Monthly Commentary from the Executive Director - Monday, April 1st, 1996

"Rural Seniors Are Shut Out Of HMOs"

From the front page of the St Paul Pioneer Press, Final Edition, 3/18/96; complete article on RWHC web site:

"Leland Dalan of Milan, Minn., says Medicare takes care of his basic medical needs. 'I've got no complaints about what I'm getting,' said Dalan, 74, a retired farmer and service station operator. But 'it's not fair' that he and his fellow seniors in the rural Midwest are, in effect, subsidizing extra health benefits - such as free prescription drugs, eyeglasses, hearing aids, dental care and even diet classes for Medicare beneficiaries in New York City, Miami and Los Angeles."

"Medicare, the government's giant health insurance program for the elderly, pays health maintenance organizations up to $759 a month to provide care for each senior citizen they enroll in New York City. But Medicare would pay an HMO only $229 a month to care for Dalan and his fellow seniors in Chippewa County in western Minnesota."

"In other words, Medicare pays more than three times as much for health care for New Yorkers as it does for Chippewa County residents - even though Medicare beneficiaries in both locations paid the same tax (2.9 percent of wages) and have the same premiums ($42.50) deducted from their monthly Social Security checks for Medicare supplemental insurance."

" 'It's a gross inequity,' said Rep. Steve Gunderson, R-Wis., chairman of the bipartisan House Rural Health Care Coalition. Medicare's low payment rates in rural counties are 'unfair because they represent the domino effect of taking the disparity between urban and rural (health care) and multiplying that over a series of years to make a bad problem worse.' "

"Rural residents aren't the only ones short-changed by the system. Twin Cities seniors don't fare much better. Metro seniors can enroll in HMOs - the seven-county metro area is the only part of the state where that option is available - but Medicare's payment rates for the Twin Cities are so low relative to other urban areas that HMOs don't offer very attractive health packages to seniors, and relatively few of them join."

"HMOs are eager to get the Medicare business, but only if it is profitable. In the Midwest, Northwest and most of rural America, Medicare doesn't pay HMOs enough to cover the costs of care, much less make a profit, said Susan Foote, Washington coordinator for the Medicare Fairness Coalition, an organization of doctors, hospitals and other health providers in 11 states, mostly the Midwest and Northwest."

" 'That system penalizes the Upper Midwest for getting its house in order and being efficient and cost-effective,' said Tim Size, executive director of the Rural Wisconsin Health Cooperative. Medicare's monthly HMO payment rate is less than $300 per beneficiary in most of rural Minnesota and Wisconsin. Foote said HMOs need around $350 to break even. Those rates are low because Minnesota and Wisconsin seniors in the fee-for-service system simply don't use medical services as much as those in other parts of the country."

"Although it's unlikely Clinton and Congress will agree on a Medicare package this year, federal policy makers will have to address the issue within a few years to prevent the hospital trust fund from going broke. When they do, Gunderson is confident they will address the issue of geographic inequities. 'We have won the intellectual and political debate,' he said. 'Everybody now concedes there's a problem ... (and) it has to be solved. So we've got the ticket to get on the train. The question now is: When is the train leaving the station?' "

Key Medicare/Medicaid HMO Limitation

HCFA Press Release, 3/26/96:

The Department of Health and Human Services today announced a regulation designed to protect beneficiaries enrolled in Medicare and Medicaid managed care plans by placing certain limitations on physician incentive arrangements that could influence physicians' care decisions.

Many managed care organizations use financial incentives to deter inappropriate and unnecessary care, including unnecessary referrals of plan members to specialists or for expensive procedures.

The final rule, was published in the 3/27/96 Federal Register, requires plans to disclose physician incentive plans to HHS' Health Care Financing Administration or to the state Medicaid agency, and to provide a summary of the plan to enrollees, if requested.

For example, some plans pay their physicians a fixed fee per patient per month. This arrangement, known as capitation payment, makes the primary care physician liable for any costs the patient incurs for specialty care made at the referral of the primary care physician. Thus, the more referrals the physician makes, the lower payment the primary care physician retains. This leads to an incentive to minimize referrals.

In addition, the regulation outlines the requirements for managed care plans with physician incentive plans that put physicians at substantial financial risk for referral services. Such managed care plans will be required to put limits on financial losses for their physicians, as well as to conduct annual beneficiary surveys.

