1601 N. Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196
Hotline: (800) 419-4777
Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 47, No. 2 February 1991


Based on the theory that spiraling Medicare costs are due to physician behavior, the Health Care Financing Administration (HCFA) is planning a number of interventions to modify this behavior.

The theory has several underlying assumptions:

1. Physicians will do the amount of work required to earn a certain level of income. If they are paid less per service, they will eagerly perform more services. (Medical services, not those related to an alternate occupation.) In fact, the amount of service they will perform is precisely such that a $2 cut in fees will be required to achieve $1 in savings for the federal budget.

2. Physicians are so avaricious that they will perform unnecessary services as long as they are paid for them, but so selfless that they will continue to perform necessary services even when they are not paid /(or even when they incur out-of- pocket costs). But just in case,...

3. Sufficient oversight by a bureaucracy with the authority to impose severe penalties will assure that the system achieves the desired work output of assured quality.

Implementation of the theory will occur on several fronts.

Relative Value Scale

The 50% ``behavioral offset'' incorporated into the model fee schedule released in September (per assumption #1) has caused alarm in organized medicine. The AMA, which still supports the RVS, has asked that the Medicare Volume Performance Standards (MVPS) be used to correct any unexpected reactions to payment cuts. But HCFA thinks it is essential to weight the correction factor ahead of time in the interest of keeping payment reform ``budget neutral.''

``We'll never be able to use MVPS to recoup past problems if we lose on the first round,'' said HCFA Administrator Gail Wilensky (Medicine and Health 1/7/91).

Wilensky is said to be a firm believer in the need for ``behavioral adjustment,'' based on her experience with a fee freeze in the mid-80s. (Expenditures in Part B continued to increase 10% per year.) She is also an experimentalist: ``Let's get [the system] working and see what happens. If the system doesn't make as much progress as we want, we'll think of some other things to do'' (ibid.).

Defining a ``Visit''

HCFA would like to ``bundle'' all services provided during a visit into a single fee. According to Wilensky, ``Medicare has never chosen to apply the common-sense definition of what a visit is, and we are considering revising the visit definition along with everything else'' (ibid.).

The 1991 budget reconciliation has already declared most EKG interpretations to be included in the visit fee (see AAPS News, Jan 1991). Similar treatment for laboratory tests has been proposed in an October 1990 monograph by Inspector General Richard Kusserow. [For a free copy, write: HHS Inspector General, Room 5259, 330 Independence Ave SW, Washington, DC 20201.]

Kusserow notes that Medicare annual expenditures for laboratory tests have doubled between 1985 and 1989, despite the fee schedule method of reimbursement, reductions in payment amounts, and restrictions on referrals to labs in which physicians have an ownership interest.

Because of the sheer volume and complexity of laboratory testing, Kusserow believes that the cost of policing individual claims would not be recovered through denials. Restoring patient copayments would have an ``uncertain'' effect on utilization, he states. Therefore, Kusserow believes that the only answer is the extirpation of the fee-for-service (FFS) system that promotes increased use.

Under Kusserow's plan, Medicare would no longer pay for individual laboratory tests but would treat them as an indistinguishable part of a physician office visit. To illustrate how a ``laboratory roll in'' (LRI) might be calculated, Kusserow divided the $1.84 billion that Medicare allowed for laboratory tests by 1.37 million office visits, to give $13.50 per visit. The actual amount to be added to the reimbursement for 90000 series procedure codes would vary by specialty. Physicians would then be responsible for securing and paying for whatever laboratory tests were necessary.

Patient copayments and deductibles would only come into play at entry to the health care system, the most effective point in Kusserow's opinion.

LRIs would be expected to save $100 million annually in administrative costs by eliminating over 25% of the line items currently processed by Medicare carriers.

Precedents for this payment method include HMOs, DRGs, and global surgical fees.

