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�3
THU 22:51 ID:flTTY GENERAL PPB
TEL HO:617-727-5762
FROM: BARBARA B. ANTHONY
Chief. Public Protection Bureau
* fa
DATE
RE:
REVIEW, RETURN WITH YOUR COMMENTS
FOR YOUR INFORMATION
SEE ME
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BARBARA ANTHONY
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Boston. MAOJIOfl
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�Barbara B. Anthony
Legal Audit Group
A n t i t r u s t Issues
A n t i t r u s t Issues Under National Health Reform
The
Issues:
1.
How would the Health Alliances
and f e d e r a l a n t i t r u s t laws?
2.
i f two or more h o s p i t a l s combine t o purchase and share a
piece of equipment, i . e . a j o i n t venture, w i l l s t a t e or
f e d e r a l a n t i t r u s t laws prevent t h i s from happening?
3.
Can h o s p i t a l s get together and form market a l l o c a t i o n
agreements whereby services, p a t i e n t s , or t e r r i t o r i e s are
d i v i d e d up among the h o s p i t a l s without running a f o u l of the
a n t i t r u s t laws?
4.
Should insurance companies which acquire i n s t i t u t i o n a l
providers continue to be exempt from a n t i t r u s t scrutiny?
5.
Should a n a t i o n a l a n t i t r u s t p o l i c y be established w i t h
respect t o the a p p l i c a t i o n of federal and s t a t e a n t i t r u s t
laws t o h e a l t h a l l i a n c e s and provider networks?
The
Solutions:
1.
(HAs)
be a f f e c t e d by s t a t e
A h e a l t h a l l i a n c e or purchasing cooperative can agree
(among i t s members) on a premium p r i c e and other terms and
conditions f o r health plan contracts, without a n t i t r u s t
exposure, provided t h a t such health a l l i a n c e operates i n a
manner consistent w i t h the state a c t i o n exemption from the
a n t i t r u s t laws. I f the formation and the governing charter
or a r t i c l e s of organization of a health a l l i a n c e are
submitted f o r approval t o the appropriate s t a t e agency
overseeing the implementation of n a t i o n a l h e a l t h reform at
the s t a t e l e v e l , and such agency approves the s t r u c t u r e and
operation of the health a l l i a n c e and provides oversight or
supervision over a c t i v i t y , the health a l l i a n c e w i l l be
exempt from s t a t e and federal a n t i t r u s t laws by v i r t u e of
the s t a t e a c t i o n d o c t r i n e .
Since i t appears that health a l l i a n c e s w i l l be established
pursuant t o s t a t e law, as required by n a t i o n a l h e a l t h
�reform, state enabling l e g i o l a t i o n can be structured so as
co provide the r e q u i s i t e ingredients f o r st-.at-.p action
immunity.
i t i s also possible f o r a health a l l i a n c e or purchasing
cooperative to bargain with health plans and agree on a
premium p r i c e and other conditions without running a f o u l of
bldLfc:
l e d e i a l a n t i t r u s t laws. Depending on the size of
the a l l i a n c e , i f i t o mcmbcrp oharc the r i s k of increases i n
premium costs, that i s , i f comiminlr.y r a t i n g i s applied, no
a n t i t r u s t problem may arise that requirea a p p l i c a t i o n of
the state action doctrine. However, i n caeee where the
a l l i a n c e i s very large and i n e r t e c t constitutes a single
purchaser or monopsony i n terms of purchasing power, the
Kt.flt.fi action doctrine should apply to prevent the abuse of
market power or predatory conduct.
Usually, the j o i n t purchasing and sharing of pqm'pment
among hospitals i s considered pro-oompelilive and
e f f i c i e n c y enhancing conduct. These agreemcnto arc judged
by the r u l e or reason t e s t , and federal and stare
a u t h o r i t i e s have indicated that these arrangements are uul
contrary to state or federal a n t i t r u s t laws and there are
numerous such arrangements already e x i s t i n g throughout the
country.
O r d i n a r i l y market a l l o c a t i o n aqreements among h o r i z o n t a l
competitors are concidcrcd to be per oc v i o l a t i o n s of the
a n t i t r u s t laws. Accordingly, hospitals would nor. bp
permitted to engage i n d i v i d i n g up services ( i . e ,
orthopedics f o r one h o s p i t a l , o b s t e t r i c s f o r i t s
competitor). t e r r i t o r i e s or patients, and agreeing not to
compete against each other without appropriate state
regulation and oversight to s h i e l d the market a l l o c a t i o n
ayreeiiieut from a n t i t r u s t exposure.
The state l e g i s l a t i v e scheme esrabliflhing health a l l i a n c e s
could also e s t a b l i s h a mechanibm whereby hospitals seeking
t o engage i n market a l l o c a t i o n agreements among themselves,
could f i l e such a plan with the appropriate s t a t s health
agency. I f the plan i s approved and i f there i s atate
oversight and supervision, such agreements would be
shielded from the a n t i t r u s t laws under the state a c t i o n
doctrine.
There are some blates, however, where resource constraints
may preclude oversight by otatc health care a u t h o r i t i e s
s u f f i c i e n t to t r i g g e r an exemption under the state a c t i o n
doctrine. Under these circumstances, e x p l i t i l exemption
from federal a n t i t r u s t laws would be required.
Another option i s to enact federal l e g i s l a t i o n that such
marker, a l l o c a r i o n arrangements be reviewed by the courts
undHi a r u l e o i reason analysis, rather than the per se
analysis.
- 7 -
�1.
Inourancc companica t h a t a c q u i r e h e a l t h care p r o v i d e r s i n
an e f f o r t t o form p r o v i d e r networks, should be s u b j e c t t o
the aanie a n t i t r u s t s c r u t i n y as p r o v i d e r s would be i f they
were i n t e r f a c i n g w i t h o t h e r p r o v i d c r o . While insurance
companies c o u l d continue t o have anr.it.nmt. immunity as l o n g
as they were c a r r y i n g on the business of inaurduue, i n s o f a r
as t h a t i s r e g u l a t e d by s t a t e e n t i t i e s (a s t a t u t o r y o t a t c
a c t i o n exemption), insurance companies should not r e c e i v e
• p e c i a l a n t i t r u s t treatment f o r conduct t h a t i s e s s e n t i a l l y
the p r o v i s i o n of h e a l t h care s e r v i c e s as opposed t o
i n s u r i u y the r i s k of such s e r v i c e s .
Another o p t i o n i s t o repeal the McCarron-Ferguson act which
c u r r e n t l y exempts the business of ijiauianct; from the
a n t i t r u s t laws t o the e x t e n t such business i s r e g u l a t e d by
the s t a t e s .
Fi.
A merhaniflm needs t o be c r e a t e d t o c o o r d i n a t e f e d e r a l and
BtaLti a n l i t r u a t review i n order t o f a c i l i t a t e
p r o - c o m p e t i t i v e and e f f i c i e n c y enhancing market
arrangements. The J u s t i c e Depa.rf.menr., rhe Federal Trade
Commission and the A n t i t r u s t Task Force o£ the N a t i o n a l
A s s o c i a t i o n of A t t o r n e y s General should form a p o l i c y group
and develop q u i c k l y o v e r a l l p o l i c y g u i d e l i n e s w i t h respect
t o mergers, j o i n t ventures and market a l l o c a t i o n agreements.
PiBCUBBigHB:
1.
Under the s o - c a l l e d "aLate a c t i o n d o c t r i n e " , which has been
developed through j u d i c i a l i n t e r p r e t a t i o n over the past
f i f t y years, conduct t h a t would otherwise rnn afoi.il of the
a n t i t r u s t laws, b o t h f e d e r a l and s t a t e , i s s h i e l d e d from
such exposure p r o v i d e d t h a t the s t a t e has (1) c l e a r l y
a r t i c u l a t e d a p o l i c y co d i s p l a c e c o m p e t i t i o n w i t h
r e g u l a t i o n ; and (2) e s t a b l i s h e d and implemented a system of
r e g u l a t i o n and a c t i v e s u p e r v i s i o n over the conduct a t
iaaue.
The a t a t e a c t i o n d o c t r i n e p r o t e c t s o t h e r w i s e
a n t i - c o m p e t i t i v e conduct from a l l a n t i t r u s t c h a l l e n g e r s ,
i n c l u d i n g p r i v a t e p a r t i e s and f e d e r a l and s t a t e governments.
T h i s d o c t r i n e was f i r s t e s t a b l i s h e d by the U n i t e d S t a t e s
Supreme Court i n Parker v. Brown i n 1943 and p r o v i d e s
market f l e x i b i l i t y f o r companies i n i n d u s t r i e s which the
s t a t e has determined need p r o t e c t i o n from the a n t i t r u s t
laws i n o r d e r t o c a r r y out a mission t h a t cannot be c a r r i e d
out under normal marketplace r u l e s . A wide a r r a y of
i n d u s t r i e s have f u n c t i onerl vmfler the s t a t e a c t i o n d o c t r i n e
w i t h a p p r o p r i a t e s t a t e o v e r a i g h t . I n the p a s t , t h i s
d o c t r i n e has s h i e l d e d i n d u e t r i e o ouch as f r e i g h t and
passenger motor c a r r i e r , r a i l , and a i r t r a n s p o r t a t i o n ;
p u b l i c u t i l i t i e s ; automobile insurance; a g r i c u l L u r a l
c o l l a b o r a t i v e s ; and hackney s e r v i c e s i n numeroua c i t i e s .
3 -
�The f i r s t prong of the state action doctrine i s e a s i l y
established by inclusion in the enabling l e g i s l a t i o n of
language which sets up a rttyulatury or oversighc scheme.
The second prong of the t e s t requirco oupcrvioion by a
state agency over the collaborative market ronduri- c a r r i e d
out by otherwise p r i v a t e e n t i t i e s . I n the ^aae o l health
a l l i a n c e s , p r i v a t e employers and i n d i v i d u a l s w i l l be
collectively determining the terms and conditions upon
which they w i l l s o l i c i t bids from health plane.
I t should be noted t h a i the state action doctrine i s not a
guaranteed insurance p o l i c y against an a n t i t r u s t lawsuit
from a f f e c t e d p a r t i e s . However, i f there Is the
appropriate l e v e l of state oversight, the state a c l i u n
doctrine w i l l defeat s u i t s from p r i v a t e p a r t i e s as w e l l ac
from the federal or state governments.
Regulation and oversight of an HA consistent w i t h a state
a c t i o n exemption would require regulatory and due process
safeguards euch as reporting of HA meetings t o state
regulatory a u t h o r i t i e s ; open processes f o r members i n
e s t a b l i s h i n g the premium p r i c e ; p r o h i b i t i o n of conduct that
i s intended to i n j u r e the marketplace, such ae d e l i b e r a t e l y
misrepresenting coses or claims experience i n an e f f o r t r.o
secure low rates of payment to health plans; d i s c r i m i n a t i o n
against HA members who may have a negative impact on the
premium that i s being sought.
Since HAs may enjoy monopsonist market power over many
health plana, atate oversight of t h e i r c o l l e c t i v e
purchasing conduct i s necessary i n order to ensure that the
exercise of t h i s market power w i l l not r e s u l t i n predatory
practices and u l t i m a t e l y consumer harm.
I f the a l l i a n c e i s not a monopsonist, that i s , i t i t i s
only one of several cooperatives seeking to purchase a
health plan's services, the a l l i a n c e can function without
state r e y u l a t i o n or oversight of i t s c o l l e c t i v e purchasing
conduct. Under euch circumotanccs, a p p l i c a t i o n of the
state a c t i o n doctrine would not be required as long as the
premiums paid by the a l l i a n c e weie community rated spread
across a l l i t s members.
Moat j o i n t purchasing arrangements are very l o c a l i n nature
and do not require any formal notice to state a u t h o r i t i e s
w i t h respect to the j o i n t purchase and sharing ot such
equipment. Unless the state has a c e r t i f i c a t e of need or
determination of nppd process, hospitals can simply get
together to purcliaae any equipment that neither can a f f o r d
i n d i v i d u a l l y or that neither can operate at an e f f i c i e n t
l e v e l of capacity on t h e i r own and proceed t o share i t . i t
i s probably sound advice f o r hospitals contemplating t h i s
- 4 -
�t y p e o f arrangement t o a t l e a s t seek t h e o p i n i o n o f
competent a n t i t r u s t counsel t o p r o v i d e them w i t h some
comfort t h a t t h e conduct they a r e c o n t e m p l a t i n q w i l l n o t
r u n a f o u l o f t h e a n t i t r u s t laws.