"No patient should have to wonder if their doctor's decision is based on sound medicine or financial incentives," said HHS Secretary Donna E. Shalala. "This regulation should help put Americans' minds at rest."

"The final rule addresses some of the concerns of Congress and the public about the pressures and incentives HMOs create for physicians' care decisions," said HCFA Administrator Bruce C. Vladeck.

The regulation applies to physicians providing medical care through health maintenance organizations, competitive medical plans and health insuring organizations. Under the regulation, HCFA may impose intermediate sanctions and HHS' Office of the Inspector General may impose civil monetary penalties upon Medicare or Medicaid managed care contractors who fail to comply. Some of the rule's key provisions are:

· Plans would be prohibited from making specific payments to physicians to limit or reduce medically necessary services to a specific enrollee.

· A physician group is at "substantial" financial risk if more than 25 percent of its potential payment is at risk for services it does not provide..

· If the physicians are at substantial risk, then the prepaid plan must provide adequate protection to limit financial losses. Plans have the option of providing protection for either 25 percent of the total potential payments or a fixed amount per patient­p;with the amount depending on the number of patients served by the physicians.

· If the physicians are at substantial risk, then the prepaid plans must conduct annual beneficiary surveys. The plans must survey enrollees and disenrollees with questions on satisfaction, quality and access to services.

Yet Another ProPAC Kick At The Cat

The Congressional track record of actually listening to its own Medicare advisory panel, the Prospective Payment Commission (ProPAC) is dismal. But ProPAC's annual report does serve at least one purpose in keeping alive the hope that rational analysis can lead to meaningful reform. From their 3/1/96 Report And Recommendations To The Congress:

"Recommendation 4: Setting and Updating the ("HMO") Capitation Rates. Geographic variation in the capitation rates and the volatility of the rates from year to year should be reduced. The Secretary should develop and test alternative payment methods..."

"Recommendation 5: Improving ("HMO") Risk Adjustment Methods. The methods used to set Medicare capitation rates should better reflect variation in the likely use of services (among competiting plans)..."

"The effective risk adjustment of payments to health plans participating in the Medicare program is crucial to prevent rewarding or penalizing plans unwarrantably. It is equally essential to ensure that the financial burden of caring for Medicare beneficiaries is allocated fairly between the capitation program and the traditional fee for service program."

"The current knowledge base is not adequate to support highly effective risk adjustment methods. Moreover, health risks and the variations in propensity to use health services may never be sufficiently understood to adjust fully for differences in expected spending among individuals. Nevertheless, the methods used in the Medicare risk program could be improved."

Making Book On Clinton-Dole Race

To facilitate your betting prowess, until the election I'll be graphing data showing the results of the polls that ask "if the election was tomorrow and the two candidates were Clinton and Dole ...would you vote for Clinton ...for Dole?"

Data from PoliticsUSA web site.

This Is Your Life, Fast Forward?

"This Is Your Life" may soon refer to more than reruns of the 50's television show. Ethical and policy considerations for genetic counseling are not new, but I believe it is fair to say that they've been seen as somewhat arcane by most of us. Not any more. More to the point, if you could buy knowledge now of your final ten years, would you? The following quotes are from an article written by Daniel Q. Haney, AP wire service, 3/21/96.

"For the first time, brain images have captured the insidious destruction of approaching Alzheimer's disease in people whose thinking and memory are still rich and vigorous."

"Combining brain scans with careful genetic screening, doctors can actually see bad spots inside the brain that are the all-but-certain early stages of the devastating illness."

"This latest innovation means doctors may be able to diagnose Alzheimer's more than a decade before it actually starts to steal its victims' mental powers."

"The new technique is part of a whirlwind of research that over the last three years has brought doctors much closer to understanding and perhaps even treating Alzheimer's disease. All of it stems from the surprise discovery that a gene implicated in heart disease also appears to be involved in most Alzheimer's cases."

" 'Right now, blood tests should not be used to predict a person's risk of developing Alzheimer's,'' Dr. Eric Reiman, study co-author cautioned. ``They don't tell us for sure whether they will develop this terrible illness. They don't tell us when they will develop symptoms, and they don't tell us what we can do about it.' "

The above report left me spinning with questions: If I tested positive, what would I do differently, who if anyone would I tell, who could find out, what would they do, could I lose my health insurance? What would be the effect on the life insurance sector and the budding business for long term care insurance? Would I want to know? Could I afford not to? This discovery will hopefully lead to a medical treatment or cure for Alzheimer's. However, in the meantime, our knowledge may have again jumped passed our ability to cope, a typical twentieth century "sorcerer's curse."

