D A I L Y
B R I E F I N G
June 17, 1998
Kennedy-Dingell Strips Employers' ERISA Immunity
The Kennedy-Dingell bill is fraught with controversy. Introduced March 31, the bill
combines Michigan Rep. John Dingell's 1997 health quality bill with the president's
consumer bill of rights.
For plans governed by the Employee Retirement Income Security Act, the bill removes
their immunity from malpractice liability. This means that ERISA plans, which are exempt
from state insurance laws, could be sued for wrongful injury or death. Some senators worry
that business might instead choose not to provide certain kinds of coverage, fearing
costly legal settlements.
Protest is already in from the Health Insurance Association of America, which sponsored
an actuarial analysis concluding that the bill's price controls on certain types of
premiums would result in 160,000 people losing coverage. Chances for passage, according to
lobbyists: no better than 40 percent.
June 16, 1998
Few Surprises In Medicare Rules Issued for PSOs
The Health Care Financing Administration has defined provider-sponsored organizations
for purposes of Medicare, clearing the way for PSOs to offer themselves as an option under
Medicare+Choice beginning Jan. 1. The Federal Register published HCFA's interim final rule
HCFA defines a PSO as an entity operated by a health care provider or group of
affiliated providers that shoulders at least 70 percent of a beneficiary's health care
expenses. Providers must also share substantial financial risk, as defined by several
criteria. If a plan meets the definition, it immediately gains an advantage over other
managed care plans: A PSO needs to enroll only 1,500 members in urban markets or 500 in
rural areas to participate in Medicare+Choice. Other types of managed Medicare plans must
sign up 5,000 or 1,500 people respectively. The idea is to give PSOs a chance to compete
right out of the blocks.
The Department of Health and Human Services must still decide on solvency standards for
PSOs. At press time, those had not been set forth. HCFA says PSO Medicare definitions had
to come before solvency standards could be issued.
June 15, 1998
Physician, Help Thyself:
Management Positions Available
Many find that the risks are worth the rewards in moving from the examination room
to the boardroom.
As executive search consultants in the health care industry, we often hear from
physicians who are considering career changes. Their desire is to move from working as a
full-time clinician or teacher to a leadership role in administration or management in a
health care organization. Although some have already embarked on a new course, enrolling
in management classes or even full-time business degree programs, others are still testing
the waters, unclear about their options. They feel unsure about the risks involved in
leaving active work in the profession for which they spent so much of their lives
June 12, 1998
MANAGED CARE OUTLOOK
Many consumers feel quality
plays second fiddle to stock price
Even bullish markets don't excite skittish consumers who worry that quality may be
traded for profit. How much is this perception reinforced when once-thriving stock
declines, as has happened to some large, publicly traded HMOs recently?
The total stock value of the HMO industry grew 13-fold between
January 1987 and November 1997, according to the Henry J. Kaiser Family Foundation.
Compare that with the growth of the stock market as a whole during the same period,
"only" four-fold, and you can see why investors jumped aboard. Still,
there's that nagging fear that what goes up.... Several large publicly traded HMOs lost
market value in 1997.
The question persists: Are the dual goals of pleasing shareholders and delivering high
quality health care contradictory? We can't answer that, but we can report what consumers
told the foundation in a survey earlier this year.
Color charts also available in PDF
SOURCE: SURVEY OF AMERICANS ABOUT HEALTH CARE AND THE STOCK MARKET,
KAISER FAMILY FOUNDATION, MENLO PARK, CALIF., 1998
June 11, 1998
The Pitfalls and Potential
Of Pharmacy Risk
Prescription benefit arrangements between physicians and managed care companies seem
to be a growing trend replete with growing pains.
In 1995, Harris Methodist Health Plan, the largest in northern Texas, informed the Fort
Worth Clinic and its physicians that they were to spend no more than 9.6 percent of each
premium dollar on drugs. If the physicians violated this directive, Harris said, they
would have to eat 35 percent of the additional cost.
Fort Worth signed off, pharmacy terms and all. Then it overran its pharmacy budget
$30,000 every month, a third of which came out of its physicians' pockets. So the plan's
directive, in essence, slashed the clinic's $11.33 per member, per month capitation by a
third to a half. Unable to negotiate a higher pharmacy budget, Fort Worth sued Harris,
claiming that the policy violated the Texas Medical Malpractice Act by encouraging doctors
to drop sicker patients, such as transplant recipients on immunosuppressants.
June 10, 1998
Stark II: Don't Underestimate
The Feds' Resolve to Enforce It
BY NEIL CAESAR, J.D.
From time to time we have discussed how important it is for physicians to consider the
Ethics in Patient Referral Act (the so-called Stark law) when crafting an income division
or compensation formula. This law prohibits physicians from dividing income among
themselves in a way that tracks their utilization of certain "designated health
services." In January, the Health Care Financing Administration proposed regulations
that clarify or modify the Stark law. No doubt, HCFA will consider many of these proposals
already to have the force of law, on the theory that many are restatements of existing
It is essential that physicians act now to ensure that their compensation formulas
comply with the Stark law--including the new proposed regulations.
June 9, 1998
NCQA Adds Performance
To Accreditation Reviews
For the first time, HEDIS data will be included. Health plans will have to focus on
results as well as systems to pass muster.