``Appropriate Incentives''

While cost-effective monitoring for overutilization might be impossible, Kusserow does not see the same difficulty in reviewing for underutilization. He states that practice guide- lines will help, but even without uniform national guidelines, PROs could use local standards of practice to initiate sanctions against physicians providing inadequate care. [Are sanctions more profitable to HCFA than denials?] He does not believe physicians will take the risk of a malpractice suit for the sake of the ``small sums'' involved in ordering a lab test.


From Capitol Hill

CLIA Delayed. Because of the objections raised by over 60,000 physicians, the Office of Management and Budget (OMB) has told HCFA to rewrite the proposed regulations. HCFA has also be directed by Congress to carry out two suggestions made in AAPS comments: a regulatory impact assessment and a study of the correlation between the personnel standards and the quality of laboratory testing.

This is the first time that physician-related proposals have been recalled for further work by a congressional and White House directive. The new regulations will also require a period of public comment.

Meanwhile, some states are rushing to adopt their own regulations for physicians' office laboratories, which might be even more stringent than federal standards.

AAPS believes that CLIA should be repealed.

Medicaid Deficit Reduction. New York Governor Mario Cuomo has the answer to reducing the deficit without cutting Medicaid payments to physicians. He is simply asking providers to kick back a portion of their payments. The ``assessments'' amount to about $200 million.

Advance Directives. The Omnibus Budget Reconciliation Act of 1990 extends to Medicaid providers requirements similar to those in force for Medicare. Providers, HMOs, nursing facilities, and other entities must maintain written policies and procedures for advance directives. All adult patients must be given written information, and the existence (or lack) of an advance directive must be documented in the patient's medical record.

More Stringent Controls for Medical Devices. The Safe Medical Devices Act (PL 101-629), signed by President Bush in Nov 1990, requires ``device user facilities'' to report to the Secretary of HHS any instances in which a medical device might reasonably be suspected to have caused injury to a patient. Formerly, only manufacturers were required to report defects. Additional requirements for manufacturers include post-market surveillance for new devices and a system for tracking the distribution of devices that could have serious adverse health consequences. An exemption from the requirements is granted for devices designed to diagnose or treat a condition that affects fewer than 4,000 individuals within the US, if no comparable device is available.

Violations of this law will subject an individual to a civil penalty of up to $15,000 per violation, up to a limit of $1 million for all violations adjudicated in a single proceeding.

Basis for Geographic Practice Cost Index. To arrive at relative value units, government subcontractors may use questionable data, pleading lack of time and money. Rental costs are based on apartment rents; earnings on data for workers with five or more years of college rather than for physicians; and office overhead for primary care physicians on averages that include specialties with very little overhead. For most prac- tices, the resulting estimate of 45.8% overhead is far too low. Sandy Goodsite, President of Professional Medical Management, Inc., who has worked with more than 100 Southern Arizona practices, advises physicians to take a careful look at the complicated formulas used to calculate their fee schedules.


Parallel Views on Practice Guidelines

``Another potential Hollywood-style hassle could be practice guidelines. I think that such guidelines could alleviate many of our current practice hassles by helping everyone know what constitutes effective medical care'' (Charles P. Duvall, Past President, ASIM The Internist Nov-Dec 90)

``Doctors are just like other Englishmen: most of them have no honor and no conscience: what they commonly mistake for these is sentimentality and an intense dread of doing anything that everybody else does not do, or omitting to do anything that everybody else does'' (George Bernard Shaw, The Doctor's Dilemma).


Understanding the Underground

....In the Soviet Union and Eastern Europe, nearly all useful production comes from black markets. The same is true in most third-world countries....

The informal sector thrives everywhere that government regulations, taxes, and labor laws prevent people from supplying and acquiring the goods and services they want at prices they can afford. In fact, the size of the informal sector is the perfect measure of how much a government has overstepped its bounds.

The US therefore has an enormous informal economy.... [S]ome recent studies have shown that in every major city, all forty sectors of the standard industrial classification have a major informal component. The informal economy is thus a major source of our prosperity, and one of the reasons that we are not as poor as we ``ought'' to be, given the size, cost, and intrusiveness of government....

