Focus, 11/18/1987, 2282 words.
Focus, 06/17/1987, 2594 words.
Early Health Care Management to Help Contain Costs
Focus, 05/13/1987, 2294 words.
Focus, 05/13/1987, 2365 words.
Focus, 05/13/1987, 2294 words.
Is Private Practice on Its Way Out?
Focus, 04/15/1987, 3046 words.
Focus, 04/15/1987, 3046 words.
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Medicare Proposals: Good & Bad
O.T. Advance, 03/02/1987
Medicare Proposals: The Good News and the Bad News
O.T. Advance, 02/26/1987
Focus, 02/18/1987, 2089 words.
Why HSA Won’t Be Missed: The demise of federal Health Systems Agencies does not signal
the end of health care regulation.
Focus, 02/18/1987, 2411 words.
Focus, 01/14/1987, 2865 words.
Quality vs. Profit
Treatment at Pennsylvania Skilled Nursing Facility Fills Gap in Post-Acute Care of Traumatic Brain Injured Patients
O.T. Advance, 12/08/1986
Retiring Professor Views Future of OT with Pride – and Concern
O.T. Advance, 09/29/1986
Dr. Hopkins to Create Videotaped Presentations of OT Treatment Sessions
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Focus, 08/13/1986, 3177 words.
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Lifecare in the Delaware Valley
Focus, 08/13/1986, 2395 words
Functional Needs Assessment Program for Chronic Psychiatric Patients
O.T. Advance, 03/10/1986
Occupational Therapy and the Sounds of Music: Therapeutic Program for the Handicapped
O.T. Advance, 02/24/1986
Some Hope Remains for Passage of OT Medicare Amendments
O.T. Advance, 02/17/1986
O.T. in a Traumatic Brain Injury Unit
O.T. Advance, 02/10/1986
High Tech Hand Therapy
O.T. Advance, 01/27/1986
Lifecare Communities: How to make the Safest Choice
Golden Years: The Magazine for Mature Floridians, 12/1985
By Thomas Derr
Philadelphia, PA, US -- BETTER late than never. That's the way the people at Community Home Health Services of Philadelphia (CCHSP) are looking at the general public's recent "discovery" of home health care.
Ever since its birth in 1886 as the Visiting Nurse Society of Philadelphia, CHHSP and its affiliated organizations have been quietly and effectively servicing the needs of homebound patients. But it's only recently that the advantages of home care have taken center stage in the public's eye.
Adele S. Hebb, president of Philadelphia Home Care, the umbrella organization for CHHSP, Philadelphia Medical Equipment Co., and Home Care Specialists (an affiliated private care services organization), offers several reasons for this new-found recognition.
"Home care provides a patient with a way of getting the medical care he or she needs in the most desired setting," Hebb says. "No one likes to have to be in the hospital, especially when a patient can be treated less expensively and just as effectively at home."
GROWING ASSERTIVENESS: With the exception of a few home care patients who might require 24-hour coverage, home care tends to be a far more cost-effective alternative to acute institutional care, Hebb explains. That cost savings potential has played a large part in growing assertiveness on the part of many patients, who increasingly are asking for home care services through their referring physicians.
But according to Hebb, that doesn't mean that the physicians necessarily are in need of prodding. "In recent years, physicians have become much more aware of the potential of home care," Hebb says. "Our services are provided under their orders, so naturally we work very closely with the physicians."
Tied in with this greater appreciation for home care on the part of physicians are the many advances which continue to take place in the kinds of therapies and technical services that can be provided outside of the institutional setting.
"The continued refinement of medical and technological advances that have taken place over the last half dozen years only improves the viability of home care services," Hebb explains. "Pharmaceutical and medical equipment companies are continually developing new techniques for treating patients in the acute care setting which we are able to adapt and utilize in the home."
THE BED IS DEAD: The growing acceptance of such services in the home instead of in the more expensive acute care setting has led to the development of something of a rallying cry for home health care: "The bed is dead," she adds.