MD Residents: Generalists Up, Specialists Down

March 20th­p;Match Day; The National Resident Matching Program had good news for community health, bad news for academic medical centers dependent on attracting medical students into specialty programs.

"For the second year in a row, more than half of graduating U.S. medical school seniors will pursue training in one of the generalist disciplines, while the number of students entering such specialties as anesthesiology and diagnostic radiology dropped significantly... Of the 14,539 U.S. medical school seniors participating in this year's Match, 54.4 percent will enter residency training in one of the generalist disciplines."

(Note that frequently pediatric and internal medicine residents later choose subspecialties.)

Study Abroad In Wisconsin

Study Abroad. So begins a particularly eye catching advertisement for a June 3-15 program at Memorial Hospital of Lafayette County, sponsored in part by the Southwest Wisconsin Area Health Education Center. "The summer institute is a two-week intensive experience for students in health profession disciplines of nursing, medicine, pharmacy, physical therapy, social work and the physician assistant program. Activities will include a lecture series, clinical opportunities, shadowing local health professionals, cultural experiences and community based activities. Application materials are available from Ann Hayes (608-265-3762) or Tammy Quall (608-831-2168).

AHEC Shifts To In-State Support

At the 12th hour of this session, the Wisconsin Senate has passed a bill to provide supplementary funding for each of Wisconsins four local Area Health Education Center (AHECs); Assembly approval and the Governor's signature is hoped for. The additional $7,500 per year per Center is truly welcomed but as importantly it puts us over a "federal match" threshhold, significantly enhancing our state's competitive advantage for scarce federal funds.

As we begin phasing off of our federal start-up funding a marketing plan has been developed to guide this critical statewide transition to State & local funding, an excerpt:

"The Wisconsin AHEC system, with established links to academic institutions, communities, and the private sector is one of the primary organizations in Wisconsin that can effectively improve the quality, supply, efficiency, distribution and utilization of health care professionals in underserved communities. The Wisconsin AHEC system has a distinctive competency to build partnerships through its intimate knowledge of both community and academic partners."

"AHEC can build on these strengths and develop its expertise in program areas that foster long term partnerships between these two groups. Through these partnerships, Wisconsin AHEC can develop a structured approach for change in the way we educate health professionals and improve care in those communities."

If you have suggestions or comments related to AHEC this would be an excellent time to call either of the two Co-Directors Cheryl Maurana (414-456-8291) or Murray Katcher (608-262-8416) or myself as Chairperson of the AHEC Statewide Program Advisory Committee.

"Specialists have it easy,
maintaining expertise within a single discipline.
We in rural health are generalists, cutting across all major health questions, asking how being rural makes a difference."


Court Declines BlueCross Bludgeon

The Supreme Court declined to take up the bludgeon offered it by BlueCross against Marshfield, lending credence to Marshfield's oft stated position that this was not a case primarily about antitrust but an example of an insurer's attempt to use the law to coerce a business deal and provider compliance. Still to be resolved: Marshfield looks forward to resolution of the one remaining issue (possible inappropriate division of a market between Marshfield and Wausau) that had been previously remanded to Judge Crabb in Madison.

However unavoidable, speculation about the motivation of individual behaviors in this case should not deflect us from the ongoing need to fine tune our understanding of what constitutes appropriate antitrust enforcement in rural health. Excerpts from the Dow Jones & Co., Inc. wire service:

"The Supreme Court refused to review a lower court ruling that threw out most of an antitrust judgment for the Wisconsin Blue Cross & Blue Shield in its battle with a network of private doctors in that state."

"The case has been closely watched because the federal appeals court based in Chicago ruled that the provision of medical care by health maintenance organizations doesn't constitute a separate market for purposes of the federal antitrust laws."

"Critics of the 1995 appeals court ruling, led by Wisconsin Blue Cross, contend that if followed broadly, it would insulate certain aggressive HMOs and their affiliated doctors from being sued for collusive or monopolistic practices that lock out potential competitors."

