Monthly Commentary from the Executive Director - November 1st, 1996

Divorce HMO Style, Who Gets The Kids?

"Marriage" and "divorce" between buyers and sellers is at the very heart of dynamic markets and price competitive health care. Or so Wisconsin and nearly 300,000 HMO enrollees are beginning to experience:

Associated Press Wire Service, 9/28/96: "Aurora, which operates more than two dozen hospitals and clinics in Wisconsin and PrimeCare, the state's largest health insurer, have severed their relationship, effective Monday. The decision followed unsuccessful negotiations with United HealthCare, of Minneapolis, PrimeCare's parent company, over how much money and control should be given to Aurora hospitals and doctors.... Larry Rambo, president of PrimeCare, said the insurer would keep paying for visits to Aurora health centers for some time to prevent any immediate disruption for patients and employers."

Alternative: If an HMO-Provider Agreement is terminated, the HMO should remain obligated to pay the terminating providers for otherwise reimbursable services until the sooner of (a) the end of all applicable enrollment cycles, or (b) twelve months following the effective date of termination.

When buyers and sellers in our more competitive markets go their separate ways, what do we want to be the impact on us, the provider's patients and insurer's enrollees? What about the promises made or implied to when we chose (or have chosen for us) a particular health plan? Notwithstanding the fine print, it is not likely for insurers to advertise access to their provider networks on an "as available basis." We would all come out ahead with an assurance that we will not involuntarily lose access to our physician or hospital when provider contracts are terminated.

So far we have been avoiding serious discussion about how we will manage managed care; requiring this language in HMO contracts will allow for orderly transitions--a common sense and simple rule to protect the public and the integrity of health care markets.

[ The Alliance (an employers' coalition based in Madison) has started to use language similar to the proposed alternative in some of their contracts. ]

Drive safely and hug a hunter. This is the peak season for deer-car crashes in Wisconsin, according to the Department of Transportation--40 percent of all deer-car crashes in the state last year occurred in October and November. Annually, crashes caused the deaths of 9 people, with another 84 being seriously injured.

New Take Over Target--Charitable Assets

The National Council of Health Facilities Authorities (for tax-exempt bonds) just had their annual fall conference in Lake Geneva, Wisconsin. A key speaker was Linda Miller, President of Volunteer Trustees Foundation for Research and Education (hospital trustees). This group tends to be "conservative" and normally resistant to regulatory interventions but has been motivated to support state governments taking action to curb what it sees as a historically unprecedented transfer of charitable assets to the for-profit sector.

The Trustees Foundation has proposed "Guidelines For Oversight Of Sale And Joint Venture Transactions In Which The Assets Of Non-Profit Enterprises Are Transferred To For-Profit Enterprises." Their bottom line: "if a deal looks too good to be true, it probably is." Their guidelines for state policy development include:

Safeguarding the Value of Charitable Assets:

Safeguarding the Community from Loss of Essential Health Care Services:

Linda Miller concluded by saying that there is "no question that some of these deals can't stand the light of day" but without public disclosure they have seen multiple communities "being run over by slick, well oiled machines." More information can be obtained by calling the Foundation at 202-659-0338.

N C Q A Watch These Initials

From The New England Journal of Medicine, September 26, 1996, "The National Committee for Quality Assurance," an article by John K. Iglehart.

"The quality of medical care provided by managed-care plans is an increasingly complicated and controversial topic. Traditionally, the quality of care has been measured by professional judgment, often rendered subjectively in individual cases. Now, as health care delivery and financing are being reordered by the rapid growth of managed care, physicians and the health plans with which they contract are being called to greater account for the quality of the services they provide."

"The scrutiny is coming largely from corporations and governments, which are concerned that as health plans compete, they may stint on services to reduce prices. In addition, the managers of many health plans believe that a stamp of approval of the quality of their care from a recognized, independent review body will help increase their share of the insurance market."

"The movement to measure medical quality through accreditation and performance indicators is a fledgling one, driven largely by purchasers of health care. Although accreditation remains a voluntary process, most of the large managed-care companies now consider it essential in highly competitive markets. Federal and state governments, which have a legal obligation to safeguard people who rely on publicly funded medical care, and many private foundations value the NCQA as an ally that can help pressure health plans to ensure and improve the care they provide."

"Nonetheless, the science of quality measurement is in its infancy. The NCQA has been thrust to the forefront because of the support it enjoys among employers and because of the vacuum left, in part, by the reluctance of the AMA and other medical organizations to take the lead. Recently, the AMA decided to develop a quality-assessment program for physicians' offices, in large part because many doctors feel harassed by the repetitive surveys conducted by or on behalf of the health plans with which they contract."

