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

Who We Are Effects What We Spend

Steven Shroeder, M.D., President of the Robert Wood Johnson Foundation, gave the opening address at the recent annual conference of the National Rural Health Association. While not intending to justify America's significantly higher per capita health care costs, he gave us an interesting insight into the complexity of making international health care comparisons:

A telling indication about how we Americans are different is his observation that an American will accept a single diagnosis of having an incurable disease only 6% of the time while the English are eleven times more likely to accept the diagnosis and not seek a second opinion. Whether this is the result of something innate in our national character or more a reflection of our current health "system" is of course up for debate. The graphic below was created from data in Shroeder's paper, "The Health Care Cost Crisis In America," printed in The Pharos of Alpha Omega Alpha, Spring, 1994.

The Rural Health Improvement Act of 1996

Last fall Steve Gunderson and other leaders of the House Rural Health Care Coalition obtained an agreement from Newt Gingrich that if they cooperated on the budget bill he would let a rural health bill come to the floor for a vote. Introduced on June 27th; Gunderson's notes in the Congressional record that the Act will:

"... reduces the wide variation existing between urban and rural areas in the Medicare adjusted average per capita cost [AAPCC] payment made to health maintenance organizations (HMOs)"

"... provides grants to develop comprehensive plans to increase access to health care for rural communities, and technical assistance and development grants to assist hospitals in creating provider networks."

"... creates two new categories of limited-service hospitals under Medicare: Rural Emergency Access Care Hospitals provide only 24 hour emergency care to communities in need of an emergency facility, but not a full-service hospital. Rural primary care hospitals may provide a broader range of services and for a period of up to 4 days."

"... directs the Secretary of DHHS, when making new grants under the Public Health Service Act, to give priority to areas not presently served by community health centers [CHCs] and to CHCs located in or adjacent to community hospitals."

encourages "... the Federal Trade Commission should promptly complete its review of the anti-trust standard to be applied to provider networks."

"... exempts National Health Service Corps loan repayments and scholarships from federal income taxes and directs the Secretary of DHHS to give priority placement to areas that have created community rural health networks."

"... increases Medicare incentive payments from 10 to 20 percent for primary care providers in rural HPSAs."

"... directs the Secretary of Health and Human Services to develop a payment methodology under Medicare for tele-medicine services provided in rural areas."

While the bill has a reasonable chance of being passed in the House, I've been told that its success in the Senate is more in doubt, given the limited remaining floor time. Even if this bill does not become law, the effort will greatly help our prospects with the next Congress.

The following preliminary analysis of the effects of a fully phased in Rural Health Development Act of 1996 on Medicare HMO capitation rates (if it becomes law) is from Tim McBride, Assistant Professor of Economics, Public Policy and Gerontology at University of Missouri and with RUPRI (Rural Policy Research Institute).

It is important to note that these rates are after the transition is complete in the year 2000 even though they are expressed in 1996 dollars.

The reimbursement to Medicare managed care plans for insuring a Medicare beneficiary is a fixed sum per month, a capitation payment. The reimbursement rate for the "typical" beneficiary is expressed in terms of the adjusted average per capita cost (AAPCC).

Each county has its own AAPCC. The adjacent chart has aggregated counties into rural, urban, etc. but rates are developed based on a county specific calculation. Actual payments received by the HMO may be higher or lower dependent on the age, sex and other characteristics of the beneficiary. Tim McBride notes that:

"the rural/national ratio increases from .83 to .87 in adjacent rural and from .80 to .85 in non-adjacent rural"

"the minimum floor still hovers in the $350 area (in 1996 dollars) under these simulations and that represents a huge increase over current minimums; that this follows mostly from the 80% floor"

"the average rural cap rate would increase 8% without a "Budget Neutral Adjustment" (BNA), but 5.1% with a BNA. Urban rates would also climb without a BNA, but would fall with the BNA"

"the variation in rates would fall by a lot in rural areas, even relative to urban areas"

Medicare Fight On Money And Rules

The following is from an article by Spencer Rich in the Monday, June 24th edition of The Washington Post:

" 'The difference between President Clinton and the Republicans is not just the money,' said Chris Jennings, a White House health spokesman. 'Even more important than the money is what rules the program will operate under in the future.' "

Absence Of Safety Valve For Inflation

"The White House objected last year that there was no provision in the bill allowing the Medicare program to automatically increase spending levels above the annual caps if inflation proved greater than expected."