Organizing For The Future

Having had more than a desired amount of quality time this month negotiating with a prominent unnamed Wisconsin insurer, the academic paper noted below struck me as particularly on target. While rhetorical references to the threat to rural health of corporate colonization may have a certain panache, it is useful to read the same perspective, from an objective source.

From the New York Rural Health Research Center, Working Paper No. 12, March 1996, A Provisional Framework for the Economic Analysis of Managed Care Development in Rural Areas:

"Rural markets are not currently characterized by numerous providers nor numerous managed care firms. This situation is not likely to change. Therefore, the kind of managed care plans that develop and grow will not be determined in competitive arrangements. Rather the development of managed care plans in an area is likely to be the result of aggressive bargaining between limited numbers of area providers, managed care plans, and the payers (employers and government). The results of this counterpoise bargaining process are largely dependent upon strategies, leadership and bargaining strength of each of the parties."

"Our analysis would indicate that the current organizational integration of medical care services in an area may well be a major factor in determining the outcome of the bargaining process. The presence of a weak or divided delivery system will limit the vitality and validity of local providers' bargaining positions. Because rural populations, by their very nature, have few close substitutes for services available to them, there is likely to be substantial asymmetries in the bargaining power relationships in the bargaining. Consumers, in particular, seem to have very little role in the process."

"As a result, the outcomes are likely to be eventually dominated by one set of powerful 'stakeholders', often either an organized provider group, such as a integrated health system, or an outside of area managed care plan. The results of this process will influence the volume of health care dollars coming into an area (and going out), the distribution of those resources across providers and across patient insurance types, and the patterns of care for many years to come."

Lemmings - The Sequel

Maybe we all don't need to think alike. According to a report in the 3/18 issue of Modern Healthcare, "the vertical integration of hospitals, physicians and health plans is 'the grand illusion in American healthcare,' a leading healthcare prognosticator asserted last week."

"And he warned that healthcare executives should think twice before drinking an elixir that's making no one healthy except the consultants peddling it. That's the outlook from the Institute for the Future, a Melo Park, Calif., organization headed by J. Ian Morrison."

"Morrison vented his contrarian views to about 1,000 listeners at the American College of Healthcare Executives' Congress this month in Chicago... professed his admiration for the Canadian system and then went on to cheerfully disembowel the conventional wisdom in the United States."

" 'You can't invoke the magic of the marketplace to control healthcare costs and then get upset when some people make too much money.' HMOs, he said, are being rewarded by the market 'for sticking it to hospitals and specialists,' as they were supposed to."

Not-For-Profit Hospitals Back To Future?

The following is an edited portion of a broadcast transcript from National Public Radio's Morning Edition, 3/12/96. While it is about the struggle of Catholic Hospitals, it also encompassed well the competing visions of community non-profits versus for-profit medicine:

Sister Carol Keahan: The Catholic Hospital mission is about providing a Christian healing presence to our brothers and sisters who are vulnerable because of their illness or vulnerable because of their illness and their economic problems.
NPR: Because they must stay true to this mission, the Catholic Hospitals face a more uncertain future than other hospitals. They have to compete in an increasingly tough market while still reaching out to vulnerable people like the poor, the uninsured and illegal immigrants, regardless of their religion.

Paul Queely (Queely is with Welsh, Carson, Anderson and Stowe, a Wall Street investment firm that does leveraged buy-outs of hospitals and healthcare companies.): By and large, I think the Catholics will slowly fade away over the next 10 to 15 years... The Catholic mission, I don't think, is doable right now. Healthcare is becoming a business and as healthcare becomes a business, those who are not professional operators are going to have an awful time of surviving.

NPR: He says the Catholics would be better off using their money for education or nutrition programs because they're not very good at running hospitals.

Queely: They're not really willing to make the tough choices today's well managed hospitals have to make. When we acquire hospitals, we can tend to lay off upwards to 30 percent of the workforce and not affect direct patient care at all. Catholics aren't willing to make those hard choices."

NPR: Queely says if Catholic hospitals were answerable to shareholders they would make those choices and run more efficiently. But Sister Carol, who has a master's degree in business, says her hospital is run like a business but with different priorities. And the members of the community who have expertise in health, law, business and social services, who help her oversee the hospital, personally have no financial interest in it. The idea that they should makes her blanch.