"The NCQA has acknowledged that it must engage the medical profession more directly and is creating a physicians' advisory body. In the past year or so, people representing private purchasing coalitions, states, the elderly, and other consumers of care have joined the board of directors."

"At a time when increased government regulation of health care is in great disfavor, the NCQA is thriving. However, this new organization suffers from all the pains attendant on rapid growth. It is uncertain whether its voluntary processes are capable of accommodating the conflicting interests of patients, payers, physicians, and hospitals."

Medicare's Flawed Formula Costs Elderly

The first chart below shows the average out-of-pocket premium in several markets as a function of what Medicare pays the HMO. Not surprisingly, Medicare enrollees pay more when Medicare pays the HMO less. The second chart below shows Medicare HMO rates in many counties (mostly rural and all of Wisconsin) well below the national average. Lots of numbers and alphabet soup but bottom line is that the elderly in Wisconsin and in most rural counties have to pay out-of-pocket premiums not required elsewhere.

AAPCC? Memorize this definition, you will be seeing it more and more: Roughly speaking the AAPCC is the adjusted (for age, sex and disability) average per capita (average for enrolled Medicare beneficiaries) cost (to Medicare under its "fee-for-service" system in each county per month). Under the Medicare Risk program, participating plans are currently paid 95 percent of the Adjusted Average Per Capita Cost (AAPCC) for each Medicare enrollee.

Data for the first chart is from "Growth In HMO Share Of The Medicare Market, 1989-1994" by Pete Welch in Health Affairs, Fall, 1996. Data for the second chart is from the Health Care Financing Authority's WWW site.

Old Data Maintains MD Payment Inequities

From American Medical News, 10/7/96:

"Medicare officials have canceled a survey they once said was critical to their congressionally mandated effort to revamp the practice cost portion of the program's physician payment scheme. Primary care specialties, who're expected to benefit from the changes, contend that the demise of the survey shouldn't delay lawmakers' January 1998 deadline. But a coalition of procedure-oriented specialties, who face payment cuts of up to 30%, says more time is needed to develop the data needed to ensure accurate results."

Medicare Commission Now More Likely

You read it here first a year ago; now mentioned by both candidates in the Presidential debate, seems more likely than ever:

An unnamed Washington source believes that it is almost certain that the Congress will punt to a bipartisan commission to balance the Medicare budget. This projection is based on the wide gulf between President Clinton and the Republicans as well as the deep splits within both parties. Such a Commission would be given a fixed time limit and its recommendation, like that made for military base closings, would have to be voted up or down, no amendments.

IPAs--No More Dr. Dangerfield

The following is from "the new Clout of IPAs," by Mary Chris Jaklevic in a supplement to Modern Healthcare magazine, Modern Physician, October, 1996:

"Until recently, independent practice associations were the Rodney Dangerfields of healthcare. They didn't get respect. But that's changing as IPAs prove they can take risk and attract new consumers to managed care."

"Unlike multispecialty groups, which consolidate assets among physicians, IPAs are contracting networks of solo practitioners (or clinics) who maintain their own offices and staffs."

"HMO growth is triggering a new generation of IPAs, distinguished by market clout and commitment to managed care."

"While the West Coast leads the nation in IPA development, elsewhere activity is building. In 1995, 39% of all physicians belonged to IPAs and 11% of all physician revenues flowed through IPAs, according to a survey by the American Medical Association."

"The main appeal of IPAs is marketability. HMOs capture market share by offering a wide choice of physicians, and IPAs are a quick and inexpensive way to assemble a vast network... In advanced markets such as California, IPAs have medical management, utilization controls, primary-care leadership and shared information systems--everything short of merged assets..."

"In fact, many IPAs refer to themselves as 'virtual' medical groups... However, a major problem for IPAs is retaining capital. Network physicians are even more reluctant than those in groups to set aside profits for long-term investment."

"IPAs might not be as efficient in medical management, but they make up for it with higher productivity... Time will tell whether these 'virtual' medical groups will consolidate their assets to create traditional multispecialty groups."

"But the trend at the moment tends to be towards flexibility and choice. Further, buying practices is a poor strategy in markets with an oversupply of physicians which describes much of the country."

How Little Hospital Care?

From an American Medical Association Science News press release, week of 10/2, "HMOs Put The Brakes On Hospital Use, Costs In California:"

"James C. Robinson, Ph.D., M.P.H., from the School of Public Health at the University of California, Berkeley, studied information about hospitals (California for-profit and nonprofit hospitals with more than 25 beds) obtained from four data systems maintained by the California Office of Statewide Health Planning and Development. He discovered that the hospital expenditures grew 44 percent less rapidly in markets with high HMO penetration than in markets with low HMO penetration."