I n a u d i a i t u a t i u n a where t h e r e i s a j o i n t venture among two
o r more h o s p i t a l s , and where each h o s p i t a l i s s h a r i n g t h e
r i s k of t h e c a p i t a l e x p e n d i t u r e o r o f l o s s f o r t h e
equipment, t h e proposed p r o j e c t i s l i k e l y t o promote
e f f i c i e n c y among t h e h o s p i t a l s who a r e p a r t i c i p a t i n g i n t h e
j o i n t v e n t u r e , and i s l i k e l y t o p r o v i d e p r o - c o m p e t i t i v e
b e n e f i t s t o consumers. The s h a r i n g o f a s i n g l e p i e c e o f
equipment by two o r more hoppita1s, w i l l reriure unneceesary
c o s t s t o each e n t i t y , thereby makiuy t h e o v e r a l l a e r v i o e
Icao expensive t o t h e consuming p u b l i c . This i s an example
of an e f f i c i e n c y enhancing j o i n t v e n t u r e t h a t has t h e
e f f e c t u l t i m a t e l y o f reducing h e a l t h care c o s t s .
such arrangements do n o t r e q u i r e a b l a n k e t exemption from
t h e a n t i t r u s t laws i n o r d e r t o take p l a c e , however, i t i s
i m p o r t a n t t o have t h e a n t i t r u s t laws i n place t o deal w i t h
a n t i - c o m p e t i t i v e market conduct t h a t may a r i s e . I t i s
p o o o i b l e t h a t i n some r u r a l e e t t i n g o , where t h e r e a r c few
h o s p i t a l s spread over g r e a t d i s t a n c e s , t h a t some h o s p i t a l s
c o u l d form j o i n t ventures and exclude a competing h o s p i t a l
from s h a r i n g t h e equipment o r f a c i l i t y t h a t i s t h e s u b j e c t
of t h e j o i n t v e n t u r e , under those circumstances, t h e
e x c l u s i o n o f t h e s i n g l e h o s p i t a l c o u l d be f o r t h e purpose
of d r i v i n g t h a t p a r t i c u l a r h o s p i t a l out o f t h e
marketplace,
where t h e r e i s n o t excess c a p a c i t y and where
t h e r e a r e few h o s p i t a l s i n a l a r g e r u r a l s t a t e t h i s would
not. hp pro-compet i t i ve, and u l t i m a t e l y could r e s u l t i n one
bet u l h o a p i t a l b e x e i c i a i n y monupoly power. U l t i u i a t e l y ,
those h o s p i t a l s would be i n a p o s i t i o n t o r a i s e p r i c e t o
t h e HA which i s buying s e r v i c e s , under these
circumstances, t h e a p p l i c a t i o n o f t h e a n t i t r u s t laws would
r e q u i r e t h a t a l l h o s p i t a l s i n an area be a b l e t o access t h e
s i n g l e piece o f equipment.
3.
Tt. has always been regarded as harmful t o t h e market p l a c e
f o r h o r i z o n t a l c o m p e t i t o r s t o g e t t o g e t h e r and a l l o c a t e
t e r r i t o r i e s and/or cuotomcro. There a r c s i t u a t i o n s ,
however, where such arrangements can reduce c o s t s t o t h e
h o s p i t a l s t h a t a r e p a r t of t h e market a l l o c a l i o n ayreemeut
and those r e d u c t i o n s i n cost could be passed on to' h e a l t h
care purchasers,
under these circumstances, a s t a t e
r e g u l a t o r y scheme i s needed t o oversee t h e a l l o c a t i o n s and
ro i n s u r e t h a t t h e e f f i c i e n c i e s a r e passed on t o r e d u c i n g
cuata f o r conaumers.
A simple s t a t e scheme could be e s t a b l i s h e d whereby
h o e p i t a l s w i s h i n g t o engage i n such conduct c o u l d f i l e t h e
- 5-
�market a l l o c a t i o n agreement with an appropriate s t a t e
h e a l t h department agency which would review the arrangement
f o r i t s e f f i c i e n c y enhancing and cost reduction features.
The health agency could have t h i r t y days w i t h i n which t o
review such agreements, and a t the end of t h i r t y days i f
the p a r t i e s t o the agreements have not been n o t i f i e d that
the agreement i s problematic, the p a r t i e s could simply move
forward t o consumate the agreement. Enabling l e g i s l a t i o n
could aloo provide that any diocuooiono leading up t o the
f i l i n g of the agreement would be free from any a n t i t r u s t
eAposure, even i f the agreemenL i l s e l f were l a t e r waa
challenged. These agreements should also be f i l e d w i t h the
appropriate state a n t i t r u s t a u t h o r i t i e s w i t h i n a p a r t i c u l a r
s t a t e as w e l l as w i t h the health care agency. (Similar
l e g i s l a t i o n has been passed i n about s i x states and i s
pending in several others.)
Thip furheme whirh i s e s s e n t i a l l y a f i l e and use unless
Uiaappx-uved aoheme ehuuld not prove burdenaume Lo liuapiLala
seeking e f f i c i e n c y enhancing ways t o t r i m costs and paee
such costs onto health care purchasers through market
a l l o c a t i o n agreements. I f the state agency does not
disapprove the agreement w i t h i n t h i r t y days, the statue can
specify that the agreement i s shleidea from a n t i t r u s t
exposure ae long as the p a r t i e s t o the agreement provide
the state agency w i t h regular reports of the operation of
the market a l l o c a t i o n agreement i t s e l f and the s t a t e
cxcrcioco the appropriate l e v e l of oupcrvioion under the
state action doctrine. Any changes r.o the agreement should
ulao be f i l e d with a atate agency and at the atate Attorney
General's o f f i c e .
I n the a l t e r n a t i v e , a blanket exemption from federal
a n t i t r u s t laws could be granted f o r market a l l o c a t i o n
agreements among providers ana health plans. I t i s worth
noting that such an exemption i s v i r t u a l l y unprecedented
and would permit anri-rompetirive as well as
pru-uompeLitive ayreemeuta.
w i t h respect t o market a l l o c a t i o n agreements t o r services,
i t may very w e l l promote q u a l i t y care i f c e r t a i n s p e c i a l t y
services are divided up among h o s p i t a l s . For example,
expertise i s more apt t o be b u i l t up i f a f a c i l i t y does
more cases; the worst q u a l i t y usually comes from f a c i l i t i e s
that do only a few cases. Moreover, i t i s easier t o a f f o r d
the expensive equipment i r a f a c i l i t y does l o t s of
procedures and i t reduces the enormous waste t o the system
that comes from the d u p l i c a t i o n of s t a f f and f a c i l i t i e s
that s i t i d l e f o r long periods of Lime because there are no
patients.
-6
�1
4.
Se© paragraph 4 i n "Solutions'
5.
See paragraph 5 i n " S o l u t i o n s " s e c t i o n .
- 7 -
section.
�Farah M. Walters
March 31, 1993
Preventing an Oligopoly
of
Large Insurers and HMOs
and
Provisions to Ensure Fair Competition
It requires little foresight to see that formation of large purchasing cooperatives will lead
inexorably to the elimination from the marketplace of all but a few large health insurers and
HMO chains. Smaller insurance companies and managed care organizations will be unable to
compete. In the case of managed care plans this will result in the elimination of the most
innovative and promising efforts at providing quality health care while containing costs. Since
some of the more recent managed care plans are provider driven, they offer the potential of
making the health care delivery system more efficient and less costly (as opposed to a particular
insurer paying incrementally less for care delivered in the same old way).
The question, then becomes: What if anything, can be done to discourage a concentration of the
market in a handful of large insurers and HMO chains? The answer to this question seems to
involve various measures, all of which have the common theme of maintaining a pure market
based solely upon direct price competition. In other words, except for the inherent competitive
advantage afforded by volume, the large insurers and HMO chains should not be permitted to
use their size in ways that traditionally violate free markets in other settings. Following are
some examples of what should be deemed prohibited conduct:
1)
Predatory Pricing. Large insurers must not be permitted to offer artificially low prices
in a particular service area, subsidizing those prices by drawing down reserves or by
diverting profits from other service areas. While it may be difficult to argue that a
purchasing cooperative should not seek the lowest price, it should be possible to prevent
a large multi-state health insurer from "dumping" below-cost coverage in a particular
service area to capture a market share.
�Recommended Actions:
a.
During the initial implementation of HIPCs, all carriers/HMOs, and health plans
currently authorized to provide services should be allowed to submit bids and be
accepted as an option for enrollees. In subsequent years participants can be
selected on the basis of actual results weeding out poor performances.
b.
Carriers/HMOs, health plans must accept all enrollees selecting their plan and not
be allowed to cut off enrollment at a self-determined number. This will ensure
that carriers/HMOs can't buy up a limited number of enrollees at a discount price
but, instead, are substantially committed to that particular marketplace and willing
and able to grow within it. This requirement will force large national carriers,
which are strong in some areas and weak in others, to be selective about markets
where they make commitments.
c.
After the initial selection of any carrier/plan, any future price increases should be
tied to actual underwriting results and the Consumer Price Index.
d.
All selected plans should be required to report on standard financial reports
quarterly (or semi-annually) results of their program. If a plan has priced on the
basis of a Medical Loss Ratio of 85% but instead reaches 110% because the
premium was too low, the next year it should be required to raise its rate 25%
plus CPI. This concept would ensure that competition was on the basis of actual
cost results and not an artificial pricing strategy to drive good performing but less
well reserved competition from the market.
2)
Exclusivity Relationships.
Just as predatory pricing is a favored device of large
insurers, the establishment of exclusive relationships with providers is the tool of choice
for large HMO chains.
predatory pricing.
Control of this practice should be easier than control of
Control, however, should be the objective rather than total
elimination of exclusive arrangements.
�Recommended Actions:
a.
Exclusivity should be permitted where the provider grouping (i.e., primary care
physician to specialist to community hospital to tertiary care hospital) already is
internally related in a delivery system. Exclusivity should be discouraged where
the providers have no common nexus except their relationship to the contracting
HMO.
b.
Another approach is to allow only providers to contract on an exclusive basis.
This approach protects their right to determine how and with whom they want to
do business. It also prevents managed care organizations, using mandated
exclusive contracting strategies, from controlling a market.
3)
Special Relationships and Influence Peddling. The deep pockets of large insurance
companies/HMOs can be used to develop special relationships and create preferred status.
Most small managed care plans cannot offer, nor compete with, the kind of "relationship
building tools" that the large companies can offer.
Recommended Actions:
a.
Each HIPC should establish the percent cap on allowable administrative costs,
15% in the first year, then reduced by 2% per year for three subsequent years.
These caps will prevent large insurers/HMOs from using reserves to influence the
outcome of the competitive process through means other than price and service
competition.
4)
Discounts.
It's a common practice for large insurers to negotiate discounts from
providers. For example, a favorite anti-competitive tool of Blue Cross, is the "favored
nation" clause. This clause effectively prevents any provider from giving a better price
to any other company, as long as the volume from Blue Cross is higher than the other
purchaser. For the purpose of volume determination, however, Blue Cross includes all
volume and not just the volume in their managed care product lines. Since Blue Cross
traditionally has had market dominance, this practice has given them a significant market
�advantage over other managed care programs this practice has effectively kept other
managed care competitors at bay and paying higher prices, while Blue Cross rides the
market with this significant advantage. Most "favored nation" contracts establish the
floor below which pricing levels cannot drop. They allow the large carriers to manage
price levels to their advantage, controlling the pricing of all competitors and often
shifting costs to other organizations.
Recommended Actions:
a)
Such discounts should be eliminated. While at first glance such discounts appear
to serve the interest of managed competition, in reality that is not the case. The
global cost of health care is not reduced if one insurer pays less for services than
does another. Without "most favored nation" contracts, providers can distribute
costs to managed care organizations on the basis of actual costs.
�WORK GROUP 16
MAJORITY RECOMMENDATION
CHANGES TO LAW AND REGULATION
C u r r e n t law. Chapters 81 and 89 o f t i t l e 5 o f t h e U n i t e d S t a t e s
Code, Chapter 55 o f t i t l e 10 o f t h e U n i t e d S t a t e s Code, S e c t i o n
890 o f T i t l e 5 o f t h e Code o f F e d e r a l R e g u l a t i o n s , and Chapter 16
o f T i t l e 48 o f t h e Code o f F e d e r a l R e g u l a t i o n s would need t o be
amended t o accommodate t h e recommended approach.
F i r s t , Chapter 89 needs t o be amended t o c r e a t e t h e a u t h o r i t y f o r
OPM and HIPCs t o work o u t agreements r e g a r d i n g coverage o f
potential enrollees.
I n t h e absence o f such agreements i n a
g i v e n l o c a l i t y , t h e s t a t u t o r y p r e s u m p t i o n s h o u l d t h a t FEHB
c o n t i n u e s t o e x i s t i n t h a t l o c a l i t y and meets a l l o f t h e
a p p l i c a b l e r e q u i r e m e n t s f o r a HIPC.
S e c t i o n 8103 o f Chapter 8 1 , and Chapter 55 o f t i t l e 10 need t o be
amended and p r o v i s i o n made f o r a p p r o p r i a t e i n t e r a g e n c y agreements
between OPM and t h e Labor and Defense Departments ( i f OWCP and
CHAMPUS e n r o l l e e s a r e t o be i n t e g r a t e d i n t o t h e FEHB),
p a r t i c u l a r l y r e g a r d i n g charge backs f o r s p e c i a l b e n e f i t s .
I n a d d i t i o n , key s e c t i o n s o f Chapter 89 need t o be m o d i f i e d as
follows:
•
•
The s e c t i o n d e f i n i n g employee, a n n u i t a n t , employer,
dependent, [8901] and r e l a t e d s e c t i o n s e s t a b l i s h i n g
e l i g i b i l i t y c r i t e r i a f o r coverage under t h e FEHB t o a l l o w
f o r a Government c o n t r i b u t i o n toward premium o f F e d e r a l
e n r o l l e e s covered o u t s i d e o f t h e Program, oir f o r e n r o l l m e n t
under t h e Program o f i n d i v i d u a l s n o t d i r e c t l y a s s o c i a t e d i n
some s p e c i f i e d way w i t h F e d e r a l employment s h o u l d be
modified with reference t o the authority t o negotiate
agreements between OPM and HIPCs.