The National Committee for Quality Assurance didn't have to reach far to grab what it
considers a useful tool to improve its evaluation of health plans. Its new accreditation
process uses performance measures from its other major review program, the Health Plan
Employer Data and Information Set, or HEDIS, already quite familiar to health plans.
June 8, 1998
Who Will Fund Tomorrow's
Breakthroughs in Medical Research?
New alliances are emerging in the field of medical research. Where does managed care
fit in? And how does it affect the research agenda?
Before White House affairs knocked national ones off the front page, the new year
produced a flurry of debates about medical research. In his fiscal 1999 budget, President
Clinton proposed a $1.15 billion increase for the National Institutes of Health--only to
be chided by Congress for not asking for more. Medical research is an election year crowd
The call for more funding recognizes not only unprecedented research opportunities in
genetics and biomedicine, but the fact that research is a driving economic force. Money
invested in it is good for American health, as well as American business.
In keeping with this theme, medical researchers have joined the managed care backlash.
The charge against the industry runs thus: By negotiating lower fees and turning to
less-expensive providers, managed care has jeopardized research dollars at academic
medical centers. Too, it is claimed, health plans' insistence on covering only standard
treatments has constrained the experimentation that research needs to thrive.
June 5, 1998
Not quite the Midas touch
Profitability of physician practices tends to drop after acquisition by a hospital or
integrated health care organization. The purchaser almost always loses money on the
practice during the first year of ownership, with one estimate suggesting that losses
between $50,000 and $100,000 per physician per year are common and that losses of $200,000
per physician are not unheard-of.
While selling a practice guarantees the physician a steady income--often higher than
what the physician averaged when solo--financial losses can lead a buyer to implement
stringent productivity measures. A model by Voluntary Hospitals of America demonstrates
the effect of practice acquisitions, based on a typical solo practice with annual net
revenue of $300,000.
Color charts also available in PDF
SOURCE: SETTING FOUNDATIONS FOR THE MILLENNIUM, VOLUNTARY HOSPITALS OF
AMERICA INC., IRVING, TEXAS, AND DELOITTE & TOUCHE, DETROIT, 1998
June 4, 1998
Value-Based Purchasing Pioneer
Corrals Hospitals and Physicians
Many companies and employer coalitions base purchasing decisions on report cards or
other statistical measures forwarded to them by health plans. Some businesses will also
study the health plans themselves, to decide which offer the best services for employees.
But the Dallas-Fort Worth Business Group on Health took a different approach. Instead of
looking at health plans, it offered hospitals and physicians a direct link to large
employers. Those that accepted agreed to establish meaningful performance measures and
carry out an outcomes reporting plan.
June 3, 1998
Genetic Testing: Can What
Patients Know Hurt Them?
BY JOHN LA PUMA, M.D.
Say your sister has breast cancer. Say you've heard of BRCA1 and BRCA2, the genes which
are mutated in 25 percent of women younger than 45 who get this disease. Say you want to
know your risk.
Say Alzheimer's runs in your family˝╣»ur Dad has it. Say your older brother is in
his 60s, and you're not that far away. Say you've heard of ApoE, on chromosome 19, now
widely available for testing. Say you want to know your chances.
Welcome to the brave new world of genetic testing. It's a world in which testing comes
before knowing, and knowing is everything. It's a world in which 26 states passed
antidiscrimination and pro-privacy laws last year, while 20 bills pending in Congress
would do the same. It's a world in which some Florida, North Carolina and Louisiana
employers wish everyone would just forget about the time they could test for sickle cell
trait. Their state legislatures had to pass laws to make sure they remembered.
June 2, 1998
Needed: Strategies To Get Physicians
To 'Buy in' to Disease Management
Physicians have to accept the programs for them to work. But most doctors need to be
convinced that they're worthwhile.
When Ellen Hughes, M.D., enrolled one of her patients in a program to help people with
heart disease learn how to take better care of themselves, it was a well thought-out move.
The patient was motivated and ready to jettison bad habits to improve her condition, and
the regimen met Hughes's criteria for disease management. The program, based on research
by heart-care pioneer Dean Ornish, M.D., offered in-depth nutritional training, group
therapy and consultation with the referring doctor. "I got a sense that it was a
service and that they were not trying to take the patient away from me," says the
June 1, 1998
A Conversation with
Regina E. Herzlinger
Harvard's Regina E. Herzlinger says entrepreneurial geniuses will give restless baby
boomers what they want: a delivery system in which consumers can choose coverage the same
way they shop for cars.
Regina E. Herzlinger, Ph.D., is the first holder of the Nancy R. McPherson Professor of
Business Administration Chair at the Harvard Business School. An expert in management
control and health care, Herzlinger argues that health care delivery in America is ripe
for a consumer-driven transformation. In her most recent book, Market-Driven Health Care
(Addison-Wesley, 1997), she details how that transformation might unfold. Impatient and
demanding baby boomers will lead the charge. To meet the needs of these customers, health
care organizations will draw on lessons that other American industries learned over the
last 20 years. Integrated delivery systems will give way to "focused factories"
that offer all the care needed to treat a particular disease. Third-party purchase of
health insurance by employers and government will yield to direct purchase of health
insurance by users.
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