As Hebb explains, there is a variety of services now available in the home that once were available only in acute care settings. Some of these now fairly common home care procedures include chemotherapy, ventilator therapies, and enteral and parenteral feeding.
Alice Shields, Director of the Home Care at Mercy Catholic Medical Center, notes the advent of Diagnostic Related Groups (DRGs) as a means of controlling health care costs. DRGs have had a tremendous impact on the home care industry and the overall health care delivery network.
"We're all very much aware that patients are being discharged from the hospital at a lower level of recovery than before DRGs," Shields says. "As a result, there is a far greater demand for nurses who can provide skilled care -- especially high tech-related treatments such as hyperalimentation and IV therapy -- in a home situation."
Shields says she is impressed by the fact that CHHSP places a continuing emphasis on educational programs to keep its nursing staff up-to-date on new and developing treatments. Because of these ongoing educational programs, CHHSP seem to demonstrate a very strong all-round knowledge in all aspects of medical care, as well as good basic knowledge in oncology and other specialty areas.
VITAL LINK: The ultimate beneficiary of this extensive training, of course, is the home care patient -- who from a medical standpoint often defies categorization.
"We have had patients with acute episodes of diabetes, heart attack patients, cancer patients, stroke victims, and some patients with multiple symptoms requiring home care treatment," Hebb says.
In fact, many of these patients, especially stroke victims, have been left with permanent disabilities, she adds. "Skilled nurses, followed by therapists, are restoring functions which these patients would not have had without home care services," Hebb says.
In that sense, home care provides a vital link between acute care institutions and out-of-the-home ambulatory therapy centers. In order to recover to their maximum level of functioning, patients who are released from hospitals and return home need the kind of nursing and specialized therapy services agencies such as CHHSP provide.
"Without homebound care, many patients would be stuck at that initial post-hospital level of functioning -- they simply would not be able to manage by themselves," Hebb says.
PATIENT & FAMILY: One care which illustrates the importance of such services involved a South Philadelphia couple. The husband had been incapacitated by a heart attack and was being cared for by his wife. One day the wife fell and suffered a skull fracture. Upon her release from the hospital, CHHSP nurses and therapists began a regimen of services designed to help her regain her normal level of functioning. Once that goal was achieved, she again was able to help care for her disabled husband, and worked with CHHSP staff in his rehabilitation program.
"Without the intervention of home care professionals, it would have been almost impossible for this elderly couple to manage for themselves," Hebb says. According to Hebb, the case also exemplifies one of CHHSP's basic home care tenets -- that the patient and family members should play key roles in the recovery program. To further this aim, CHHSP staff members teach family members
how to administer appropriate treatments or therapies. This helps to supplement the work of the home care professional as well as further facilitate the recovery of the homebound patient.
In addition to providing that kind of in-home training, CHHSP also seeks to develop linkages with other community resources in health care and health-related human resources, Hebb says. The idea is to provide a network of health care providers of various types that can work together to maximize a patient's recovery.
For example, once a patient is discharged to home care, he or she may require the services of a speech pathologist as part of the home care program. Once the patient recovers enough so that he or she is no longer homebound, CHHSP may arrange for the patient to visit a center for speech therapy so that the patient's highest possible level of speech function is reclaimed.
This continuity of care is provided for all types of patients, for all ages -- from the two day-old infant to patients who are over 100 -- and regardless of ability to pay, Hebb says.
WHO PAYS? Therein lies the rub. Over the years, CHHSP's commitment to serving the medically indigent population -- as well as patients who can pay for home care services -- has placed great strains on the organization's financial resources.
"As we strive to meet the needs of the community, we ask the community's help in helping those who can't pay," says Hebb. "As a result, we rely heavily on the support of community organizations, philanthropic individuals, and corporate donations." Some of the major contributors to CHHSP include the Visiting Nurse Society of Philadelphia, the City of Philadelphia, the United Way, and grants from the Medical Trust, the William Penn foundation, SmithKline Beckman Corp., and Tasty Baking Co.