The s e c t i o n s e s t a b l i s h i n g t h e minimum s t a n d a r d s f o r p l a n s
and p r o v i s i o n s f o r p l a n p a r t i c i p a t i o n and t e r m i n a t i o n [8902,
8903] s h o u l d be amended t o conform w i t h t h e p a r a l l e l
p r o v i s i o n s f o r HIPCs.
•
The s e c t i o n on t h e Government c o n t r i b u t i o n f o r m u l a [8906]
s h o u l d be r e p l a c e d w i t h a p r o v i s i o n t h a t m i r r o r s t h e g e n e r a l
employer c o n t r i b u t i o n p r o v i s i o n s o f t h e g e n e r a l l e g i s l a t i o n .
•
The p r o v i s i o n s f o r c o n t i n u a t i o n o f coverage f o r r e t i r e e s and
former spouses [8905] and f o r o t h e r i n d i v i d u a l s c u r r e n t l y
covered under TCC ( t h e FEHB v e r s i o n o f COBRA) [WP], i f t h e
n a t i o n a l approach i s d i f f e r e n t .
�•
The s e c t i o n s on b e n e f i t s [8903, 8 9 0 4 ] , s e r v i c e d e l i v e r y
arrangements, and p r o v i d e r r e l a t e d r e q u i r e m e n t s , i f t h e
n a t i o n a l approach i s d i f f e r e n t s h o u l d be amended t o conform.
•
The s e c t i o n s on premiums, a d m i n i s t r a t i v e funds and r e s e r v e s
[8909] needs t o be r e v i s e d t o p r o v i d e f o r r e c e i v i n g and
d i s b u r s i n g b o t h F e d e r a l and non-Federal funds and t o p e r m i t
t h e a d m i n i s t r a t i v e p o r t i o n o f premiums f o r non-Federal
e n r o l l e e s under t h e FEHB t o be accounted f o r w i t h o u t
a f f e c t i n g budgetary o u t l a y s .
NOTE: THIS I S A PRELIMINARY LIST AND SHOULD NOT BE CONSIDERED
EITHER COMPLETE OR EXHAUSTIVE. ONCE A DECISION I S MADE ON THE
OPTION, REFINEMENT WILL BE NECESSARY.
Since r e g u l a t i o n s f l o w from s t a t u t e , i t i s premature t o l i s t
necessary r e g u l a t o r y changes except t o note t h a t b o t h t h e FEHB
program r e g u l a t i o n [ 5 USC 890] and t h e a c q u i s i t i o n r e g u l a t i o n
t h a t implements t h e FAR f o r t h e FEHB program [48 USC 1 and 16]
w i l l need t o be amended t o conform t o t h e s t a t u t o r y changes. The
s t a t u t e s h o u l d c o n t i n u e , as under c u r r e n t law, t o a u t h o r i z e OPM
t o r e g u l a t e as necessary.
�Broader Statutory Changes
To enable managers of M i l i t a r y AHPs t o compete e f f e c t i v e l y ,
a number of r e v i s i o n s are needed i n applicable f i s c a l , personnel
and c o n t r a c t i n g laws. These include the f o l l o w i n g :
F i s c a l Management. E s t a b l i s h i n the Treasury of the United
States a new fund, t o be administered by the Secretary of
Defense, from which w i l l be paid expenses f o r personnel,
operations and maintenance, procurement, and c o n s t r u c t i o n r e l a t e d
to the d e l i v e r y and f i n a n c i n g of h e a l t h care services by M i l i t a r y
AHPs. The fund w i l l receive appropriated monies associated w i t h
DoD premium o b l i g a t i o n s f o r M i l i t a r y AHP enrollees, as w e l l as
employer-funded premiums f o r employed M i l i t a r y AHP enrollees and
Medicare-funded premiums f o r Medicare b e n e f i c i a r i e s .
Administration of the fund w i l l necessarily include f l e x i b l e
a u t h o r i t i e s more comparable t o standard c i v i l i a n h o s p i t a l f i s c a l
management p r a c t i c e s , such as carry over of p r i o r year balances,
and the l i k e . A p o t e n t i a l model f o r t h i s new fund i s the
National Defense S e a l i f t Fund, established i n law i n 1992.
Personnel Management. Give the Secretary of Defense a l l of
the personnel a u t h o r i t i e s f o r the m i l i t a r y medical system t h a t
the Secretary of Veterans A f f a i r s c u r r e n t l y has f o r the Veterans
Health A d m i n i s t r a t i o n . S p e c i f i c a l l y , a l l a u t h o r i t i e s of chapter
74 of t i t l e 38, United States Code, w i l l be applicable t o DoD.
These a u t h o r i t i e s include: special pay, more comparable t o
p r e v a i l i n g c i v i l i a n rates, f o r physicians, nurses, and other
health care providers; personnel management procedures
appropriate t o the h e a l t h care f i e l d and professions involved;
medical education and continuing p r o f e s s i o n a l education programs
and a c t i v i t i e s ; and special need waivers of normal reductions i n
r e t i r e d pay f o r former m i l i t a r y members who become f e d e r a l
c i v i l i a n employees.
Personal Services Contract A u t h o r i t y . Reform current,
r e s t r i c t e d a u t h o r i t y t o u t i l i z e personal services contract
personnel t o supplement regular f e d e r a l employees. S p e c i f i c a l l y ,
section 1091 of t i t l e 10, United States Code, would be revised:
a) t o authorize payment amounts (up t o a cap) comparable t o
p r e v a i l i n g c i v i l i a n rates f o r t h a t category of h e a l t h care
providers; b) t o increase the current maximum pay cap s t r u c t u r e
from a l e v e l t i e d t o m i l i t a r y compensation rates f o r senior
uniformed personnel i n various s p e c i a l t i e s (reaching a maximum of
approximately $150,000 f o r c e r t a i n s p e c i a l t i e s ) t o a cap of
$200,000 (the current Department of Veterans A f f a i r s personnel
system cap); and c) t o authorize the Secretary of Defense t o
e s t a b l i s h s i m p l i f i e d c o n t r a c t i n g procedures, i n l i e u of current
�Federal A c q u i s i t i o n Regulation procedures, f o r personal
contracts w i t h i n d i v i d u a l s .
services
"Small Purchase Threshold" f o r S i m p l i f i e d Contract
Procedures. Increase the current threshold of $25,000 f o r
contracts t h a t may be awarded under streamlined procedures t o a
new t h r e s h o l d of $100,000 f o r supplies, equipment and services
necessary f o r e f f e c t i v e operation of the M i l i t a r y AHP.
This
proposal r e l a t e s t o sections 2302(7) and 2304(g) of t i t l e 10,
United States Code. This w i l l allow m i l i t a r y treatment
f a c i l i t i e s t o carry out normal operations i n a more expeditious
manner, comparable t o c i v i l i a n h o s p i t a l p r a c t i c e s . There i s
precedent i n law f o r the $100,000 threshold i n DoD contract
a c t i v i t i e s i n c i d e n t t o the Persian Gulf C o n f l i c t . I t was also a
recommendation of DoD's January 1993 A c q u i s i t i o n Law Advisory
Panel Report t o Congress. As a c o r o l l a r y change, the t h r e s h o l d
for noncompetitive c o n t r a c t i n g w i l l increase from $2,500 t o
$10,000, p r o v i d i n g a d d i t i o n a l , needed f l e x i b i l i t y t o M i l i t a r y AHP
managers.
"Unspecified Minor Construction" A u t h o r i t y . Increase from
$1 m i l l i o n t o $5 m i l l i o n the maximum size of minor h o s p i t a l
c o n s t r u c t i o n p r o j e c t s t h a t may be c a r r i e d out without p r o j e c t s p e c i f i c s t a t u t o r y a u t h o r i z a t i o n . The process f o r o b t a i n i n g
approval of many minor c o n s t r u c t i o n p r o j e c t s , which includes
s p e c i f i c s t a t u t o r y a u t h o r i z a t i o n f o r p r o j e c t s over $1 m i l l i o n ,
s u b s t a n t i a l l y delays management i n i t i a t i v e s t h a t include
r e l a t i v e l y , minor p h y s i c a l p l a n t renovations. Increased r e l i a n c e
of more cost e f f e c t i v e o u t p a t i e n t procedures, f o r example, may be
delayed f o r years awaiting s p e c i f i c Congressional approval of
r e l a t i v e l y minor renovation. More f l e x i b l e minor c o n s t r u c t i o n
a u t h o r i t y i s needed t o allow M i l i t a r y AHP managers t o move
toward common c i v i l i a n h o s p i t a l management p r a c t i c e s . As a
c o r o l l a r y change, the authorized use of "operation and
maintenance" funds f o r very small c o n s t r u c t i o n p r o j e c t s would
increase from $300,000 t o $1 m i l l i o n . These reforms would revise
provisions of section 2805 of t i t l e 10, United States Code.
I n t e r i m Cost Containment I n i t i a t i v e s
As DoD
i n t o the new
containment
legislative
f o l l o w s the several year process of f u l l i n t e g r a t i o n
h e a l t h care managed competition system, ongoing cost
i n i t i a t i v e s should be strengthened through
amendments. These include:
Specialized Treatment Services Program. This proposal would
extend and revise 1991 l e g i s l a t i o n concerning operation of the
�Specialized Treatment Services (STS) program, under which
regional (or, f o r organ t r a n s p l a n t s and other e x t r a o r d i n a r y
procedures, n a t i o n a l ) m i l i t a r y medical centers would be
designated f o r p a t i e n t r e f e r r a l s . The two-year a u t h o r i t y t o
e s t a b l i s h p a t i e n t r e f e r r a l procedures outside the standard 40mile h o s p i t a l catchment area would be made permanent. I t would
also permit the designation of c i v i l i a n STS f a c i l i t i e s i n areas
without m i l i t a r y centers. F i n a l l y , i t would authorize payment o f
t r a n s p o r t a t i o n and r e l a t e d expenses f o r the p a t i e n t and an
attendant t o t r a v e l t o an STS f a c i l i t y when cost e f f e c t i v e .
CHAMPUS Physician Payment Reform. This proposal would
c o d i f y i n t o permanent law an i n t e r i m Appropriations Act p r o v i s i o n
c a l l i n g f o r t r a n s i t i o n of CHAMPUS physician payment methods t o
adopt l i m i t s s i m i l a r t o the Medicare fee schedule, established
using a Resource-Based Relative Value Scale. Payments f o r
overpriced procedures are reduced under the reform.
Peer Review Organization Program. This proposal would
codify a r e c u r r i n g Appropriations Act p r o v i s i o n i n order t o
r e i n f o r c e the effectiveness of the CHAMPUS Peer Review
Organization program, which i s designed t o assure q u a l i t y and
appropriate u t i l i z a t i o n under CHAMPUS. DoD would be authorized
t o adapt, by r e g u l a t i o n , the q u a l i t y and u t i l i z a t i o n review
requirements and procedures i n e f f e c t f o r the Medicare program.
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1
(b) TABLE OF CONTENTS.—The table of contents of
2 this Act is as follows: [tentative'
T I T L E I—ASSURING H E A L T H CARE SECURITY THROUGH
U N I V E R S A L COVERAGE [ACCESS.ooi]
Subtitle A—Universal Access
Sec. 101. Coverage of citizens, permanent
nonimmigrants.
Sec. 102. Treatment of other individuals.
resident
aliens, and long-term
Subtitle B—Specification of Health Security Plan Providing Coverage
Sec. 111. Coverage of employees and dependents of large employers through
ERISA plans.
. OSec. 112. Coverage of other employees, self-employed individuals, and uninsured
individuals through HDPC plans.
Sec. 113. Coverage of medicare-eligible individuals through medicare plan.
Sec. 114. Coverage of individuals under federal government plans.
Sec. 115. Treatment of [family members]/[spouses and dependents].
Sec. 116. Coordination of coverage.
Subtitle C—Employer Responsibilities
Sec.
Sec.
Sec.
Sec.
Sec.
121.
122.
123.
124.
125.
Responsibilities of large employers.
ResponsibiUties of other employers.
Enforcement.
Coordination of employer responsibilities.
Definitions relating to employment.
T I T L E 11—COMPREHENSIVE B E N E F I T PACKAGE [BENEFITS.ooi]
Sec. 200. Provision of comprehensive services by health security plans.
Subtitle A—Description of Comprehensive Sen-ices
Sec. 201. Hospital sen-ices.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
See.
Sec.
Sec.
Moivk.
100-5 f i n - d i
= — \
202.
203.
204.
205.
206.
207.
208.
209.
210.
211.
212.
213.
214.
215.
216.
217.
218.
Sen-ices of physicians and other health professionals.
Clinic-based sen-ices.
Preventive sen-ices.
Outpatient prescription drugs and biologicals.
Laboratory and radiology sen-ices.
Reproductive health sen-ices.
Extended care services.
Hospice care.
Rehabilitation sen-ices.
Mental health services.
Substance abuse treatment sen-ices.
Durable medical equipment [and prosthetic and orthotic devices].
Ambulance sen-ices.
Child vision and denial sen-ices.
Adult dental sen-ices.
Dialysis sen-ices.
Other sen-ices.
�[******CONFIDENTlAi.-"*"J
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OUTLINE.TC
3
Subtitle B—Cost Sharing
Sec.
Sec.
Sec.
Sec.
231.
232.
233.
234.
Application of general deductible for fee-for-service plans.
Copayments and coinsurance.
Limit on cost-sharing.
Limits on the imposition of additional cost-sharing.