One way in which informal businessmen avoid detection is subcontracting....The work places of these subcontractors violate every labor code in the book, but they are known for high quality, low prices, and quick service. Consumers seek them out, and would-be subcontractors ask if they too can't be ``exploited'' by having their own home business....

The informal sector serves all classes in society, but those who really depend on it for essential services like child care and transportation are the poor. This puts a new spin on the old leftist claim that America offers one system for the rich and one for the poor. Except that it has been liberal policies in taxes, regulation, and unionism that have created the problem.

The informal sector is no paradise....Informal firms must always be less efficient than open firms in a free market....It is, however, instructive that informal economic arrangements work as well as they do. It should increase our skepticism about the ``benefits'' of government services....

It is an illusion to think that the informal economy could be wiped out through tougher enforcement. Even Stalin and Mao couldn't do it. But it could be abolished peacefully: by repealing the oppressive laws that create the informal sector. Such laws stay on the books...because of the continuing power of interest groups that seek protection from competition in a free market. Eliminate these laws, and we will gut the special interests...and raise everyone's standard of living. Most importantly, we would...increase respect for the rule of law, which the government has done so much to undermine.

Jeffrey A. Tucker, The Free Market Dec 1990
Ludwig von Mises Institute, Auburn University, Auburn, AL

AAPS Scores Victory in Supreme Court of Florida

On December 18, 1990, the Supreme Court of Florida granted the Jurisdictional Statement filed by the Association of American Physicians and Surgeons (AAPS), James F. Coy, MD, Sidney R. Steinberg, MD, and Claud A. Boyd, MD, to hear and consider their challenge to the constitutionality of the Florida Birth-Related Neurological Injury Compensation Act (NICA). The decision is a most important victory for AAPS.

NICA, enacted in February, 1988, provides for compensation, irrespective of fault, in birth-related neurological injury claims. Florida-licensed physicians who practice obstetrics may choose to become a member of the fund by paying an initial assessment. All other Florida-licensed physicians are required to pay an annual assessment, whether or not they render any obstetrical services, even if they do not practice in Florida. Worse yet, the Act authorizes the Commission of Insurance to raise the assessment in his discretion. The assessment has already been raised from $250 to $500 per year. Physicians who fail to pay are turned over to the Florida Department of Professional Regulation to have their licenses revoked.

AAPS and three Florida-licensed members of its board of directors (two of whom do not reside or practice in Florida) filed suit in the Circuit Court in and for Leon County, Florida (see AAPS News Aug 1989). The suit alleged that the Act violated the ``due process'' and ``equal protection'' clauses of the US and the Florida Constitutions as well as the ``privileges and immunities'' clause of Article IV, §2 of the US Constitution. Further, they alleged that the Act unconstitutionally delegated the power to tax.

At the time the AAPS case was filed, the Florida Medical Association (FMA) then had pending a case challenging the validity of the Act. The FMA case and the AAPS case were consolidated for trial, and the case was tried in June, 1989.

The Circuit Court upheld the Act, and both the FMA and AAPS appealed the decision to the District Court of Appeal for the First District in Tallahassee. There, in July, 1990, the Appellate Court affirmed the decision of the Circuit Court.

AAPS therefore filed its Jurisdiction Statement asking the Supreme Court of Florida to hear the case. The FMA also filed such a statement. However, the Court voted to refuse to accept jurisdiction in the case brought by the FMA, although noting that it would allow the FMA to file an amicus curiae brief in the AAPS case. The FMA Motion for Leave to File a Brief Amicus Curiae was granted December 31, 1990.

Like all state supreme courts, the Supreme Court of Florida rarely accepts Jurisdiction Statements. That the Court did so in the AAPS case indicates that it believes that the issues raised by AAPS are of such importance that the highest court in the state must address them.

Kent Masterson Brown, AAPS Legal Counsel, will argue the case for AAPS on April 10, 1991.

AAPS thanks the American Health Legal Foundation for its support of this litigation.