"However, Gail Wilensky, Medicare administrator during the Bush administration, said in an interview that while the bill did not have automatic inflation adjusters, she has no doubt that 'if a problem with inflation arose three to four years out, Congress would have to act and would act' to make adjustments."

Adverse Selection Against The Trust Fund

"Democrats contend that allowing Medicare beneficiaries to opt out of the existing fee-for-service program would undermine Medicare's financial condition by leaving the system overburdened with a disproportionate number of people requiring expensive health care, a process called 'adverse selection.' "

"Wilensky, who heads the PPRC and favors giving patients more options in Medicare, said the specter of adverse selection is definitely a problem, although its severity is unknown."

Allowing Balanced Billing

"Existing 'balance billing' limits on how much doctors can charge Medicare patients." Last year's GOP bill would have left the current 15 percent limit in effect for all Medicare beneficiaries who remained in the traditional Medicare fee-for-service program and also would have forbidden extra charges in some of the private plans such as HMOs. However, the GOP bill would have wiped out any limit on charges by doctors treating patients with MSAs or in private fee-for-service plans."

"Wilensky said she thinks allowing people to join private plans where there is no limit on balance billing need not produce great problems as long as they also have the right to choose an HMO where no balance billing is allowed or to stay in traditional Medicare with limits on such billing."

Medicare Inpatient Costs Decreased In 1995

The following is from the Prospective Payment Assessment (PPS) Commission's Medicare And The American Health Care System, Report To The Congress, June, 1996, pages 60-66:

"The 6.9 percent growth in operating costs per case in the eighth year was the smallest since the first year of PPS, and the rise of 1.3 percent in the tenth year was below economy wide price inflation. Costs actually decreased (for the first time) by 1.3 percent in the eleventh year" (Federal Fiscal Year 1995).

From the eight through the eleventh years, urban hospitals held their growth in costs per case to 2.7 percent annually, while rural hospitals rose at a 3.9 percent rate." In PPS 11, Urban hospitals had a PPS inpatient margin of 5.4% compared to that of .6% for rural hospitals. Exclusive of rural referral centers and those rural hospitals receiving a sole community provider payment supplement, the average rural hospital had a PPS inpatient margin of -2.5%.

But Note: "A hospital's basic DRG payment reflects its location, local wage rates, and mix of Medicare cases. These factors partly (emphasis added) explain why PPS payments are higher for some types of hospitals than others. Hospitals in urban areas receive greater payments per discharge than those in rural areas, reflecting historical and continuing differences in cost."

National & Wisconsin Democrats Crow

Abstracted from a June 5th U.S. Newswire article:

"The Democratic Party yesterday scored its most impressive victory in a state legislative election since November 1995 and, in the process, wrestled control of the Wisconsin State Senate from the Republicans. Democrats have now won 29 of 36 state legislative special elections across the country since November of 1995--a 83 percent win record for the Democrats."
"State Rep. Kim Plache defeated Republican incumbent George Petak in the 21st State Senate district in Racine County, Wis. Her victory shifts control of the Wisconsin State Senate to the Democratic Party and gives Democrats a 17-16 majority in that chamber."

" 'This confirms what we've been saying all along, that the American people trust Democrats more on the issues they care about most,' said Sen. Chris Dodd, general chairman of the Democratic National Committee. 'Local elections all across this country are going to Democrats, the clearest indication yet of the direction of the country heading into the November elections,' Dodd concluded."

"DNC National Chairman Don Fowler said 'All politics is local and when it comes down to it, people in towns across America believe that Democrats can better handle issues of education, crime, health care and Medicare than can the Republicans.' "

Integrating Provider & Community Values

Once a year the National Rural Health Advisory Committee (advisory to the Secretary of Health and Human Services and to the Congress) take one of its three meeting out of Washington. This year, we went to southwest Colorado in order to gain a better understanding of the low population densities typical of rural health in the west.

I was particularly impressed with the thoughtfulness of the work being done by the community and staff at the Indian Health Service Unit in Shiprock, New Mexico. I have heard a lot of us talk about the need for local providers to become more integrated with local communities but rarely have I seen it done so well.