Subtitle C—Exclusions
Sec. 251. Exclusions.
Sec. 252. Experimental services.
Sec. 253. Practice guidelines.
Subtitle D—Role of National Health Board
Sec. 261. Definition of benefits.
Sec. 262. Modification of benefit package.
T I T L E E H — H E A L T H SECURITY PLANS [HSP.ooi]
[Sec. 300. General provisions.]
Subtitle A—General Requirements for Health Security Plans
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
301.
302.
303.
304.
305.
306.
307.
308.
309.
310.
311.
312.
[to be provided] Accessibility (insurance reforms)
Benefits.
Conditions on restrictions on providers.
Information reporting requirements.
Portability, [may be under benefits]
Financial solvency (general consumer protection).
Utilization review.
Administrative simplification.
Quality assurance.
Consumer protection.
Ethical foundations.
Preemption of State laws.
Subtitle B—^Additional Requirements for HTPC Plans
Sec. 321. Plan certification: termination of certification.
Sec. 322. Restrictions on bidding areas and sen-ice areas, [could be under
HTPC?]
Sec. 323. Financial solvency (HIPC plans).
Sec. 324. Enforcement.
[Subtitle C—^Additional Requirements for Non-HIHC Plans [jurisdictional
concerns: this should go into an ERISA title, with a cross reference to
requirements of subtitle A of title H I . ] ]
Sec. 331. Reference to additional requirements for ERISA plans.
Sec. 332. Reference to additional requirements for medicare.
Sec. 333. Reference to additional requirements for Federal Government health
security plans.
T I T L E I Y — H E A L T H INSURANCE PURCHASING COOPERATIVES
'•.(.
Subtitle A—Establishment and General Responsibilities [HIPC.001]
Sec. 401. State establishment of HIPCs.
March 23. 1993 (10:41 a.rrO
�L
7
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OUTLINE.TC
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
402.
403.
404.
405.
404.
405.
406.
407.
408.
, [ ,
Ky^
Enrollment of HIPC-eligible individuals in HEPC plans.
Agreements with HTPC plans.
Grievance procedures for HLPC-plan enrollees.
Quality assurance.
Agreements with small employers.
Receipt of premiums.
Coordination among HIPCs.
Responsibility for containment of growth of premiums of HIPC plans.
Additional authorities.
Subtitle B—Cost Containment [HIPC.002]
J
Sec. 421. Responsibility for containment of growth of premiums of HIPC plans.
TITLE V—PROTECTION FOR AT-RISK POPULATIONS (LOWINC.ooi:
NO DRAFT]
Subtitle A—^Populations Eligible for Assistance
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
501.
502.
503.
504.
505.
506.
507.
508.
Low-income individuals generally.
Low-income children.
Low-income pregnant women.
Homeless individuals.
Migrant workers.
Disabled individuals.
Individuals in rural and other medically undersen-ed areas.
Income-related definitions.
Subtitle B—Forms of Assistance
Sec. 511. Additional sen-ices.
Sec. 512. Cost-sharing assistance.
Sec. 513. Special sen-ice delivery rules.
Subtitle C—Administration and Coordination
Sec.
Sec.
Sec.
See.
521.
522.
523.
524.
Application process.
Eligibility determinations.
Appeals.
[Reconciliation]
TITLE VI—IMPROVEMENTS I N HEALTH CARE DELIVERY SYSTEM
[MOST OF THIS IS IN P H S A ; \VE MAY SEPARATE OCT MEDICARE GME
REFORMS; LOOK OUT FOR TRUST FUNDS| [TO BE PHS.OOr??: NO DRAFT]
Subtitle A—Creating a New Health ^Vurkforce
Subtitle B—Promoting Community-Based Health Care
Subtitle C—Public Health Initiatives
TITLE VTI—FINANCING; ASSISTANCE FOR SMALL BUSINESSES ITO
BE TAX....]
Subtitle A—Financing [TAX.001]
[review placement of premium provisions]
March 23. 1993 (10:41 a.m.)
�SUBTITLE B—ASSISTANCE TO CERTAIN SJIALL BUSINESSES (E.G., TAX CRED-
ITS) [MAY WISH TO CONSOLIDATE TAX PROVISIONS TOGETHER: PUT INTO
TAX TITLE] [TAX 002]
Subtitle C—luter^HIPC Trust Fund [TAXOOS]
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
731.
732.
733.
734.
735.
735.
.
.
.
Establishment.
Management.
Deposits into Trust Fund.
Payments from Trust Fund.
Appropriation of current program receipts.
HIPC reinsurance account.
Government contributions.
Transfers of taxes.
Crediting of state and federal medicaid maintenance of effort payments.
. Transfer of fands for low-income assistance.
. Payment of expenses for relating to research on outcomes of health
care services and procedures.
Sec.
Sec.
TITLE ..—REFORM OF MEDICAL MALPRACTICE SYSTEM [NEEDS TO
BE SEPARATE FOR JURISDICTION, PROBABLY JOINT BETWEEN ENERGY &
COMMERCE AND JUDICIARY]
[related to hsp provisions too, because plans required to provide for certain
grievance processes]
TITLE ..—REFORM OF ANTITRUST LAWS AS APPLIED TO MEDICAL CARE [NEEDS TO BE SEPARATE FOR JURISDICTION FOR JUDICIARY]
TITLE Vm—ADMINISTRATION AND OVERSIGHT ITO BE NHB.ooi: NO
FILE YET]
SUBTITLE A—NATIONAL HEALTH BOARD
SUBTITLE B—OTHER
[is fraud and abuse here'?]
TITLE IX—LONG-TERM CARE {TO BE LTCARE.ooi: NO FILE YETI
TITLE X—iEEDICARE PROGRAM ITO BE MEDICARE.ooi: NO FILE YETI
[could include long-term care; or non-longterm care elements]
TITLE XI—iEEDICAID PROGRAM [TO BE MEDICAlD.ooi: NO FILE YETI
[could include long-term care: or non-longterm care elements]
TITLE XH—ERISA |ERISA.ooi]
Subtitle A—ERISA Plan Requirements and Procedures
See. 1201. ERISA plan requirements and procedures, [this would amend
ERISA to add in a series of sections that parallel subtitle B
of title HI].
1
March 23 1993 MO M a.m.)
�,
[******CONnDENTIAL******]
'
Hi.C.
OUTLINE.TC
6
"Sec.
"Sec.
"Sec.
"Sec.
«
X X I . Scope of coverage [namely employees, etc.]
XX2. ERISA plan certification; termination of certification.
XX3. Financial solvency (ERISA plans).
XX4. Enforcement, [needed given ERISA provisions?]
Subtitle B—[More]
TITLE Xm—VETERANS' HEALTH [TO BE YA.001: NO FILE TET]
TITLE XIV—HEALTH CARE FOR THE MILITARY AND
DEPENDEMTS (CHAMPUS) [TO BE DOD.ooi: NO FILE TETJ
TITLE XV—HEALTH CARE FOR FEDERAL EMPLOYEES, RETIREES, AND DEPENDENTS (FEHBP) [TO BE FEHBP.ooi: NO FILE
YET]
TITLE XVI—HEALTH CARE FOR NATIVE AMERICANS (IHS) [TO BE
THS.001: NO FILE YET]
TITLE XVH—OTHER FEDERAL HEALTH INSURANCE PROGRAMS
[TO BE 11: NO FILE YET]
TITLE XVm—STATE HEALTH REFORM INITIATIVES [TO BE
S T A T E . 0 0 1 : NO FILE YET]
[What's the jurisdiction oq this provision; depends on what provisions are superseded: if just in HIPCs, maybe belongs up there; or hsp provision??]
[TITLE XIX—SHORT-TERM PRICE CONTROLS] [TO BE 11: NO FILE
YET]
TITLE XX—GLOSSARY [GLOSSARY]
Sec. 2001. General definitions and glossary of terms.
-
1 TITLE ...—TIMETABLE FOR IMPLEMENTATION: TRANSITION] [TO
BE TIMETABL.001]
[this would be drafted here temporarily and then distributed into section 6 and
into the various titles, to avoid jurisdictional confusion.]
March 23. 1993 (10:41 a.m.)
�FanahM Waters
March 25,1993
Managed Care Programs:
Conventional Wisdom
or
New Models?
I . Introduction
At a gathering of Chief Executive Officers of several major corporations in 1991, the CEO of
a Fortune 500 company stated that his company was very committed to reducing health care
costs for its workforce. When questioned how he was going to accomplish this goal, he replied
that in his view the seventies was the decade when companies said "yes" to everything and ended
up with very rich benefit packages for their employees and their dependents. The eighties were
the "take back" years when some companies attempted either to reduce the size of the benefit
package or to require larger contribution from their employees. He then added that the nineties
were going to be known as the "managed care" decade; when the companies werefinallygoing
to learn how to "manage" the health care cost of their employees. This CEO is representative
of a large number of purchasers of health care who have turned to managed care as the solution
to their health care cost problems. As a result, managed care products are rapidly replacing
traditional indemnity plans for many insured groups. Since managed care is also a central
component of managed competition and health care reform initiatives currently under
development, there needs to be a thorough understanding of the critical success factors required
for managed care plans.
n . Are current Models successful?
The inception of managed care, especially in the form of HMOs, can be traced to large
employers. In recent years however, managed care has become the main domain of the
insurance companies. It must be recognized that while insurance companies historically have
had a great deal of experience infinancinghealth care and dealing with the actuarial concepts
of risk adjustment, premium setting, etc., they have had no experience in the delivery of health
�care. Thus, in a real way these companies decided to manage the cost of health care without
understanding health care delivery systems or the psyche of providers. As a result, most
managed care plans became "discounted medicine" programs which showed a reduction in health
care costs during the first year and very little sustained reduction over a period of time.
Following is a brief list of the more obvious and commonly described shortcomings associated
with the traditional managed care programs offered by most insurance companies.
1)
Most managed care programs, as stated above, are simply discounted medicine where the
collective purchasing power is used to extract discounts from hospital providers,
physicians, etc., on a unit-cost basis. While unit cost can easily be lowered, reducing
total health care cost per enrollee is an entirely different matter.
2)
Most managed care companies spend a tremendous amount of resources to design and
implement archaic and draconian utilization review (UR) schemes. Most common UR
programs, such as second opinion, preadmission certification, continued stay review, are
designed to "second guess" providers who have a knowledge of and experience with each
patient's condition. Several studies have pointed out that the amount of monies spent on
these types of UR activities often does not bring about a sufficient return on investment.
Furthermore, they only aggravate patients and providers who must deal with this system
of barriers. These practices also result in higher overhead costs for providers who have
to comply with many nonsensical requirements of these so called UR activities. All of
these create a group of unhappy consumers, providers, and insurance companies - all
now engaged in an adversaria] relationship.
3)
Most utilization review activities are designed to focus on hospitalization, even though
hospitalization expenses represent only 37-40 percent of every health care dollar.
4)
The most alarming deficiency of these models, however, is that most plans have very
limited ability to provide timely, comprehensive data to the providers regarding
utilization by the enrollees in their practice. Nor do these models have sufficient
capability of producing any data for the employers/purchasers in terms of patterns of
�utilization by their employees. In essence, neither the purchasers nor the providers have
access to data which is essential in managing health care costs.
5)
Most plans do not have an objective, formal process for coverage or denial of new
technology on a generalized or on a case-by-case basis. As a result, decisions regarding
use of new procedures, often turn into major disputes between the enrollee and the
insurance companies, with the employer caught right in the middle.
6)
The nature of the capitated system and the short-term incentives it provides for physicians
can, and occasionallv do, encourage under utilization. They also tend to reduce access
to appropriate level of health care when needed. Both of these phenomena can become
quite costly in the long run by foregoing preventive medicine in favor of expensive
procedures and hospitalizations down the road.
7)
While there is some lip service to quality assurance (often in terms of a thorough review
of credentialing records), there are very few quality assessment mechanisms in place for
review of care, especially at the ambulatory level. This is important, since Americans
receive most of their health care in the ambulatory setting as opposed to the in-hospital
setting.
IH. Can Small. Innovative Managed Care Plans Effectively Compete?
In recent years there has been a movement on the part of providers to develop and implement
innovative managed care delivery models using integrated delivery systems. These plans, which
are designed by individuals who fully understand the health care delivery system, have often
proved to be quite cost effective and have received high satisfaction ratings from the consumers.
In most markets however, these small, innovative managed care programs have not been able
to gain a sufficiently large market share nor to compete effectively with the big insurance
companies. The question then might be, if the insurance companies have not managed health
care costs, why have they captured a large share of the managed care market, or, why are these
innovative cost effective programs unable to compete effectively with the larger insurance
companies? The answers are different in different markets, but they include the following:
�1)
The ability to lobby for and obtain favorable legislation at the state level. The
insurance companies (including and especially Blue Cross companies) have developed one
of the most sophisticated lobbying mechanisms at the state level. This has enabled them
to obtain very favorable legislative rulings which give them a significant market
advantage. For example, a favorite anti-competitive tool of Blue Cross is the "favored
nation clause." This clause effectively prevents any provider from giving a better price
to any other company, as long as the volume from Blue Cross is higher than the other
purchaser. For the purpose of volume determination, however, Blue Cross includes all
volume and not just the volume in their managed care product lines. This practice has
effectively kept other managed care competitors at bay and paying higher prices, while
Blue Crossridesthe market with this significant advantage.