"Dr. Robinson writes: 'HMOs have traditionally reduced rates of hospital utilization by 40 percent, compared with unmanaged fee-for-service insurers. In California, medical groups paid on a capitation basis are continuing to push down on hospital utilization, both through fewer admissions and shorter lengths of stay, thereby achieving the lowest rate of hospital use in the nation.' "

Dr. Robinson writes "that during the 1990s, HMOs reduced cost inflation primarily by reducing admissions and length of stay and secondarily by reducing the intensity of services provided per patient day. HMOs accelerated the substitution of outpatient for inpatient surgery, the shift from acute to sub acute inpatient days, and the reduction of psychiatric hospitalization."

"In the coming decade it is likely that this pattern of relative effects will be reversed. Rates of inpatient days cannot continue to decline indefinitely, especially in states such as California where utilization has already been reduced considerably. The biggest impact will come through consolidations of hospitals and hospital systems that reduce excess capacity. The longer term impact of managed care on hospital costs will depend on whether market forces can continue to limit growth in the intensity of services provided per patient day. "

Rural Health and Rural Economics

The following is from a report presented at the 10/3/96 meeting of Wisconsin's Rural Health Development Council based on work done at the University of Kentucky:

NRHA To Consider Expanded Participation

The National Rural Health Association Board of Trustees at their November meeting will be considering a proposal to promote the expansion of community participation in state and national rural health policy development. The proposal is based on the principle that rural health advocacy is more effective when it better mirrors the elements of a successful community--"strong and diverse leadership, vigorous and grassroots-oriented community action."

"State and national forums need to become much more proactive in getting over traditional barriers to seeking out and bringing to the table a more diverse constituency. This is not a '70's' issue of assuring "fair" representation but a '90's' issue of becoming more effective through community based thinking and action and expanding the scope of coalitions open to us. While we have expanded who is at the table locally, we by and large have continued business as usual as we go about our state and national advocacy efforts, unnecessarily remaining isolated from natural allies by our professional 'rural health' identities."

Policy Roots For Rural Medicare Reform

A draft Compendium Of Recommendations Sensitive To Rural Health And Relevant To The Anticipated 1997 Medicare Reform Debate has been completed and will be available for the NRHA Rural Health Policy Board at its November meeting in Chicago.

The summary of key recommendations made over the last few years was taken from nineteen sources and are organized into the following issue categories:

Contact RWHC or NRHA if you would like a copy of this twenty page working paper.

Medicaid HMOs Need Collaborative Outreach

The Rural Wisconsin Health Cooperative has joined with a number of organizations which are interested in collaborative initiatives aimed at reducing the incidence and associated costs of preventable illness and injury to discuss the formation of "rural zones of collaboration." These organizations include HMOs active in southwestern Wisconsin, the Wisconsin Health and Hospital Association, The Alliance and your Bureau of Public Health.

The impetus for the formation of this work group was the rapid changes taking place in the delivery of health care and the opportunities created by those changes. Since then we have focused on developing a number of collaborative efforts including enlistment of provider support for the Women's Health Initiative (a National Institute of Health study involving 163,000 women), collective support for local community needs assessment, promotion of insurer collaboration with providers, and an initiative to reduce teen alcohol use.

At our most recent meeting, discussion centered on the difficult task of assuring HealthCheck exams and timely immunizations for infants and young children enrolled in Medical Assistance Managed Care. Our group agreed that in order to screen at least 80% of the HealthCheck eligibles and immunize at least 90% of the infants and preschoolers on time, the full efforts of both local public health departments and HMOs will be necessary. Furthermore, we agreed that in order for those efforts to be well coordinated, local health departments and HMOs must begin to plan for the integration of delivery and record keeping systems.

To increase the number of HealthCheck exams and timely immunizations, it was agreed that a series of regional meetings would be helpful. Such forums would facilitate HMOs and local health departments to identify and remove barriers to the delivery of these important preventive services.

The Department of Health and Family Services has indicated that this suggestion fits well into a plan that they already have underway for a series of regional discussions to further the Medicaid HMO expansion.

Primary Health Care Educator Award

(MADISON, October 10, 1996) -- Governor Thompson announced today that he has established the Primary Health Care Educator Award to recognize the important contribution made by these professionals to the health of Wisconsin citizens. The Governor made his announcement on National Primary Care Day, sponsored by the Association of American Medical Colleges.

"The health of our citizens relies on their access to preventive medical care, the type provided by primary health care providers," Governor Thompson said.