While respectful of the Navajo, I don't believe that we all should run out and adopt another culture, just the opposite--that their value statement (below) serve as a benchmark for how health professionals and a ommunity can come together to forge a common vision, a vision that I suspect is and should be unique to each community.

The Indian Health Service Hospital, Shiprock, New Mexico,
Based On Navajo Beliefs And Values Of The Four Directions

EAST: White - Stands for Life: Growth/Physical Being

We believe and acknowledge the circle of life and value of people of all ages, recognizing that education and wellness is a life long process.

Therefore, our philosophy is to educate ourselves and our community to maintain a healthy lifestyle.

SOUTH: Turquoise Blue - Stands for Journey: Nurturance/Mental Being

We believe in the development of oneself socially, emotionally, spiritually and physically in order to maintain healthy lives.

Therefore, our philosophy is to promote/nurture health and provide quality health care.

WEST: Yellow - Stands for Relations and Family: Emotions/Protection

We believe there is strength in family, clan, community, and the nation.

Therefore, our philosophy is to work closely with the community in the provision of health care.

NORTH: Black - Stands for Hope: Wholeness/Spiritual Being

We believe there is a lesson to be learned and there is hope from the wholeness of the individual, community, and the earth.

Therefore, our philosophy is our service shall be provided with sincerity, dedication, commitment and compassion.

Alternative View On The Physician Surplus

From "Managing The Physician Workforce: Hands Off The Market Is Working" by Spencer Foreman in Health Affairs, Summer, 1996.

"In the health care system of the past, a surplus of physicians was seen as a cost generator because physicians were able to determine prices and create demand for their services. In a system dominated by managed care, a surplus will have very different consequences. It will move the supply toward a more appropriate mix of generalists and specialists. It will move physicians into the inner city and, over the long run, prove effective in reducing the number of training slots."

"The residual influence of the fee-for-service market, particularly for Medicare, is the length of the medical residency pipeline. It is still jammed with specialists in training; and the absence of well-disseminated market information on which medical students and residents can base career decisions will slow the process. Some issues, such as the difficulty of attracting adequate numbers of physicians to small rural communities may require approaches beyond the market."

Competition, Education & Research

The following is from "Academic Health Centers In A Changing Environment," by David Blumenthal and Gregg Myer in Health Affairs, Summer, 1996.

"The current tendency of our sample of Academic Health Centers (AHCs) to de-emphasize teaching and research raises basic questions about the future character of these institutions and about society's interest in the public goods they have produced. Under the pressure of market restructuring and changing public policy, are AHCs becoming fundamentally less "academic" or does their current deemphasis of academic missions represent a transient adaptation to the stress of health care market restructuring? More broadly, has a distracted health care system momentarily lost track of an enduring commitment to certain public goods, or has society made a (more or less) conscious decision to disinvest in academic missions?"

Man Bites Dog--Medical School Collaboration

Wisconsin's medical school deans Michael Dunn and Phil Farrell met with the Rural Health Development Council for several hours in early June to "provide their thoughts on potential areas of collaboration that could be entered into between the two medical schools." The schools were complimented on their current efforts in addressing the need for primary health care providers. However it was agreed that we were at a time in Wisconsin where significant additional major improvements could be accomplished. The Council went on to recommend that both schools build on their current success by formally committing to a collaborative process to further improve the distribution of physicians in Wisconsin's underserved communities.

Competitors Can Support Research

The Zones of Collaboration Task Force in southern/central Wisconsin is supporting the Women's Health Initiative, a National Institute of Health study that will ultimately enroll 163,000 women at 40 sites across the country. This is the "most far-reaching study of women's health ever undertaken. The study is focusing on strategies for preventing heart disease, breast and colorectal cancer and osteoporosis in post menopausal women."

The Task Force is requesting each of its otherwise competing HMO participants to assist the national site centered in our area (at the University of Wisconsin-Madison) in identifying potential study participants. The study is not part of the University Hospital and Clinic system and is not a substitute for a volunteer's normal source of health care.

This is the first attempt of the Task Force to test the idea of transcending the growing regional HMO-Insurer-System competitiveness to support activities that ultimately benefit all HMOs, all communities and each of us. As the UW site is one of the few in the national study that specifically targets women living in rural communities, it is particularly important that this site recruit a full complement of study participants.
The Women's Health Initiative is also looking for community partners to co-host orientation sessions in rural communities. Ideal partners are rural hospitals and hospital auxiliaries, church groups, public health departments, etc..