2)
Predatory pricing. The deep pockets of large insurance companies have enabled them
to gain market share by severely underpricing their managed care product. Once the
desirable market share is gained, and the purchasers/large employers are hooked, the
premium prices are raised to reflect real costs. In most cases, the employers/purchasers
are reluctant to change to other products because they do not wish to interrupt the
continuity of care for their employees and to deal with a lot of complaints from their
workforce.
3)
Special relationship with brokers. Once again, the deep pocket of insurance companies
is used to develop special relationships with the powerful brokers, consultants and other
middlemen who influence purchasing decisions of employers. Most small managed care
programs cannot offer, nor compete with, the kind of "relationship building tools" that
the large companies are offering. Examples of these are one-week cruises, out-of- state
golf outings, private loges for special sports events, etc.
4)
Advertising. The large companies have almost unlimited resources in covering full-scale
newspaper, radio and television advertising campaigns. These campaigns often are aimed
at specific markets which the insurance company has targeted for expansion, and the
companies can bring to bear an almost unlimited amount of resources. This simply is
not possible for small managed care companies to duplicate.
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�Given these conditions, a real danger of managed competition is the possibility that the entire
country's health care insurance in the not too distant future might be in the hands of a few large
insurance companies. This would be very similar to the post-deregulation airline industry.
IV. A New Managed Care Model
The goals of providing universal access to high-quality health care at reasonable costs will not
be achieved through a mountain of new regulations, nor through creation of many more layers
of bureaucratic structures. The health care delivery system in the United States and its
associated high cost did not arise by accident, nor was the system created through a malicious
intent on the part of providers. In most part, the delivery system in this country was designed
as a reaction to the irrational reimbursement policies of large insurance companies. For
example, as recently as almost a decade ago, many people were admitted to hospitals to have
routine tests done, simply because the insurance companies would not cover the cost of these
services on an out-patient level, but would cover the cost in full if the patient was hospitalized.
Until recently, most insurance companies and governmental payors did not reimburse for routine
screening and preventative care. Large employers' tendency to treat health care as a very
inexpensive resource by offering unlimited benefit packages, first dollar coverage, etc., created
a situation which removed any level of cost sensitivity or cost consciousness from the
user/consumer.
While health care providers do assume a portion of the responsibility for the excessive increases
in the cost of health care, they are also uniquely qualified to design and implement some of the
more innovative solutions to the health care cost problems in this country. It is absolutely
critical that the relationship between the purchasers of health care and the providers of health
care become one of partnership and collaboration in order to produce the best answers to some
very difficult questions.
Let me now share with you an example of such a partnership. The following is a description
of a managed care program called QualChoice. The program was developed by University
Hospitals Health Systems, Inc., in Cleveland through a licensing agreement with Novalis
Corporation for use of design and software capabilities. QualChoice was implemented in
January of 1991. It was initially targeted to self-funded employers and it is currently applying
�for a state insurance license in order to become fully insured. The QualChoice design model
and philosophy in terms of its relationship with providers, UR procedures, etc., differs
significantly from the common trends in managed care.
The mission of QualChoice was to establish a managed care program that would enhance the
quality of medical care, preserve the clinical freedom of physicians, reduce the overall cost of
medical services to Cleveland employers and preserve some level of freedom for individuals in
selection of providers.
In two years, QualChoice has developed a high quality comprehensive health care delivery
system which includes a tertiary university hospital, primary affiliate of Case Western Reserve
University School of Medicine, 13 community-based hospitals, 550 primary care physicians, 900
specialists, and a full complement of ancillary providers including home health care, pharmacy,
laboratories, DME, etc.
The program offers a unique benefit design allowing enrollees to select how they access services,
either using their primary care physician or deciding to pay more for self-referrals to specialists,
etc. the enrollment has reached 30,000 in two years. Strong anti-competitive tactics by some
large companies have prevented faster growth in enrollment.
A Primary Care Physician (PCP) ~ who service as medical manager of patient care ~ has been
selected by 98 percent of QualChoice enrollees, 50 percent of whom selected a PCP for the first
time. This means initial contact with the health care system is at the primary care level - the
least costly encounter setting. Yet satisfaction levels (89 percent) were as high as those reported
in national surveys for enrollees in non-managed care environments. In fact, in the QualChoice
model, satisfaction level measurements actually increased as use of the plan increased.
By giving physicians clinical decision-making freedom linked with financial accountability for
results, physicians are incented to achieve quality outcomes in the most cost-effective manner.
This is demonstrated in hospital utilization rates superior to most HMOs and PPOs, but with
realistic, non-punitive freedom of choice for enrollees. Hospital days per 1,000 enrollees were
�316 in 1991, and 301 in 1992, which favorably compares to the average Ohio HMO rate of 377
per 1,000.
The result of the QualChoice model effectively implemented has been to reduce costs in the first
year through aggressive medical management. Actual savings realized forfirstyear groups was
25 percent over trended predecessor plans. In subsequent years, the program, continuing to
apply medical management and utilization improvement, will save additional amounts.
QualChoice's second year realized a year-over-year increase of 2.9 percent compared to a
national trend of 10.1 percent.
Through establishment of a partnership between hospitals, physicians, and employer plan
sponsors, a collaborative, non-adversarial environment has been created. With sophisticated
analytical tools, QualChoice has been able to identify best practices, superior clinical decisionmaking, and progressive medical management protocols. The reordering of physician incentives
permits the restoration of clinical freedoms, but now with a shared commitment to both costeffectiveness and quality outcome.
Appendix I summarizes how QualChoice's design and philosophy differ from the conventional
wisdom, regarding what works in managed care.
Appendix II provides a summary of key components of the new model.
Appendix III provides a detailed description of the basic concepts and objectives of the program.
�Appendix I.
Conventional Wisdom
New Model
Combine capitation and fee for
service into new hybrid to create
incentives.
Fee for service is bad~induces
volume; Capitation is good-heavy
risk shift to providers checks
volume.
•
"Shadow" captiation is global
budget ajusted to patient mix
• Modest risk shift with fee
withhold is enough
• Keeps link between service and
payment-key to good
information
• Capitation is simple
• Breaks link between service
provision and billing
• Provides global budget cap
Physicians can't be held accountable
for all care costs unless in large
pools.
Physicians in small groups can be
accountable for all costs and
outcomes-large pools destroy
accountability.
Peer review should be carried out at
plan-wide level.
Physicians in small panels do this
best with plan support.
• Patterns over time are analyzed
across all categories of care with
patients.
Plan/Network alone selects
physicians.
Physicians won't look at or react to
data-data hoarded at a plan/network
level for control purposes.
Physicians select physicians with
plan support-go at risk together for
performance as a small group.
5.
Physicians get detailed, analyzed
data every month and do react~key
to behavioral change.
�Appendix I . (continued)
Conventional Wisdom
New Model
Plan/Network preauthorization and
other micro-management necessary
to catch abuse; focus on hospital as
most costly setting.
Physician clinical freedom to refer is
key to control and quality-focus on
ambulatory setting~so long as
accountability for aggregate cost is
focused on panel.
Patient must choose which
network/plan to use then is locked
in-steep cost/coverage consequence
to go out of network.
Patient free to choose plan/network
and is free to go in and out of that
network at will with modest cost
consequence to go out (point of
service).
• Will almost always use network
of choice anyway.
8.
More extensive data and expensive
methods to get data are required to
do analysis.
8.
Existing data widely used is
sufficient to provide feedback and
gauge practice patterns by panel.
No huge expense involved.
9.
Unit costs are focus of control via
discounts/limits.
9.
Overall outcome/selectivity of
network and intelligent incentive
plan more than unit costs are keys to
cost control.
10.
Savings go back to plan/network or
employer if achieved.
10.
A share of savings first to physicians
(panels) who created it.
�Appendix H.
Key Components of New Model
1.
Small, self-selected primary care physician (PCP) panels:
•
•
•
•
•
2.
Incentive model-focused on PCP panels:
•
•
•
•
3.
Free patient accessing choices in and out of network
Channeling incentives to PCP's and panels
Uniform scope of covered services with graduated cost sharing if greater out-ofnetwork choice
Local entity to administer-combines attributes of PPOs, HMOs, TPAs into one:
•
•
•
•
6.
No balance billing
Tight referral rules in authorizing care
Access to medical records
Point-of-service benefit design:
•
•
•
5.
Shadow capitation-age, sex and employer adjusted
sets standard-pooled by panel
Free for service with RBRVS and fee limits
Withhold on fees (20 percent) adds element of risk
Graduated sharing of savings with panel based on performance adds incentives
Uniform physician contracts for specialists and PCP's:
•
•
•
4.
Back up and coverage
Peer review
Risk pooling/risk sharing/performance unit/participates in savings
Coordinate and provide all covered services-gateway to the system for all
services
Accountable for all outcomes and cost
Local provider by in/equity
Administers data systems
Does all provider contracting
Markets, takes some risk
Administrative data system:
•
•
•
•
Processes claims at a line item level (CPT-4, ICD-9 specific); compares against
shadow capitation
Tracks referral authorization-who provided care as well as who authorized care
Maintains enrollment, etc.
Provides data back to physicians continuously
�Appendix 11.
Key Components of New Model
(continued)
7.
Analytical data system:
•
•
•
8.
Replacement/displacement of fragmented offerings
Rating of whole group as single whole unit
Flexibility on risk arrangements (self insured to fully insured)
Regulatory approval both HMO like and insurance like (combined~to create a
new class)
Standard coverage plan:
•
•
•
10.
M
Ability of local entity to serve full employer groups:
•
•
•
•
9.
Relational data base
Pattern analysis~ drill down" and "what i f capability
Episode tracking and comparative
Broad scope
Covers health promotion/well care
Special rules for catastrophic coverage/case management
Standard rules of competitive network market engagement-elimination of socially
unproductive insurance practices:
No preexisting condition exclusions
No shadow pricing
No risk skimming
Community rating
Group purchasing
Unified government and private sector rules
�Appendix m.
Basic Concepts and Guideposts: What are the underlying
concepts and objectives of the program?
There are seven concepts that form the foundation of the proposed managed care program.
When distilled and stated as principles, they can be summarized as follows:
1.
Physician/Enrollee Relationship. A sound relationship between each enrollee and
the Network primary care physician (PCP) of his/her choice is essential to both quality
of care and cost control. Yet, enrollee freedom to directly access other Network and
Out-of-Network providers is an essential safeguard that is central to the program's
design.
2.
Clinical Freedom To Practice. Direct program intrusion into clinical decision
making is counterproductive in the long term. Accordingly, authority for clinical
decision making must rest with the primary care physician in order to foster quality of
care.
3.
Fee-For-Service Reimbursement. A direct connection between the provision of
service and payment is essential to enhance the accessibility of services and to provide
continuity in the management of a patient's care. Thus, fee-for-service reimbursement
is central to the program's design.
4.
Medical Care Panels. Physician organization is critical to establishing both
accountability and responsibility for care. Small physician teams which render and
arrange care (called Medical Care Panels) are the essential performance units of the
program.
5.
Optimal Medical Outcomes. Optimal care as defined by early diagnosis, most
appropriate treatment and sound medical outcome is the program's most important
objective. Selective provider contracting, primary care physician clinical coordination
and Medical Panel organization are central to achieving this goal.
6.
Reporting. Meaningful information and analysis of enrollee service patterns is the
physician's most powerful tool in shaping beneficial practice patterns. Such information
is routinely provided to primary care physicians and to Medical Care Panels in a way that
directly supports their clinical responsibility and accountability in the program.
7.
Financial Incentives. Financial incentives should foster physician attentiveness to
practice patterns and provide rewards for desirable medical outcome over a prolonged
period of time. Incentives are specifically designed to do this and to reinforce the
accountability/responsibility of the primary care physician. Incentives are not tied to
short term, specific medical care decisions.
�The program is similar to standard HMO, PPO, and indemnity programs to some extent, but the
program discards a number of their basic tenets while enhancing others. Its integration of the
organizational, financial, clinical and data aspects of health care coverage management is unique.
1.
Physician/Enrollee Relationship. A sound relationship between each
program enrollee and the Network primary care physician (PCP) of
his/her choice is essential to both quality of care and cost control.
Yet, enrollee freedom to directly access other Network and Out-ofNetwork providers is an essential safeguard that is central to the
program's design.
The program offers an alternative to the separate HMO, PPO and indemnity insurance coverage
plans typically available today because it provides-in a single plan-three coverage options to the
covered enrollee each time he or she accesses services:
Option 1 offers the greatest level of coverage and the least out-of-pocket expense to the
enrollee if the services received are either performed by or arranged by the enrollee's Network
primary care physician (PCP).
Option 2 allows the enrollee to seek care directly from any member of the Network. This
means that the enrollee may see a Network specialist without first obtaining his/her primary care
physician's approval. Option 2 offers more freedom of choice than Option 1, but the enrollee
pays a higher portion of the total health care bill-via copayments and coinsurance-than if he/she
had sought care through the Network primary care physician.
Option 3 allows the enrollee to seek care from physicians who are not members of the
Network. This means the enrollee can go anywhere to receive necessary medical care. Option
3 offers the greatest freedom of choice of any of the three options. However, Option 3 also
requires that the enrollee pay the greatest share of his/her health care bill via higher coinsurance,
copayment and deductible features than in Option 2.
It is important to note that in Options 2 and 3, the out-of-pocket expense of enrollees is
contractually limited.
None of the options expose enrollees to unknown or unlimited liability for covered services.