AMA Middlemen to Watch the Watchers of the Watchers

The AMA was low bidder on a $1-million, 5-year contract to serve as mediator between PROs and their overseer, the SuperPRO (a California-based firm called SysteMetrics). The new Super Super PRO is officially known as the Physician Consultant Contract.

The duty of the 2,100 volunteer physician consultants will be to adjudicate disputes between the PROs and the SuperPRO on issues of appropriateness or quality of care. (PRO work on coding and DRG validation cannot be appealed to AMA consultants.) The physicians must choose between the positions of the PRO and the SuperPRO and outline their findings in a one-page summary.

The SuperPRO does not have the authority to modify PRO actions. Its opinions are reported to HCFA and may influence decisions on PRO contract awards (AM News 11/23-30/90).


Physician Rights Under Medical Staff Bylaws

As hospital medical staff bylaws are revised, physicians should be alert to provisions protecting their due process rights-or to lack of same, as in footnote 2 of the enclosed pamphlet. Are the physician's staff privileges (and thus his livelihood, especially in the shadow of the National Practitioner Data Bank) subject to arbitrary revocation, with or without cause? One hospital attempted to insert a clause that stated, in effect, that staff privileges were contingent on the doctor's fitting in with the hospital's strategic plans:

In acting on a new application or a request for renewal of appointment for staff membership and clinical privileges,. . . consideration shall include the Hospital's current and projected patient care, teaching and research needs and the Hospital's ability to provide the facilities, beds and support services that will be required. In making the required need/ability determinations, consideration will be given to utilization patterns, present and projected patient mix, actual and planned allocations of physical, financial, and human resources to general and specialized clinical and support services, and the Hospital's and Medical Staff's general and specific goals and objectives.

This provision, which would have given unlimited discretion to the hospital's representatives, was deleted from the revised bylaws after an alert county medical society officer called them to the attention of the community.

Binding arbitration is one method of protecting physicians' rights and shielding hospitals from antitrust actions. It can assure that peer review is done ``with clean hands'' (in the words of by the Semmelweis Society).

Model provisions for peer review that could be incorporated into medical staff bylaws will be presented at the January Board of Directors meeting in Atlanta. (Call AAPS for details after January 26, 1-800-635-1196.)

Bylaws, arbitration, and other medical staff issues will be the subject of the regional medicolegal seminar planned for April 26, 1991, under the cosponsorship of the St. Louis Metropolitan Medical Society.

(Reprints of the pamphlet are available, $12 per 100, bulk prices on request.)