Bill Cox (Catholic Health Association): Hospitals run by for-profit corporations will ultimately lose their Catholic identity. But he predicts that Catholic Hospitals that manage to survive will eventually make a comeback. When we get more of the inefficiencies out of healthcare, you're going to see a lot fewer for-profit hospitals because the profit isn't going to be there and you're going to see Wall Street a lot less enamored with healthcare than it is today. And hospital care will be back in its traditional not-for-profit setting.

Cheaper Drugs Can Cost HMOs More

From 3/20/96 AP wire service by Steve Sakson:

"HMOs that steer their patients to cheaper prescription drugs are actually increasing the cost of care in the long run because some of these people are getting sicker, a new study says. The study challenges a key principle of health maintenance organizations­p;that cheaper medicines such as generics or older formulations reduce costs without degrading quality of care."

"As restrictions on drug choices increase, 'researchers found more patient visits to physicians, more emergency room visits and more hospitalizations, all of which would likely lead to an increase in medical costs,' the study said. The chief author said it shows that health plans must pay more attention to a patient's overall treatment program­p;not just on individual components like the cost of drugs."

" 'If patients and their clinicians work together to get that patient better as quickly as possible, that will lower costs, even if it means taking a more costly drug,' said Susan Horn, a senior scientist at the Institute for Clinical Outcomes Research in Salt Lake City."

" 'The study was welcomed by the nation's biggest HMO­p;6.5 million member Kaiser Foundation Health Plans. Kaiser has liberal policies on drug choices and puts doctors, not business executives, in charge of such decisions,' said Dr. William Elliott, who chairs a committee that picks drugs for Kaiser's northern California region."

" 'It would never be in our interest to be penny wise and pound foolish because cutting back in one area obviously would increase costs in another,' he said. Elliott acknowledged that some HMOs impose severe restrictions on drugs that can be counterproductive. He wouldn't name them."

HMO Database On Quality Being Created

"The National Committee for Quality Assurance (NCQA) will create a national database for purchasers and consumers on the quality of managed care plans. The Quality Compass report, which will be available 8/96, will integrate and summarize NCQA accreditation information and data from the NCQA's Health Plan Employer Data and Information Set (HEDIS). NCQA Pres. Margaret O'Kane called Quality Compass an important development 'in the drive to make meaningful information on quality accessible to the public.' "

"The centralized database will give health care professionals 'one-stop shopping' for accreditation and HEDIS information, as well as streamline the reporting process for managed care plans. It will also allow plans to compare their performance against regional and national benchmarks. According to Dr. Steven Udvarhelyi, a centralized database with information submitted electronically is the 'logical next step in making information on health plan performance publicly and broadly available.' Quality Compass with be available in both printed form and on CD-ROM; the information will be updated semi-annually." (NCQA release, 3/21).

Sewer Wars Backup On Rural Health

Milwaukee County and its neighbors have not been able to reach a mutually agreeable resolution to an increasingly heated dispute about the handling of the suburb's affluent effluent. As this dispute took on mythic dimensions, it acquired its own proper name, the Sewer Wars. I had not properly anticipated its effect on rural health as my experience with this issue has been limited to a parochial battle over the placement of a columbarium (call if you need details).

Back to the Sewer Wars. The Wisconsin Health and Educational Facilities Authority (WHEFA) had engaged the services of a lobbyist to help shepherd through this legislative session a number of technical amendments to the statute that authorizes its operations. In particular, we had wanted to make it clear that entities with a consolidated license under the new Rural Medical Center licensed would continue to have access to state tax exempt bonds.

On an unexpected vote of 8 to 6, the Joint Finance Committee moved that all WHEFA amendments be held over until the next legislative session. According to a reliable but unconfirmed source, the problem was that we had chosen a lobbyist that a majority of the members of the Joint Finance Committee thought needed his sails trimmed for too vigorously backing the "wrong" side in the Sewer Wars. As a consequence, his legislative proposals just didn't do so well.

As part of the Rural Medical Center rule making process already underway, there will be language to accomplish the same end, but not until next year. Hopefully we can keep our hands clean.

RWHC Manager Clinical Services

Mary Jon Hauge, P.T.

Mary Jon will have been with the Cooperative, 15 years this fall.

She lives in Prairie du Sac with her husband (a wildlife biologist) and three children. A key interest is following her kid's sporting events.

In the "large" amount of free time characteristic of all Cooperative managers, she pursues interests in gardening, baking, reading and travel.

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