The level of coverage provided by each of these three options is described in the Benefit
Summaries. The extent of cost sharing may vary by employer since employers are free to
choose the specific levels of copayment, out-of-pocket maximums and deductibles they wish to
be applicable to their own group.
Thus, the most distinguishing feature of the coverage design is the freedom of choice it offers
to enrollees while providing incentive-through more complete coverage-for access through
�Network primary care physicians. Thefreedomto choose among three options is central to
promoting quality. The enrollee always has substantial coverage if he/she believes that the
program as a whole or a particular Network provider does not offer the quality or extent of
service the enrollee seeks.
In short, the program's coverage design allows enrollees to "vote with their feet" if they believe
they are not receiving the care they think they need. While fostering a strong relationship
between primary care physician and enrollee, the program avoids the strict "lock in" of a
gatekeeper system. Therefore, it provides an important safeguard to the enrollee.
For example, the freedom to access Network specialists directly is always available in the event
an enrollee is not satisfied with the referral made (or not made) by his or her primary care
physician. Indeed, a repeated pattern of access by an enrollee around the enrollee's chosen
primary care physician may suggest a lack of an effective doctor-patient relationship or a
blockage in access. This is an example of the type of pattern the program's quality assessment
program investigates.
Additionally, it should be noted that enrollees are permitted to change their designation of
primary care physician every six months should they believe this to be in their interest. Even
this minimum time requirement may be waived by filing by the enrollee of a justifiable
grievance.
As a practical matter, most enrollees seek stable, trusting relationships with their primary care
physician and the ability to change primary care physicians is usually exercised only when such
a relationship cannot be formed. The freedom to change a primary care physician is, therefore,
intended to remove any obstacle to the forming of a sound doctor-patient relationship, not to
foster "hopping" from one primary care physician to the next.
Thus, the program, in its core design, seeks to establish and maintain a strong, stable
relationship between the enrollee and the primary care physician of his/her choice which is built
upon well-founded patient satisfaction and trust. Should this fail to any degree, the enrollee is
safeguarded by the important freedoms and substantial benefit coverages provided through the
program for services by other providers both within and outside the Network.
2.
Clinical Freedom To Practice. Direct program intrusion into clinical
decision making is counterproductive in the long term. Accordingly,
authority for clinical decision making must rest with the primary care
physician in order to foster quality of care.
Nationally, over the pastfiveto eight years, there has been a tremendous growth in the presence
of managed care programs through which benefits-particularly inpatient benefits-are
preauthorized to determine medical necessity. Increasingly, preauthorization has been extended
�to other, non-inpatient services. This massive intervention in the practice of medicine has
produced only marginal savings in many cases. Yet, so strong is the concern over rising health
care costs, payor fervor for this approach seems unabated.
However, this program takes the view that the trend in medicine toward greater outpatient and
office-based practice and the rapid, continuous introduction of new technology makes
preauthorization and other administrative controls problematic, expensive and unwieldy.
Simply put, managed care preauthorization does not lend itself well to the subtle, but critical,
trade-offs in ongoing medical decision making, where one must consider the efficacy of a variety
of treatment approaches for a particular patient with a particular diagnosis. In short, the
complex judgements that the most effective physicians make (often in the most costly treatment
situations) should never be made by or interfered with by a managed care organization.
Additionally, such managed care intervention may raise potential employer and physician legal
liability for poor outcomes that can be alleged to have been caused (at least in part) by this
intervention.
For all of these reasons, one of the most significant aspects of the program is that it does not
contain any program-administered preauthorization requirements of any kind of Network care.
Thus, physicians may refer or admit within the Network without approval or intervention.
The program does, however, carefully address the issue of determining medically appropriate
and necessary services in two ways.
First, authority to authorize care is left squarely with the primary care physician designated by
each enrollee. Thus, care authorization rests with each patient's primary clinician, not with the
program. This underscores the program's strong desire for a sound, stable relationship between
each enrollee and the primary care physician of his/her choice.
In exercising his/her referral and care authorization authority, the primary care physician is
under no constraint in making any and all Network referrals or in-patient admissions that he/she
deems necessary and appropriate. This includes the ability to make limited or unlimited referrals
to Network specialists and other providers. An unlimited referral means the specialist or other
provider is not restricted by the primary care physician in the services he/she may perform. A
limited referral is an authorization to the specialist to provide specifically enumerated services
such as a consultation.
Second, the program establishes guidelines regarding the definition and scope of medically
necessary services after considering the advice of its Medical Advisory Committee. These
guidelines are intended to assist Network physicians in arranging and authorizing needed services
covered under Option 1.
Given this general program design, there are only two specific circumstances in which the
program becomes directly involved in the coverage authorization process. The first is in Out-ofNetwork referrals. The Network includes a large percentage of local physicians, representing
�all specialties. In most cases, therefore, there should be no need to refer to Out-of-Network
physicians. In some cases, however, such a referral is both necessary and appropriate.
If a primary care physician believes an Out-of-Network referral is necessary, he/she may make
such a referral after consultation with the program's Medical Director, who evaluates the case
in accordance with defined policy.
In no event can a referral to an Out-of-Network provider be blocked by the Medical Director.
It should be noted that there is a financial disincentive for referrals made without Medical
Director participation. This disincentive is meant to encourage physicians to use Network
providers whenever practicable.
The second circumstance in which the program becomes involved in the coverage authorization
process is in certain high-cost or high-risk cases suitable for case management. In such cases,
for which guidelines are established, the primary care physician refers the case to the case
management program and works with the assigned case manager to establish an alternative plan
of coverage options for the enrollee. The physician establishes the clinical care needs of the
enrollee while the case manager identifies the support services available to meet these care
needs. Often, alternative benefits may be available to the enrollee in such cases following the
development of a plan of care voluntarily agreed to by the employer, enrollee, physician and
other providers of service.
3.
Fee-For-Service Reimbursement. A direct connection between the
provision of service and payment is essential to enhance the
accessibility of services and to provide continuity in the management
of a patient's care. Thus, fee-for-service reimbursement is central to
the program's design.
One of the most marked trends in the managed care field is the growth of fully or partially
capitated payments to physicians. While the use of a primary care capitation to cover officebased services is most common, specialty care capitation and inpatient/hospital capitation is also
rapidly growing.
Several serious concerns are raised by these approaches. First, they may directly reward
underserving of patients. This is particularly true when the capitation covers only a piece of the
full spectrum of covered services-fostering a "hand o f f of the patient to another provider to
escape charges against the physician's account. Effective, continuous medical management may
thereby by jeopardized.
Second, quality assessment systems may be unable to detect the subtle, yet critical, judgements
and clinical trade-offs buried in care patterns obscured or invisible beneath a capitation amount.
�A related consequence is the degrading of databases due to the disconnection between service
and payment.
Finally, capitation shifts risk to the physician in a way that may be excessive as well as
immediate, causing an extreme "financial intrusion" into care decisions.
For these reasons, the essential reimbursement feature of the program, on behalf of the
employers it represents, is fee-for-service payment for all physician services rendered.
Physicians are expected to bill their normal fee for every service they render. Under the terms
of the Physician Agreement, the program establishes fee maximums, taking into account
prevailing fee patterns in the local area for each billing category. The fee maximums are
intended to assure reasonable payment to physicians for their services while maintaining the
program's competitiveness in its local market.
The Agreement's use of fee-for-service as the basis of payment represents a deliberate rejection
of the capitation approach to financing health care services due to concerns over the
inappropriate incentives to underserve that capitation may provide and to the excessive risk it
may transfer to individual physicians.
However, since fee-for-service systems are inherently prone to excessive use patterns, all fee
payments to Network primary care physicians and specialists are subject to a withhold of 20
percent. This is a feature the program has in common with many managed care programs
offered in today's marketplace.
The fee withhold is intended to foster physician attention to program costs and coverage
authorization procedures. The program establishes a financial system which uses aggregate cost
performance targets for enrollees that are age, sex, geographically and employer adjusted against
which fee-for-service payments are compared.
4.
Medical Care Panels. Physician organization is critical to establishing
both accountability and responsibility for care. Small physician teams
which render and arrange care (called Medical Care Panels) are the
essential performance units of the program.
The program takes the point of view that one of the fundamental reasons why many managed
care organizations have not successfully fulfilled their promise is that they have failed to clearly
fix physician accountability and responsibility for performance or to meaningfully reward good
performance when it occurs. Attention to the mechanisms of financing health care coverage
while avoiding its proper organization is simply ineffective.
The program establishes two critical organizational features which directly address this concern.
As has already been noted, the role of the primary care physician is made central in
�"coordinating the overall health care (including admissions to hospitals and referrals to
specialists, Network physicians and other providers) of enrollees."
On the one hand, enrollees are encouraged by fuller coverage to select and to seek care first
through their primary care physician. On the other hand, primary care physicians assume
responsibility for arranging the full scope of covered services to which an enrollee is entitled.
Thus, in addition to providing needed primary care services, primary care physicians perform
two other critical functions on behalf of enrollees: they decide when to make a referral and to
whom to refer. Whatever the service needs of the patient, the primary care physician either
arranges with others to provide them or directly provides them himself/herself.
This responsibility to provide or arrange care across the full scope of covered services is
supported by the authority given to the primary care physician to arrange/coordinate care. A
"chain of referral" is created in the program which always ties back to the primary care
physician. Even in the case of an enrollee's direct access to a specialist under Option 2, the
specialist must check with the enrollee's primary care physician if he/she wishes to make a
subsequent physician referral or inpatient admission.
The focusing of this broad care coordinating responsibility and authority in the primary care
physician is closely aligned with and integrated into thefinancialmodel embodied in the
Physician Incentive Plan.
There is, by design, no way for the primary care physician to "hand off the enrollee to another
provider and avoid the ultimate responsibility for his/her care, even when access occurs under
Options 2 or 3. This responsibility persists over time for as long as the enrollee designates the
primary care physician as his/her primary care physician.
And, equally important, the responsibility persists regardless of the accessing option chosen by
the enrollee at the point of service. This is so because all cost (net of enrollee cost sharing) is
tracked back to and attributed to the primary care physician of the enrollee by the program's
financial incentive system.
The single most important organizational feature of the program is the requirement that primary
care physicians form Medical Care Panels. These are formal relationships among a small
number of physicians, five to twenty members, (the average size is eight) who may have
established professional ties and who voluntarily agree to form a Panel. As such, Panel
membership is always entirely self chosen.
Panels are intended to fulfill a number of distinct functions which are critical to supporting all
of the basic principles of the program.
First, Panels form the basis for comparison of expected enrollee medical care costs to the actual
medical care costs. This provides a method to compare medical performance and thereby
determine eligibility for return of withhold and incentive awards for physicians in a Panel.
�Second, Panels are the focal point for reports on the pattern of service provided or arranged by
physicians in the panel for enrollees who have designated a primary care physician from that
Panel. This includes all services provided by or arranged by the primary care physician across
the full spectrum of covered benefits for each enrollee. Thus, Panels are essential for the
meaningful collection, organization and analysis of data and for peer review by Panel members
themselves as well as by the program.
All covered services, whether directly rendered by Panel members or by other providers, are
recorded by Panel, by primary care physician, by patient over time. These reports reveal
patterns of practice specific to each Panel-and each Panel member-that profile the care given to
enrollees in a way that causes this information not to be lost among the hundreds of physicians
that comprise the Network. This is essential for meaningful analysis and interpretation. It also
permits meaningful comparisons between and among Panels.
Third, they may act as the backup coverage for a PCP in the event that an enrollee's designated
primary care physician is unavailable. The Enrollee Coverage Certificate provides each enrollee
with 24 hour/7 days a week coverage under Option 1. This can be more credibly delivered
when there are well-defined backup and coverage relationships. The Panel structure facilitates
this, although backups may be any Network physician.
The program assumes from the outset that there needs to be a method for accumulating the
experience and service patterns of enrollees in order to permit patterns of care to be seen and
interpreted. Individual primary care physicians generally do not treat a large enough number
of enrollees to accomplish this. Panels address this need.
In contrast to the Panel approach, most HMOs typically pool the experience and service patterns
of hundreds of physicians. This obscures the practice patterns specific to individual physicians
and often leaves to an HMO-wide utilization review committee the task of trying to sort out
patterns at too remote a level.
In such systems, where everyone is made equally accountable for performance, no one is
accountable. Everyone loses or gains together. This fosters a generalized lack of concern with
the cost effectiveness of care. Such systems make individual physicians indifferent to and
uniformed about cost outcomes except in the most aggregate way. Lacking internal physician
discipline, these systems typically seek unilateral HMO administrative intervention into care
decisions in an attempt to control cost through preauthorization programs. This is precisely the
kind of undesirable result this program seeks to avoid.
Equally important, the common HMO pooling of plan-wide experience also often blocks
meaningful focus on quality of care and the outcomes of patient management over time. It is
common for HMOs to fall into the easier, but far less significant mode of looking at indicators
such as plan-wide length of stay by diagnosis or plan-wide volume of a particular procedure
rather than the care outcomes for particular subgroups of physicians over time. Peer review thus
becomes pro forma and predominantly oriented to review of usage statistics, not care outcomes.
�These shortcoming are precisely what the program seeks to overcome. Medical Care Panel
formation is critical to this. Panels are designed to support a sufficient enrollee population to
permit patterns of care to be seen but be small enough to focus peer review attention on care
outcomes and cost patterns in relation to those physicians who comprise the Panel and the
enrollees who rely on these physicians for their care.