New Members

AAPS welcomes Drs. Paul M. Allen of Pascagoula, MS; John T. Austin of Bossier City, LA; Peter C. Balacuit of Monrovia, CA; Griffith C. Barlow of Glendale, CA; WB Belsom of Monroe, LA; B.L. Bercaw of Naples, FL; R. Dale Bernauer of Lake Charles, LA; Robert R. Bowes of Santa Ana, CA; Patrick J. Brandner of Las Vegas, NV; Albert H. Capanna of Las Vegas, NV; Anthony J. Castiglia of Templeton, CA; Brian Chung of Whittier, CA; David C. Cook of Whittier, CA; John C. Cooksey of Monroe, LA; Jewell L Daniels of E. Orange, NJ; Peter T. Di Napoli of Palm Harbor, FL; Victor L Dragon of Palm Harbor, FL; R. Michael Duffin of Hemet, CA; Robert A. Fiddes of Whittier, CA; James P. Fitzgerald of Whittier, CA; Robert G. Gagliano of Las Vegas, NV; Richard L. Glatzer of Miami, FL; C. Thomas Gott of Las Vegas, NV; Bert G. Hassler of Arcadia, CA; William V. Healey of San Antonio, TX; C. Fred Hering of Monrovia, CA; Steve Jackman of Springfield, IL; Paul Jacobsen of Whittier, CA; Paul W. Knoop of Reno, NV; Thomas W. La Grelius of Torrance, CA; Jon L. Landeen of Logan, UT; Rendel Levonian of Pico Rivera, CA; James H. Machikawa of Montebello, CA; James T. Malouf of Logan, UT; Theodore F. Marshburn of Whittier, CA; Roderick T. McDonald of Arcadia, CA; MH Melmed of Englewood, CO; George W. Merkle of Carlsbad, CA; Haig Minassian of Whittier, CA; Tom Mitts of Visalia, CA; Martin Naughton of Reno, NV; Tom Neel of Carrollton, TX; Larry Nestor of Huntington Beach, CA; Bonna Rogers Neufeld of Fresno, CA; Richard A. Nicholls of Ocean Springs, MS; Declan R. Nolan of Anchorage, AK; Mark W. Odou of Montebello, CA; Bruce L. Odou of Montebello, CA; Anchorage Fracture and Orthopedic Clinic of Anchorage, AK; Kenneth R. Pervier of Anchorage, AK; Arthur R. Polin of Palm Harbor, FL; Clifton C. Presser of Lutherville, MD; Thomas E. Price of Roswell, GA; Wallace A. Reed of Phoenix, AZ; N.B. Richter of Clifton Heights, PA; Henry C. Rowe of Hayes, VA; William E. Ryan of Pennington, NJ; W.W. Sadowinski of Whittier, CA; Marc P. Salomone of Palm Springs, CA; Alfredo O. Santesteban of Bedford, TX; Edward Schauer of Farmingdale, NJ; Richard J. Schneider of Greenbrae, CA; Wm. F. Schubert of La Canada-Flintridge, CA; Howard D. Slobodien of Metuchen, NJ; Joel Smietana of Montebello, CA; Thayer A. Smith of Downey, CA; John M. Snyder of Anchorage, AK; Jerry H. Titel of Tustin, CA; David Vastola of North Palm Beach, FL; George B. Von Wichman of Anchorage, AK; Raymond J. Votypka of Cleveland, OH; J.W. Weber of New London, WI; Patrick Francis Wheehy of Newport Beach, CA; and Francis J. Williams of Newport Beach, CA.


Welcome, G.I.M.S.!

The Graduates of Italian Medical Schools, a New York based association founded in 1966, has voted to join AAPS.

An excerpt from the G.I.M.S. December newsletter shows their insight into what America is supposed to be about.

From an article titled ``The Stamp Act: Carta Bollata and Marche da Bollo British Style'':

In 1765 the British Treasury mandated that in the Colonies all documents beyond love letters and shopping lists be written on Government-issued paper, or validated by government stamps. Violators would be prosecuted in an Admiralty Court, without jury (per direttissima they would say in Italy). Nine states protested but were silenced. So, they stopped importing British goods. The merchants in England got the message and convinced the Treasury that the Stamp Act was the wrong thing to do, and the law was repealed in 1766. This proves two points: Two hundred years ago, Americans fought for their rights, together. They had what it takes! Money was already then the most leveraged argument.


Letter to the Editor

This is in reference to Otto Scott's The Gelded that accompanied the December AAPS News.

Near the bottom of panel 4, Scott says that not only have the managers of American industry and business been gelded, but that our mililtary leaders and, in fact, the American majority have been muzzled, or ``treated as mutes.''

I would change one letter in the last word-``t'' to ``l,'' ``mutes'' to ``mules.'' Mules have all of the appearances of virility without the capacity. They do not breed. They cannot propagate. They are intentionally produced, bred for one purpose-to be passive, obedient beasts of burden.

Once gelded we are drones, workers, controlled automatons. The ``new man,'' harnessed to obediently ``giddy-up,'' ``whoa,'' ``gee,'' and ``haw'' at every command. Obey or get whipped.
Curtis Caine, Sr., MD, Jackson, MS


AAPS Calendar

Jan. 26, 1991. Board of Directors meeting, Embassy Suites Hotel, Atlanta, GA.

Apr. 26, 1991. Medicolegal seminar, cosponsored by St. Louis Metropolitan Medical Society, St. Louis, MO.

Apr. 27, 1991. Board of Directors meeting, St. Louis, MO.

Oct. 17-19, 1991. Annual meeting, Griffin Gate Marriott, Lexington, KY.