Interested organizations as well as those interested in personally participating in the study should contact Susan Dinaur at the Women's Health Initiative in Middleton, Wisconsin at 608-263-3237.

The Obsession To Gut The Hospital

From "Our Obsessive Quest to Gut the Hospital," by Uwe Reinhardt in Health Affairs, Summer, 1996.

"Nations with much lower levels of health spending typically have had far more hospitals beds, hospital admissions, and hospital inpatient days per capita than the United States. Although by itself that fact does not prove anything, it does suggest that a policy of single-mindly emptying hospitals not only does not save any money, it might even add to total national health spending."

"Let us begin by debunking the much-mouthed canard that 'hospitals are expensive places.' That mantra implies a causal flow from hospitals as settings to treat patients to the cost of such treatments. Rather, the chain of causation is that hospitals tend to cater to very sick patients, that very sick patients tend to receive very elaborate treatments, and that such treatments tend to be expensive. If the same sick patients received the same expensive treatment in any other setting (for example, in a bus or in an army tent), would we call buses or tents 'expensive places?' "

"The rapid growth of the nation's home health care and sub-acute care industries may have been one of the more expensive experiments in recent health policy... the rapid growth of these two industries has been substantially fueled by the economically inefficient pricing policies adopted by (or forced on) the hospital sector in its dealings with the managed care industry... Chances are that we will rediscover that at the margin of a hospital episode, a hospital bed is actually a relatively cheap place for convalescent patients."

Appropriate Rural Policy Goals

From an Article by Glen Pulver (Professor Emeritus, University of Wisconsin) in Economic Forces Shaping The Rural Heartland by the Federal Reserve Bank of Kansas City, April, 1996:

Targeted: "One size fits all" rural policy will not prove effective in the future.

Flexible: Rural policy must be flexible enough to accommodate continuing changes in production technology and national and global economic structures.

Accountable: Rural policy must produce real results with no overlap or other fiscal waste.

Sustainable: Rural development policy must provide a positive rate of change in the quality of life based on a system to be maintained indefinitely.

Politically Supportable: Future political actions aimed at rural concerns may need to fit within the framework of a set of broader national, state, or local goals.

Rural Areas Again Experiencing Growth Spurt

The following is from an article by Scott Kilman and Robert Rose in the Friday 6/21 edition of the Wall Street Journal.

"New research by two prominent rural demographers finds that most rural areas of the country are growing at their fastest rate in more than two decades. Ken Johnson of Loyola University in Chicago and Calvin L. Beale of the U.S. Agriculture Department, found "widespread and substantial' gains in rural population between 1990 and 1995."

"In all, some three-quarters of the 2,304 rural counties are growing, up from 45% in the 1980s. Rural areas have seen a 5.1% population increase in the past five years, a sharp reversal from the 1980s, when tough times for farmers and rural manufacturers hurt many of the same areas. 'Some areas are growing so fast they couldn't turn it off if they wanted to,' says Mr. Beale, who is credited with calling a previous rural population turnaround, when decades of migration out of rural areas were reversed in the 1970s."

"The two found the greatest growth in counties that are attracting retirees and others in search of recreation, such as those in the Western mountains, upper Great Lakes, Ozarks and parts of the South. But even places that are lagging, such as counties dependent on farming and mining, are faring far better than they did in the 1980s. Prof. Johnson and Mr. Beale found that rural counties gained 1.6 million people through migration in the first half of the 1990s. In the 1980s, rural areas lost 1.4 million people through migration."

Rural Providers Pawns In A Larger Game

From an article by Jay Greene in the 6/24 edition of Modern Healthcare:

"As large hospitals and healthcare systems in Georgia expand their service market to capture new patients and compete for managed-care contracts, smaller hospitals in rural areas are becoming squeezed by their stronger and richer competitors. In states such as Georgia with high proportions of small and rural hospitals, the frenzied drive by systems to gain geographic coverage is a concern among small hospitals, said John Ortiz, a partner with Andersen Healthcare."