Hence, the program requires that Panels not be smaller than five primary care physicians
(otherwise they are too small to effectively pattern the practice) nor larger than twenty primary
care physicians (or they become to unwieldy). To place this size range in perspective, consider
that the average primary care physician in the United States today maintains an active patient
case load of about 2,500. Thus, five "average" primary care physicians joining together in a
Panel are collectively caring for 12,500 patients, and twenty "average" primary care physicians
are caring for about 50,000 patients.
Since approximately 1,500 covered lives is sufficient to obtain an adequate number to pattern
the practice, even Panels of five can readily achieve sufficient enrollment through the program.
This represents approximately 12 percent of the patient base of a Panel of five primary care
physicians and 3 percent of the patient base of a Panel of twenty. The average Panel size is
eight primary care physicians-more than sufficient to obtain reasonable focus on cost and
outcome patterns.
In sum, Panels are the program's medical performance units from both a qualitative and cost
effectiveness point of view. They are voluntarily chosen by the physicians who comprise them
and can be voluntarily changed by these physicians in accordance with program rules. They also
provide structure to the essential, decentralized quality assessment and peer review mechanisms
of the program. Because of their size, Panels highlight poor performance as well as high-quality
performance.
The financial incentive system is directly tied to the Panel structure. Withhold return, for
example, is based on the performance of each Panel, not on the program as a whole.
5.
Optimal Medical Outcomes. Optimal care as denned by early
diagnosis, most appropriate treatment and sound medical outcome is
the program's most important objective.
Selective provider
contracting, primary care physician clinical coordination and Medical
Panel organization are central to achieving this goal.
In many managed care systems, there is extreme concern with the micro management of some
of the pieces of the full spectrum of care. Hence, for example, one sees a focus on specific
types of inpatient stays even though these represent only a portion of the total spectrum of care
an individual patient may receive. Or, one sees concern over how well a specific procedure is
�managed or in what setting it is performed. Coupled with this focus on the individual pieces of
the care spectrum is often an obsessive concern with their unit cost.
These concerns are not necessarily inappropriate in and of themselves. Too often, however,
they become the exclusive concern of the managed care organization and blot out attention to
more important matters.
With such a focus, the big picture over time is lost. How a patient is cared for through a series
of settings and procedures, and whether appropriate diagnosis and medically sound judgment,
are consistently made over time, have the greatest influence on outcome and overall cost. Sound
medical judgment, intervention and coordination, not solely unit cost or the efficacy of a single
service, are the proper objective of those seeking to maximize value.
This is brought more into focus when one considers that in any large insured population, only
2 to 3 percent of those covered become chronically or catastrophically ill in any given year, but
these patients often account for 50 to 60 percent of total medical costs. They also typically
remain at higher than average cost levels in years following their onset of illness. Misdiagnose,
inappropriately or ineffectively treat these patients or achieve suboptimal outcome, and costs can
truly escalate with a profound effect on the ultimate payout by the employer. This is true even
if specific services are appropriate and at proper price levels.
It is self-evident to many with experience in the health carefieldthat in virtually any market in
the United States certain physicians consistently outperform their peers in the exercise of medical
judgment and in achieving desired medical outcome for their patients over time. Such physicians
also tend to refer to others with similar practice attributes.
These naturally formed subsets of the physician community are generally hidden to the payors,
whose data systems, provider network organizing approaches and quality assessment programs
are simply not designed to find them. If found, however, these provider system subsets
constitute a highly selective network that can support a high value program (i.e., one that
achieves the optimum combination of cost and quality).
Clinical freedom is absolutely essential to such a program. Indeed, it is precisely the unimpeded
and effective exercise of expert medical judgment by highly qualified physicians that confers
greatest value to the purchaser. Hence, contracting with such physicians, without imposing
administrative control over their clinical decisions, lies at the very core of high value programs.
This Program seeks to both recognize and act upon this basic insight.
Accordingly, the program has been designed with a view toward optimizing outcome through
contracting with highly qualified primary care physicians and Medical Care Panels. These
primary care physicians in turn seek relationships with highly regarded specialists.
Given selectivity in Panels that comprise the program, a strong, continual bond between enrollee
and primary care physician is thefirstcritical step in maximizing both the inherent quality and
value of a selected network. As has been noted earlier, the primary care physician makes two
pivotal decisions on behalf of his/her enrollees: when to refer and to whom to refer for a
�presenting condition or diagnosis more appropriately treated by other than the primary care
physician directly. These are two of the most critical decisions made in health care-ones
enrollees are not usually in a position to best make entirely on their own. Moreover, these are
certainly not decisions for program's management to make. Yet, if made well by the primary
care physician, these decisions profoundly influence overall medical outcome and, hence, cost
patterns in a beneficial way.
This is why the Physician Agreement leaves the primary care physician responsible to provide
or arrange for the provision of all covered medical services enrollees need for as long as the
enrollee continues to designate that primary care physician.
Since all services for each enrollee, whether or not rendered by the primary care physician, are
tracked and attributed to the Medical Care Panel of that primary care physician, suboptimal
outcomes become readily apparent. An unnecessary procedure, an inaccurate diagnosis that
causes ineffective or inappropriate treatment, a refusal to refer a patient when needed-all
ultimately become apparent in the service pattern over time. These kinds of outcomes and
patterns are the major concern of Panel-specific quality assessment monitoring and analysis.
Even care rendered under Options 2 and 3 is attributed to each Panel net of enrollee cost
sharing. Due to the design of the cost sharing features of these options, they are made
actuarially comparable to Option 1 in their impact on cost chargeable to the program and the
Panel. Thus, there is no advantage or incentive for a primary care physician to encourage
his/her enrollees to access care via these options nor enrollee incentive to use them in lieu of
Option 1 if there is a sound enrollee relationship with the primary care physician. This is why
there is such program focus on the potential quality concerns raised by a repeat pattern of Option
2 or 3 use by an enrollee.
Thus, in its basic design and supporting procedure, the program seeks to encourage timely care
and referral in an endeavor to achieve the best outcome both medically andfinanciallyfor the
primary care physician, the Panel, and the enrollee. In the process, this gives value to the
employer (as the ultimate payor) as well.
The Medical Care Panel structure facilitates and enables this focus on outcome to occur more
effectively. Suboptimal outcome or aberrant patterns of practice by one physician in the Panel
will not escape the attention of the others in the Panel the way they might in other programs
where the experienced of hundreds of physicians is mingled together. This is why peer review
is decentralized largely to the Panel level and why the financial system described in Point 7
below is specifically designed to dovetail into and support the Panel's structure.
In sum, the program takes the point of view that the best value for the employer's health care
dollar can be achieved through sound, decentralized physician organization and physician
coordination of clinical decision making, not through direct, centralized management of care.
Over time, the program seeks to rely on highly respected performers (where optimal medical
outcome and cost control are synonymous) and to weed out those who don't perform up to this
standard. The program will always seek to remain selective in its network membership.
�To this end, physician agreements are for one-year, calendar-year terms. The agreement
renewal cycle gives and opportunity to assess whether physician and Panel performance is
supportive of the program's desire for and intention to foster quality of care. It also gives the
physician a chance to do likewise. In this way, a long-term relationship between the program
and the physician -over a multi-year period-can only be based on mutual trust and strong
performance by both parties.
6.
Reporting. Meaningful information and analysis of enrollee service
patterns is the physician's most powerful tool in shaping beneficial
practice patterns. Such information is routinely provided to primary
care physicians and to Medical Care Panels in a way that directly
supports their clinical responsibility and accountability in the
program.
Rarely, if ever, do physicians see information that shows a complete profile of all the services
rendered over a prolonged period of time to each of their patients. Yet, this is exactly what is
necessary to detect beneficial as well as less than desirable patterns of practice.
In this program, the enrollee's profile of applicable covered services, regardless of setting,
provider, procedure, etc., is continually kept and updated and shared with the enrollee's primary
care physician (as well as his/her Panel) on a periodic basis. Comparative data on the program
as a whole and for similar patients (demographically) is also available. This data is directly
derived from claims and, hence, underscores the need for the direct link between payment and
the provision of service.
While great detail is available, the real purpose of the reporting is to present and analyze
aggregate patterns over time. If a repeat pattern of admission and readmission occurs, it will
readily appear in the data as will a repeat pattern of office visits for the same diagnosis. But
most importantly, each enrollee's service profile over time becomes the record of how
effectively their health care needs have been met.
Thus, the program seeks to fix overall care responsibility with the primary care physician,
establish performance units through Medical Care Panels, support these performance units with
meaningful data, and focus Panel attention on significant patterns of practice and patient care
outcomes.
Supporting all of this, with the objective of causing physicians to pay attention to the experience
generated in their panel and to realize a reward for cost-effective, high-quality performance, is
the financial incentive system discussed below.
�7.
Financial Incentives. Financial incentives should foster physician
attentiveness to practice patterns and provide rewards for desirable
medical outcome over a prolonged period of time. The program's
incentives are specifically designed to do this and to reinforce the
accountability /responsibility of the primary care physician. Incentives
are not tied to short-term, specific medical care decisions.
The financial model supporting the program establishes a financial record keeping system by
Panel through which it is possible to determine how each Panel is performing tn the aggregate
against the expected cost of medical care established for enrollees of the programs cared for by
that Panel. In brief, this record keeping system is explained below.
The medical care component for each employer group is calculated based on the employer
group's own historical medical care costs trended into the rate year. From this medical care
component, an amount called an enrollee allowance is directly derived, which includes all
expected medical care costs for physicians and other types of medical care, inpatient hospital
care, outpatient hospital care, home care, laboratory tests, x-rays, and care by Network
specialists and other providers. This allowance is adjusted to reflect the age and sex of each
enrollee as well as the historical cost pattern of his/her employer.
For each enrollee who designates a primary care physician, the amount of the enrollee allowance
is attributed to the Panel of that primary care physician, and the sum of all such credits is posted
monthly to the Panel's patient care account. This is shown to the Panel in the monthly reports
mentioned above.
Likewise, all services rendered to enrollees of each Panel are tracked and posted monthly,
regardless of which provider rendered the service and which accessing option was chosen by the
enrollee.
Thus, a ledger-like record is created for each Panel which shows all medical care credits
(enrollee allowances) and all care cost debits (fee-for-service payments and other provider
payments) that are net of enrollee cost sharing. This is further broken down by primary care
physician, by enrollee. From this database, it is readily possible to spot patterns as they emerge.
Following the close of each calendar year, the credits and debits for each Panel are totaled after
allowing sufficient time for claim run out. If the credits of any Panel exceed its debits, amounts
withheld form the fees of Panel members and other providers they referred to are returned in
whole or in part depending on the size of the balance.
If, after all the withheld fees are returned, there is still a balance in the Patient Care Account,
the Panel is entitled to share in the remaining balance and receive incentive awards which
represent payments beyond full fee reimbursement. This sharing increases dramatically with
growth in the size of the Panel (number of enrollees). These incentive awards can be thought
of as the recognized "value added" by the sound medical care and coordination of the Panel.
�Several observations about the Physician Incentive Plan are critical.
First, the pay back of withheld fees is contractually guaranteed if the Panel has a positive yearend balance, regardless of how other Panels may have performed. Good performance is always
rewarded.
Second, financial reward is based on the aggregate performance over time of all physicians in
each Panel, not on the performance of individual physicians. Even more importantly, reward
is not linked to specific medical decisions, but rattier, to aggregate outcomes for all enrollees
cared for by the panel over a prolonged period of time. Poor medical outcomes for a Panel over
time will inevitable translate to poorfinancialoutcomes for the Panel (as well as possible nonrenewal in the Network).
Third, the three-year vesting schedule on incentive awards is specifically designed to guard the
program against a "hit and run" style of medical management where financial gain in a single
year can be obtained through short-term, suboptimal care. In order for physicians to be eligible
for payment of the full amount of the incentive award, they must remain in the program over
a multi-year period. Their tenure with the program is, in turn, related to the quality of their
performance.
Fourth, no matter how adverse thefinancialexperience of a particular Panel, physicians are
always paid for each and every service they render even if debits for their Panel greatly exceed
credits.
Fifth, catastrophic care protection is provided for high-cost cases, thus preventing the costs of
the truly catastrophic case form overwhelming the experience of a Panel so long as the
physicians in the Panel cooperate with the program's case management program.
Sixth, the period when physicians are at greatestriskof losing their fee withholds is when their
Panel enrollment is small. This is also the time when the consequence of such loss is least
significant to the physician economically. As Panel enrollment grows and the physicians who
comprise it have more at stake, the visibility of any adverse patient care/cost patterns is
enhanced due to the larger enrollee numbers, which make patterns more evident and allow for
these to be brought to the attention of the Panel.
Thus, the Physician Incentive Plan is intended to support the program's self-chosen performance
units-Panels-with reasonable safeguards against loss of withheld fees and with a share of the
value created by their own effective care management. Since there is some physician financial
risk in the program created by the fee withhold, physicians can choose which other physicians
they wish to be at risk with and, thus, have some say in controlling the outcome. Effective
performance is rewarded by a contractual guarantee to each Panel that withheld fees will be
returned and incentive awards can be earned regardless of aggregate program results if that
Panel's performance has bettered the expected medical care cost target.