"The educators who encourage interest among students in primary care careers and promote community support of primary care are making a tremendous contribution to Wisconsin. They deserve to be recognized," he added.
Primary health care providers include physicians trained in family practice, general internal medicine, general pediatrics, general obstetrics and gynecology, nurse practitioners and nurse midwives, and physician assistants.

Academic and clinical faculty and community-based instructors affiliated with the state's two medical schools, the two physician assistant training programs and the nurse practitioner and nurse midwifery programs will be eligible for the award. A review committee composed of leaders of the Wisconsin primary care and health education communities will review the nominations and make recommendations to the Governor.

The first award will be presented later this year and annually thereafter during the week of National Primary Care Day.

For further information regarding the Primary Health Care Educator Award call Margaret Kristan, Primary Care Section, Division of Health at (608) 266-2833.

EMS Rural Representation To Be Improved

The following report of the October meeting of the state EMS Board is courtesy of the Wisconsin Health and Hospital Association and a welcome response:

"Executive Committee: Dan Williams, Chair, reported that this committee discussed the Physician Advisory Group membership and recommends opening up two more positions to increase physician involvement across Wisconsin, especially from rural areas. Discussion revolved around pressure from the Governor's office to increase involvement and the need to designate these as rural physician positions. It was moved and passed that two more physician advisory group positions would open. These seats would not be "designated" as rural, but the Board would consider rural physicians for these positions before others. Letters will be sent to providers in October outlining the procedure for nominating candidates."

Your End-Of-Life Preferences?

From "Preferential Treatment" by Katherine Esposito in the October 11th issue of the Madison, Wisconsin weekly, Isthmus.

"Seventy-five years ago, if a heart attack or stroke didn't deliver the fatal blow, a subsequent bout of infectious pneumonia usually did. For years, pneumonia was even called "the old man's friend" because of how quickly people died after contracting it."

"Nowadays, dozens of life-saving treatments conspire to save many lives that would have once been lost. But a life saved sometimes means a seriously impaired quality of life--the survivor, perhaps incontinent and unable to hold meaningful conversations, often requires round-the-clock nursing care. Living wills and power of attorney for health care, collectively called advance medical directives are designed to help people avoid such outcomes."

"But not all advance medical directives are created equal. In fact, living wills are effective only in a small number of cases because, contrary to the impression created by high profile cases... it's more likely that the patient's condition will be ambiguous--mentally incapacitated, yes, vegetative no."

"If the person had signed a power of attorney for health care, a lifelong friend, or a spouse, or an adult child--could advise physicians."

"The lesson here is that patients and their families should be actively involved in their own care, at the beginning of life, the middle and the end. At the very least, talk to your doctors about your values and wishes and, if you want to go further, complete an advanced medical directive."

A copy of the State of Wisconsin's authorized format for a "Living Will" or instead of that, a copy of the State of Wisconsin's authorized format of a "Power Of Attorney For Health Care" are both available at:

or call the WI Division of Health at 608-266-8475.

RWHC Product Catches On Nationally

Clear expectations benefit everyone. In fact, when people know what is expected of them, they often exceed expectations. This is true in any profession, but in health care-where change has forced dramatic new roles and ways of working at all levels-it is profoundly so. Managers need practical methods to assess and maintain staff competence. And all health care professionals need to know performance expectations whether they are being newly oriented to a position, playing a role in shared staffing or management, or simply working to stay abreast of new skills and technologies.

For the past four years, RWHC staff and member roundtable participants have committed to the development of competency based assessment and education materials. These group efforts have generated practical tools that can be utilized for initial job orientation, development of position descriptions, continuing education and performance appraisals.

We took a calculated business risk and began to market these materials nationally. Beginning in August, we have already met our sales target for 12 months, with requests for purchases coming from thirty states.

More information on RWHC competency based assessment and education materials is available at our WWW site under "Non-Member Services," by contacting Linda Briggs ( or by calling our office at 608-643-2343.

RWHC Admits Five Urban Systems

There is a growing perception that regional systems will develop increasingly aggressive positions and seek to dominate rural health rather than work with the local communities and other systems serving those communities. There is an opportunity to counter this perception if we can jointly identify and implement selected collaborative initiatives in the best interests of rural health.

Accordingly, following an affirmative response to earlier invitations, the Cooperative has admitted the following specialty provider based systems as Affiliate Members (non-voting); the University in Madison was already a member:

RWHC Administrative Services Manager

Carrie Ballweg

Carrie started with the Cooperative part-time in 1984 while in high school; becoming full-time after college.

With her husband and one year old son, she enjoys biking, walking and playing volleyball.

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