Another key sponsor of CHHSP's efforts has been the Pew Charitable Trusts, and its senior program officer of that program, Brent W. Roehrs. "We understand and recognize that voluntary services comprise an extremely important part of the overall healthcare delivery system," Roehrs says. "This is especially true for those who can't afford to pay full freight for the care they
According to Roehrs, the home health care market has grown increasingly competitive in recent years, so that many for-profit home care agencies now are going after many of the paying clients that CHHSP might once have gotten. "The problem is, these for-profit agencies don't have the same commitment to subsidized home care that a voluntary agency such as CHHSP has," says Roehrs.
"CHHSP has to take the money they get from paying customers and use it to underwrite the cost of its indigent care services. Thus the for-profits often are able to undercut CHHSP's prices -- they don't have to factor in the free cases as CHHSP does."
HCFA A MASTER HEADACHE: But free market competition is only one of the challenges facing CHHSP's financial well-being, Roehrs adds. "I think what has really hurt home health agencies in general -- and voluntary agencies like CHHSP in particular -- is the ongoing problem with the Health Care Financing Administration," she says.
Over the past two years, HCFA has significantly increased its rate of payment denials for a variety of services agencies deliver in the home. This has served to further increase the financial strain on home health agencies -- especially voluntary organizations which already allocate a sizable amount of money toward unreimburseable care.
The HCFA policies are designed to save money for the nation's costly Medicare program, HCFA officials charge. However, the primary effect of the policy is that agencies who are denied reimbursement must "swallow the cost" of services already provided. As a result, many agencies are finding it increasingly difficult to continue to provide home care to patients who cannot afford to pay for such services.
"HCFA has been one of our major headaches," CHHSP's Hebb asserts. Throughout 1986, HCFA pursued a policy of denying payment for services on the grounds that many treated patients were not actually "homebound." The policy created such an uproar that Sen. John Heinz (R-Pa) and other government and health care officials across the nation were able to pressure HCFA into relaxing its stance.
This year HCFA has been denying claims on the basis that many patients did not actually have a "medical necessity" for the treatments home care agencies provided.
"The program is, every time we think we have one problem solved, another HCFA-related problem pops up," Hebb says.
BUREAUCRATS DICTATING POLICY: What makes the new "medical eligibility" controversy even more unconscionable is the fact that the home care services CHHSP provides are done under the direction of physicians. What this boils down to is that a group of government bureaucrats is dictating healthcare treatment policy to medical professionals.
The situation also creates something of a dichotomy in that HCFA administrators seem intent on constricting Medicare expenses at a time when recent federal legislation actually has increased the range of Medicare coverage, Hebb says. The challenge for agencies such as CHHSP will be finding a way to keep pace with the evolving medical needs of the homebound population in this time of shrinking government support.
"We are continually developing and expanding our services to meet the changing patterns and needs of our patients," explains Hebb. "Over time, the pattern of what people want or need changes substantially in health care."
TWO MAJOR ISSUES: This leads inextricably into major changes in the way health care ultimately is delivered, she adds. As a result, many more changes can be expected in the way patients are served by physicians, hospitals, and home care providers.
"The one thing we can count on is that the way we deliver health care services at present will not be the right way of doing it two years from now, because of the way the health care environment continues to change," Hebb says. Two current health issues in particular likely will have a profound impact on the nation's health care delivery system -- and home health agencies in particular,” says Hebb. These two issues are the continued "graying of America," and the growing AIDS epidemic.
America's aging population is "of major significance for home care," says Hebb. She sees a continued expansion of home care services in nonskilled "personal care" support services, private duty nurses, meals and laundry services, and other services provided by agencies such as Home Care Specialists, an affiliate of CHHSP.
"As more and more older people opt away from the 'hated' institutional care, home care will become an increasingly popular and demanded alternative. We see it as being a substantial part of our future," Hebb says.
At the same time, the health needs of AIDS patients will continue to expand as the disease spreads -- with many patients being left where they simply can't function without some kind of outside help. Home care, because it is so much less costly than institution-based care, is a logical means of dealing with those increased needs. Still, it's not the kind of service which home care agencies will be able to provide without outside support.