�Obstacles t o AHP Development and Integrated Health Networks
1. State Corporate Practice of Medicine Laws
The corporate p r a c t i c e o f medicine d o c t r i n e generally
p r o h i b i t s t h e ownership o f p r o f e s s i o n a l corporations by l a y
i n t e r e s t s , the employment o f physicians by h o s p i t a l s o r other l a y
organizations, the a c q u i s i t i o n by l a y i n t e r e s t s o f the i n t a n g i b l e
assets o f a medical p r a c t i c e , and any k i n d o f l a y c o n t r o l over
physicians t h a t
i s seen t o i n t e r f e r e
with
professional
prerogatives.
Recommended Federal Action: P a r t i a l Preemption extended to
organizations for purposes of providing services to t h e i r members
only, to hospitals and t h e i r owned subsidiaries and a f f i l i a t e s ,
other health care e n t i t i e s as long as licensed professional retains
independent c l i n i c a l decision-making, unimpeded by decisions of lay
managers.
2. Anti-networking Laws
They may take various forms and may be found i n insurance
laws, laws s p e c i f i c t o s p e c i f i c kinds of managed care organizations
or even i n p r o f e s s i o n a l l i c e n s u r e and p r a c t i c e p r o v i s i o n s .
Examples: "any w i l l i n g provider," "freedom o f choice," " f a i r
reimbursement," " u n f a i r claims p r a c t i c e s , " " a n t i - d i s c r i m i n a t i o n , "
"mandatory assignment," "gatekeeper" p r o h i b i t i o n s . A l l reduce plan
autonomy, r a i s e a d m i n i s t r a t i v e costs, and l i m i t the plan's a b i l i t y
t o channel p a t i e n t s t o a desired network o f providers who agree t o
compensation reductions and commitment t o cost and q u a l i t y c o n t r o l s
i n exchange f o r volume.
Recommended Federal Action: Override r e s t r i c t i v e state laws and
substitute the legitimate consumer desire for freedom of choice
through other mechanisms inherent i n the design of the overall
health plan, e.g, a v a i l a b i l i t y of freedom of choice plans, quality
and access requirements on health plans, designating certain
essential community providers i n certain circumstances, etc.
3. U t i l i z a t i o n Review
Many s t a t e s , under pressure form providers, have attempted t o
regulate how u t i l i z a t i o n review e n t i t i e s can conduct t h e i r reviews.
Examples: reviewers must be licensed i n the same s p e c i a l t i e s and i n
the same s t a t e as t h e provider being reviewed, reviewers must
reside i n t h e same s t a t e f o r which they review, UR must be
a v a i l a b l e around t h e clock, review standards are e x p l i c i t and
a v a i l a b l e , appeal mechanisms are s t r i c t l y prescribed. UR companies
document s u b s t a n t i a l "savings" from UR. Physicians f e e l hassled and
intruded upon and bear increased a d m i n i s t r a t i v e costs. Most s t a t e
UR s t a t u t e s do not appear o v e r l y burdensome and few requirements
are more r i g o r o u s than those adopted f o r a c c r e d i t a t i o n by URAC
This may be only a t r a n s i t i o n problem: the r o l e o f independent UR
firms w i l l d i m i n i s h as AHPs organize and conduct u t i l i z a t i o n
�management a c t i v i t i e s i n t e r n a l l y .
Also, UR
standards
and
a c t i v i t i e s w i l l c l o s e l y f o l l o w n a t i o n a l e f f o r t s i n technology
assessment and guidelines development.
Recommended Federal Action: Substitute Federal standards for
varying state standards and preempt troublesome state statutes that
disable UR programs.
4. State Practice Acts/Licensure Laws
workforce group)
Federal Laws and Regulations that may
(Under j u r i s d i c t i o n
of
be obstacles
1. Fraud and Abuse: Anti-kickback statute under Medicare
Medicaid and Stark s e l f - r e f e r r a l prohibitions.
and
Issue i s whether a d d i t i o n a l "safe harbors" or exceptions are
created f o r i n t e g r a t e d d e l i v e r y systems t h a t bear f i n a n c i a l r i s k .
Current a p p l i c a t i o n of fraud and abuse concepts may inadequately
p r o t e c t e n t i t i e s t h a t w i l l compose the i n t e g r a t e d community care
networks envisioned under the h e a l t h care reform.
2. IRS/Private Inurement
A major b a r r i e r t o c a p i t a l formation f o r development of
i n t e g r a t e d d e l i v e r y systems and Alps are the p r i v a t e inurement
aspects of the IRS Code as applied t o 501(c) c h a r i t a b l e tax-exempt
organizations, such as h o s p i t a l s . A tax-exempt organization cannot
permit any of i t s revenues t o inure t o the b e n e f i t of (nfyy p r i v a t e
i n d i v i d u a l or shareholder, nor may i t b e n e f i t p r i v a t e , r a t h e r than
p u b l i c i n t e r e s t s . The IRS standards c u r r e n t l y include a degree of
general p u b l i c access t o the provider's f a c i l i t i e s , i n c l u d i n g open
emergency rooms, open medical s t a f f s , and acceptance of Medicaid
p a t i e n t s , etc.
E x i s t i n g IRS requirements may not apply w e l l t o
managed competition e n t i t i e s . A l t e r n a t i v e t e s t s f o r meeting p u b l i c
b e n e f i t s t e s t s need development, and the i n d u s t r y need some
c l a r i f i c a t i o n of how they can organize and receive tax exempt
financing.
3. Antitrust Laws.
The i n d u s t r y perceives huge a n t i t r u s t u n c e r t a i n t i e s about
whether they can proceed, which types of o r g a n i z a t i o n a l s t r u c t u r e s
and what kind of c o l l a b o r a t i o n w i l l pass a n t i t r u s t muster.
Yet,
there seems t o be no compelling case f o r formal change i n the
governing f e d e r a l a n t i t r u s t s t a t u t e s .
Problems seem t o l i e i n
perceptions and u n c e r t a i n t y , which we should aggressively address
through a d m i n i s t r a t i v e s o l u t i o n s , r a t h e r than l e g i s l a t i o n . I n one
area, l e g i s l a t i o n may be desirable.
The McCarran-Ferguson Act
grants an a n t i t r u s t exemption t o the business of insurance t o the
�extent that such business i s regulated by state law. Under the new
health system, t h i s exemption may immunize anticompetitive conduct
by health plans.
To provide symmetry to exposure to antitrust
oversight (providers w i l l continue to be subject to such scrutiny)
and because c o l l u s i v e behaviour may be more of a problem i n the
HIPC system, a repeal of the McCarran-Ferguson exemption may be
warranted.
�Regulations Issues for Health Care Reform
Task Group 16A
1. Personnel and Pay Regulations
Existing federal regulations governing hiring, placement, and compensation all
seriously restrict the ability of rural IHS hospitals and clinics to recruit and retain
essential medical and health care professionals. These limitations have created
shonages in which the IHS must spend substantially more to purchase care or pay
emergency coverage to private physicians. Pay flexibility would allow IHS to offer
compensation packages that are necessary to attract and retain physicians and other
professions in hardship locations. Frequently, the funding needed to offer
competitive salaries is substantially less than is now spent to purchase care from
outside sources.
2. Federal Acquisition Regulations (FAR)
The FAR procurement regulations do not fit medical purchase situation very well
(compared, say, to construction or commodities). Medical care is not a commodity.
Professional judgment, as exercised by a trained and knowledgeable gatekeeper and
in due consideration of the necessary facts, information, and policies, is the most
appropriate and reasonable basis for referral decisions that constitute a medical
procurement. We also believe that it is not possible to prescribe, in policy or
regulation, a strict decision making protocol that is reasonable and practical for every
situation and case that may arise. Profession judgment exercised on a case-by-case
basis in an informed way is a more practical and reasonable solution than is the blind
application in all cases and circumstances of prescriptive procurement protocols.
Cost is a factor but not necessarily the only one. Decisions must be made in the
context of a number of relevant considerations which may include such factors as
access, capability, continuity of care, quality, needs of the patient and family, and
cost.
3. Anti-deficiency Act
The legislation should authorize special reserves or other provisions for emergency
appropriations to guarantee coverage to AI/AN beneficiaries during the unpredictable
transition period. These provisions are especially critical for programs that remain
IHS operated during this period. As a federal agency, anti-deficiency legislation
prohibits spending in excess of appropriated amounts even if a patient needs medical
care that is guaranteed in the benefits package. The conflict between the antideficiency principle and the guarantee of medical benefits to each individual must be
resolved.
�
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Health Care Task Force Records
Creator
An entity primarily responsible for making the resource
White House Health Care Task Force
Is Part Of
A related resource in which the described resource is physically or logically included.
<a href="https://catalog.archives.gov/id/10443060" target="_blank">National Archives Catalog Description</a>
Description
An account of the resource
<p>This collection contains records on President Clinton’s efforts to overhaul the health care system in the United States. In 1993 he appointed First Lady Hillary Rodham Clinton to be the head of the Health Care Task Force (HCTF). She traveled across the country holding hearings, conferred with Senators and Representatives, and sought advice from sources outside the government in an attempt to repair the health care system in the United States. However, the administration’s health care plan, introduced to Congress as the Health Security Act, failed to pass in 1994.</p>
<p>Due to the vast amount of records from the Health Care Task Force the collection has been divided into segments. Segments will be made available as they are digitized.</p>
<p><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0885-F+Segment+1"><strong>Segment One</strong></a><br /> This collection consists of Ira Magaziner’s Health Care Task Force files including: correspondence, reports, news clippings, press releases, and publications. Ira Magaziner a Senior Advisor to President Clinton for Policy Development was heavily involved in health care reform. Magaziner assisted the Task Force by coordinating health care policy development through numerous working groups. Magaziner and the First Lady were the President’s primary advisors on health care. The Health Care Task Force eventually produced the administration’s health care plan, introduced to Congress as the Health Security Act. This bill failed to pass in 1994.<br /> Contains 1065 files from 109 boxes.</p>
<p><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0885-F+Segment+2"><strong>Segment Two</strong></a><br /> This segment consists of records describing the efforts of First Lady Hillary Rodham Clinton to get health care reform through Congress. This collection consists of correspondence, newspaper and magazine articles, memos, papers, and reports. A significant feature of the records are letters from constituents describing their feelings about health care reform and disastrous financial situations they found themselves in as the result of inadequate or inappropriate health insurance coverage. The collection also contains records created by Robert Boorstin, Roger Goldblatt, Steven Edelstein, Christine Heenan, Lynn Margherio, Simone Rueschemeyer, Meeghan Prunty, Marjorie Tarmey, and others.<br /> Contains 697 files from 47 boxes.</p>
<p><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0885-F+Segment+3"><strong>Segment Three</strong></a><br /> The majority of the records in this collection consist of reports, polls, and surveys concerning nearly all aspects of health care; many letters from the public, medical professionals and organizations, and legislators to the Task Force concerning its mission; as well as the telephone message logs of the Task Force.<br /> Contains 592 files from 44 boxes.</p>
<p><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0885-F+Segment+4"><strong>Segment Four</strong></a><br /> This collection consists of records describing the efforts of the Clinton Administration to pass the Health Security Act, which would have reformed the health care system of the United States. This collection contains memoranda, correspondence, handwritten notes, reports, charts, graphs, bills, drafts, booklets, pamphlets, lists, press releases, schedules, newspaper articles, and faxes. The collection contains lists of experts from the field of medicine willing to testify to the viability of the Health Security Act. Much of the remaining material duplicates records from the previous segments.<br /> Contains 590 files from 52 boxes.</p>
<p><strong><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0885-F+Segment+5">Segment Five</a></strong><br /> This collection of the Health Care Task Force records consists of materials from the files of Robert Boorstin, Alice Dunscomb, Richard Veloz and Walter Zelman. The files contain memoranda, correspondence, handwritten notes, reports, charts, graphs, bills, drafts, booklets, pamphlets, lists, press releases, schedules, statements, surveys, newspaper articles, and faxes. Much of the material in this segment duplicates records from the previous segments.<br /> Contains 435 files from 47 boxes.</p>
<p><strong><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0885-F+Segment+6">Segment Six</a></strong><br /> This collection consists of the files of the Health Care Task Force, focusing on material from Jack Lew and Lynn Margherio. Lew’s records reflect a preoccupation with figures, statistics, and calculations of all sorts. Graphs and charts abound on the effect reform of the health care system would have on the federal budget. Margherio, a Senior Policy Analyst on the Domestic Policy Council, has documents such as: memoranda, notes, summaries, and articles on individuals (largely doctors) deemed to be experts on the Health Security Act of 1993 qualified to travel across the country and speak to groups in glowing terms about the groundbreaking initiative put forward by President Clinton in his first year in the White House. <br /> Contains 804 files from 40 boxes.</p>
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Identifier
An unambiguous reference to the resource within a given context
2006-0885-F
Text
A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text.
Original Format
The type of object, such as painting, sculpture, paper, photo, and additional data
Paper
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Regulatory Issues/Oligopoly
Creator
An entity primarily responsible for making the resource
Task Force on National Health Care
White House Health Care Task Force
Jennifer Klein
Identifier
An unambiguous reference to the resource within a given context
2006-0885-F Segment 2
Is Part Of
A related resource in which the described resource is physically or logically included.
Box 26
<a href="http://clintonlibrary.gov/assets/Documents/Finding-Aids/2006/2006-0885-F-2.pdf" target="_blank">Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/12093118" target="_blank">National Archives Catalog Description</a>
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Format
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Adobe Acrobat Document
Medium
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Preservation-Reproduction-Reference
Date Created
Date of creation of the resource.
2/6/2015
Source
A related resource from which the described resource is derived
42-t-12093118-20060885F-Seg2-026-003-2015
12093118