"The targeting of smaller facilities is 'a hospital-driven initiative to try and prevent Columbia from gaining market share,' Ortiz said. 'It's not market-driven by employers demanding lower costs. These smaller hospitals are the victim of circumstances and not of the marketplace (changing to managed care).' "

(Spokesman for one of the larger hospitals): "We don't want to take over small hospitals...our tactic has been to work with the smaller hospitals with our organization and in our managed-care agreements." (A local hospital representative) "says they have it backwards. They assault a community first and then asks you to work with them in managed-care contracting later... They acquire clinics for leverage (in contract negotiations). That's what they did here." ("Another local hospital representative says of the same larger hospital, "they invited themselves here, and our position is the clinic isn't necessary. It will dilute the services we have to offer... They say they aren't after our patients. Only time will tell."

Rural Health Stereotypes Alive & Well

Just when you thought you could pick up one of Wisconsin's better papers without encountering blatant stereotypes about the state of rural health.... Pat Ruff and I wrote the following letter to the Wisconsin State Journal to protest another example of their misunderstanding of rural health:

"Your June 17, 'Drug Strikes Strokes' emphasized the importance of an immediate diagnosis by use of a CT scanner but went on to inaccurately generalize that rural areas do not have local access to this technology."

"The 21 community hospitals in the Rural Wisconsin Health Cooperative all have access to CT scanning equipment with a majority having their own CT equipment on-site and available 24 hours a day. Local physicians are skilled in utilizing CT scans for diagnostic purposes and increasingly scans can be immediately transmitted via computer, as needed, to a specialist. In many cases the patient can be treated promptly and effectively in the local community hospital without having to waste valuable time (and incur the expense) of being transported away from home."

"As a good proportion of your readership lives outside Madison, it might be interesting for the Journal to visit some of the fine clinics and hospitals that provide modern, quality care throughout southern Wisconsin."

Americans Are Becoming More Involved

Abstracted from "What Americans Think" by Richard Morin", The Washington Post National Weekly Edition, June 23rd, 1996.

"Harvard political scientist Robert Putnam has claimed that 'by almost every measure, America's direct engagement in politics and government has fallen steadily and sharply... Well yes it's true that some measures of participation are in decline (voting in recent local and national elections) are down. But other indicators of civic engagement suggest vigorous growth."

"Americans are actively involved in the politics and social lives of their communities. Americans are volunteering unprecedented amounts of their money and time to worthy causes. According to U.S. Bureau of Census data, per capita charitable giving in constant dollars has increased from $280 in '60 to $522 in '95."

"Likewise, about 48 percent of the population volunteered an average of four hours per week to various organizations and causes. Survey by Princeton Survey Research show that the percent of Americans who are involved in charitable or social science activities has increased from 46 percent to 56 percent between 1991 to 1995. (Other data suggest a slight decline.)"

"The proportion reporting that they had contacted local officials about a political issue increased from 14 percent in 1967 to 24 percent in 1987 and the proportion reporting contact with a state or national official doubled from 11 percent to 22 percent... These hopeful numbers may be bad news for professional doomsayers, which includes about 99 percent of all working journalists. But good news for America."

Your Congressional Rep. In Coalition?

Do you know where your Representative is tonight? If you don't know, ask. If the answer is no, get to work. As of November 11th, only Representatives Klug (WI-2nd), Gunderson (3rd) and Roth (8th) were members of the House Rural Health Care Coalition. As the ability of this key group to forward and pass legislation to assist rural health is directly related to their numerical strength; it is imperative that all Representatives with significant rural constituencies be involved and active.

Apple Has Tripped But Don't Count It Out

While we Apple lovers love to look at Windows 95 and rightly claim "been there, done that," we must acknowledge those occasional instances when DOS based systems are on the cutting edge of communication. A friend and "elder" in our church confessed that he bought an IBM last year. Given its limitations, the machine works fairly well, except whenever he turns it on, it destroys any radio reception throughout his house, including a battery run walk-man. To make the story really interesting, this only started after he installed Windows 95. To date, no fix has been found; he and his wife just listen to less radio. (This is true, as told to me first hand; it is not a urban legend.)

New RWHC Email Addresses

We have consolidated our email acccounts to a new server in Sauk City; staff now using email includes:

Tim Size, Executive Director

Patricia Ruff, Deputy Director

Linda Briggs, Nursing

Darrell Statz, Accounting

Other Staff

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