"This is one for federal and state government entities to handle," Hebb says. "It's just too big a problem to deal with unless we get all the people involved."
So far it's a manageable problem in this area. But as more AIDS patients deplete their own financial resources for expensive medical care, their numbers could swell the already growing numbers of the medically indigent. That will only magnify the pressures already being placed on CHHSP and other voluntary non-profit health care organizations.
BOTTOM LINE: "We're thankful for all the support we do get from foundations, corporations, individuals, and other organizations," says Hebb. But the constant demands for more services, and the continued funding restriction of HCFA are taking their toll.
"The bottom line is we very much need all the community support we can get," Hebb says. "We could do so much more for the medically indigent if we only had the money."
By Thomas Derr
Philadelphia, PA, US -- SAY the word "massage" to most people and two mental images generally crop up. One is of a large, muscular blond gentlemen of Scandinavian descent, usually named "Sven" -- the other is of a scantily-clad young woman named Sheila whose specialized training and expertise could only in the most remote way possibly be considered part of the "healing arts."
Those are images which Gayle Davidson and the rest of the American Massage Therapy Association hope to change very soon.
Davidson's young Philadelphia-based company, Sportsmassage Associates, Inc., is part of what are among the most popular "alternative" healthcare trends in recent years -- sports massage and massage therapy.
And a quick glance at the list of clients served by Davidson should give a clear idea of the kind of credibility that her field of endeavor has come to enjoy. Davidson has worked the Boston Marathon for several years, as well as the 1984 Olympics in Los Angeles. She also has provided sports massage services at the International Games for the Disabled, the Chicago Marathon, the Pittsburgh
Marathon, and a wide array of other professional and amateur games and races.
In the recent first round of the Stanley Cup playoffs, her firm was called upon to provide sports massage therapy for the visiting New York Rangers hockey team as they challenged the Flyers. Davidson says it’s about time the concept of sports massage began to take root in the U.S.
RESOURCE: "With all the input and media hype over cocaine, steroids, blood doping and everything else under the sun you could imagine, massage is probably the most natural untapped resource in American sports medicine," Davidson says.
While European athletes have been utilizing the technique for years, as far as American sports medicine community is concerned -- it's just coming out of the closet, she adds.
In fact, within the past two months alone, major articles on sports massage have been featured in Time magazine, The New York Times, The Runner, and The Physician and Sports Medicine.
One nationally prominent physician and running advocate, Dr. George Sheenan, even called the technique a "miracle." Though thankful for the attention and the good doctor's enthusiasm, Davidson notes that his claim is probably somewhat exaggerated.
"It's not a miracle, really," she says. "It's just one of these special areas of interest which we have not studied in the American sports medicine community."
According to Davidson, the American sports medicine community has tended to be more involved with activities that involve drugs and other more traditional lines of research. That's not hard to understand, because pharmaceutical companies are usually the financial backers for such research programs. So until very recently, there has not been the will to investigate such alternative approaches to sports medicine, she says.
But thanks to the efforts of several well-respected and enlightened physicians, a committed group of hardworking massage therapists and organizations such as the American Massage Therapy Association (AMTA), sports massage seems primed to come into its own.
CERTIFICATION: According to Jean Neiswinter, National Eastern District Director of AMTA, sports massage has become a very prominent thing in the massage dimension.
"I would say it is now one of the priority things on our agenda, with the American Massage Therapy Association," says Neiswinter. "We are, I think, the only association which gives sports massage certification upon taking a very rigid examination."
One of the problems that "legitimate" massage therapists such as Neiswinter, Davidson and other AMTA members have faced is the lack of uniform standards for certification and regulation of massage therapists.
In the City of Philadelphia, for example, all one has to do to go into the massage business is to provide two photos for personal identification, then pay a twenty dollar fee for a masseur's license, and another fee for a state license. There are no city or state requirements as to training or experience for individuals who seek to practice massage. This fact has caused a certain amount of consternation among "legitimate" practitioners.
