I doubt many physicians know what that entails. It states that practices must know the cost to provide each unit of a patient encounter. How many of you know this information. It is readily available. The largest outflow of money is for physicians including malpractice insurance. The article states this should be between 45-55% of the gross charges and aligned to the practice’s strategic goals.
The next article describes the potential gain in that area of PPOs and the decline of HMOs due to rising HMO rates. It states that people do not like change and PPOs are more stable than HMOs. The article goes on to state that the administrative costs for an open-ended HMOs is $25 versus $17 for a PPO. In NY all HMOs must offer an open-ended, (out of network) plan.
The following article tells of how to plan for practice merger. It states one should by management consolidation achieve operational savings. The new entity must decide who will do the accounting and what the structure of the entity will be. The remainder of the article talks about where the practice will locate, the retirement and benefit plans, where to bank, and individual tax issues. The article does not talk about the most important aspect of merger, team building, the coming together as a group with groupthink and not as individuals.
The last article tells the story of how a freestanding outpatient surgical center can lose significant money for hospitals. It also states how these centers draw not only the high profit procedures but also nurses and surgical technicians, which are in short supply.
A patient had a cardiac septal defect that required surgery. She demanded not having any black males in the OR during her surgery. As the surgeon should you refer her somewhere else or follow her wishes. The JCAHO in its patient-rights standard and the hospital espouse that the patient’s best interest is most important. The best interest of the patient is the surgery. The JCAHO stated the hospital should either respect the patient’s wish or arrange for a transfer. What would you as the surgeon do? The answer for one surgeon in Tennessee is he asked a black perfusionist to leave the OR and be replaced with a white partner. He later apologized and said his action was wrong. Another surgeon had already turned down the patient due to her demand.
How much are you worth? It depends. In China, the government is selling condemned prisoner organs for $10,000 per kidney. The sales are going to Chinese and foreigners, who move to the front of the line by paying extra. The prisoners giving the organs are allowed to die under anesthesia instead of being shot in the back of the head.
What do you do? In a Sacramento Bee story both sides of the argument of do you do what is the most cost effective or what the patient wants or demands. The article cites several physicians and even the most ardent devotees of managed cost occasionally stray to what the patient wants. Most physicians surveyed for a Western Journal of Medicine article on which the Sacramento piece is based believe the physician has the obligation to consider cost as well as benefit for any treatment. The patients believe that treatment is paid for so let’s just do it. Physicians want good evidence based guidelines, if guidelines are being used.
An article in Modern Healthcare by Sidney Meyer said that defined contribution health coverage is making a run. This has evolved as employees and employers have fretted over "choice" and increasing premiums for HMOs. The PPOs are now the fastest growing payment option in the country, but the negotiated discounts may become less. The people have the unrealistic expectation that healthcare should be all encompassing and free. Defined contribution means employers will give employees a set amount of money and allow them to pick among various alternatives. If the plan picked cost more than the allotted amount, the employee would pay the difference. This allows the employee to become much more involved with medical choices and their costs.
In another article in Jenks Healthcare Business Report, a survey showed that most respondents believed defined contribution either under the voucher or MSA program would prevail. The other side is that there needs to be an economic downturn for these to become major players. A MSA, which is due to expire this year unless Congress renews it, is like an IRA where the deductibles are paid from the tax deferred account and any excess is used to buy retirement funds. A voucher is an asset given to employees to purchase their own health insurance. This relieves the employer of the headache of dealing with health benefits.
In Denver next year healthcare payment hikes will be 20-30%.
Indiana Medicaid needs an additional $71.2 million from the legislature to cover this year’s shortfall plus an additional $446 million more over the next two years.
An article in the New York Times discusses the state of emergency medicine with many hospitals in the urban centers on diversion a larger percentage of time. This is due to not only ED overcrowding but also a shortage of inpatient and especially ICU beds. There are less nurses, the patients are older and sicker and managed care patients and the uninsured use the ED as their physician. The JCAHO’s head Dr. O’Leary thinks this is just a part of the usual wax and wane of medical care and will resolve itself. He wants to see scientific evidence that this is a trend and not just a sporadic fit. He also states that there will need to be a lot of "dead canaries" before public policy makers get moving.
The Portland Business Journal has a story about the physicians who get called in to see ED patients and then need to follow them in their offices. The physicians are stating they do not have the time to care for these extra patients. The large increase in patients is impacting on the time the physicians have for their own patients and their own families.
Say good-bye to Foundation Health Systems. It has officially changed its name to Health Net and will convert all its products to the new name over the next year.
The Phoenix Business Journal reports applications to Arizona Medical Schools are down 7-10% annually, as have the rest of the nation. The decline has been blamed on the good economy, dissatisfaction by practicing physicians, a higher cost and more time for a medical education and significant competition for the medical school applicant by other healthcare entities. On the other hand, the quality of applicant is high and the diversity is greater.
Stanford University has named Dr. Phillip Pizzo the new medical school dean. Dr. Pizzo comes as the physician-in-chief of Boston’s Children’s Hospital.
Modern Healthcare announced its top 100 hospitals in the US. No Northern California hospital was on the list.
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.