Because of the lax city and state standards of regulation, it is virtually impossible for law enforcement authorities to differentiate between legitimate massage therapists and the kind of "message" services that generally gain the attention of the police vice squad. And the Philadelphia police department does maintain records on who is licensed to practice massage in the city.
"What infuriates me more than anything is that I am listed in the police department's "Blue Files" because I have my masseuse license," says Davidson. "It's not a nice compliment."
NO RESPECT: Several months ago, Davidson telephoned a city assistant district attorney to complain about his using the terms "prostitution, escort and massage" all in the same sentence. Although he was apologetic, and in fact, was well aware that legitimate, professional massage therapy did exist, there was little he could do.
"We don't get the press. Because of the AIDS thing and everything else going on people are more interested in hearing about the prostitution and the escort business," Davidson explains.
Davidson says she ran into the same type of general apathy while trying to bring about attention and media awareness for a Sports Massage Workshop which was held in Philadelphia during the last weekend in April, and which drew approximately 100 massage therapists from throughout the MidAtlantic region.
"One radio producer said pointblank that if it was about prostitutes, massage and escort, he'd cover it," she says. "He admitted that his station does not give equal time to the professional massage services. That's just the way it is."
Nevertheless, AMTA continues to sponsor such events, in hopes of bringing together some of the best people in the field to come up with some greater uniformity, high standards, and to establish high qualifications for would-be massage practitioners.
EDUCATION: Basically the AMTA is trying to educate therapists to a higher level of education than they are accustomed to, Davidson says. By AMTA standards, it's not the kind of education that can be done over a weekend, although there are some "schools" which advertise such programs.
By contrast, AMTA schools require a minimum of 500 hours of training in a wide variety of subjects, including anatomy, physiology, kinesthesiology, hydrotherapy, business practices, ethics, and contraindications of massage therapy.
The only AMTA-certified school in Pennsylvania is the Pennsylvania School of Muscle Therapy in King of Prussia. According to the school's director, Victoria Ross, it is one of about 50 AMTA-recognized facilities across the country.
Ross, who also operates the Deep Muscle Therapy Center at the same location, says she has worked with patients who have a wide variety of conditions, including polio, lupus, muscular sclerosis, muscular dystrophy, as well as other joint and muscle injuries. She says most of her referrals come through physicians, lawyers and insurance companies.
CLOSE TIES: But the facility has other close ties to the medical profession as well. Ross says that one of her chief supporters in the field is the renowned Philadelphia neurosurgeon Dr Eugene Spitz. Ross credits Dr. Spitz with being one of the first "traditional" medical professionals to acknowledge the potential of massage therapy as a legitimate and viable medical treatment.
Ross also retains several other medical professionals as consultants, including a medical doctor, a chiropractor, and a cranial specialist. Compared to the Pennsylvania School of Muscle Therapy, most "massage schools" fall woefully short, notes Davidson.
"In Philadelphia there are some schools that last from 16 hours on a weekend to maybe 100 hours," Davidson explains. "That really doesn't give you enough information to be what I'd call an informed massage therapist -- a person that could handle an emergency situation."
AMTA requires its students to be certified both in cardiopulmonary resuscitation and first aid. That's important because of the fact that massage therapy greatly increases the activity of the patient's circulatory system.
"Thus, if someone is on your table, it is very important to know it in case a situation occurred," Davidson notes.
SENSITIVITY: Another difference is that in legitimate massage therapy, the patient is draped and the professional is covered at all times. Communication is also important. There is extreme sensitivity involved, so that communication between the patient and professional is critical. It is important to know whether or not the pressure being applied is too heavy, or too light. And if the
patient has any specific injuries, this too must be communicated between therapist and client. Still, most people seem to be almost completely unaware of the concept or the value of legitimate massage therapy.
"A lot of people just don't understand massage therapists," explains Davidson. "They just don't understand -- who are these people, what kind of training do we have? And with the lack of licensure, regulation, legislation -- you just have a can of worms there. That's why you need to have some type of governing body or professional association."
It is that void which the American Massage Therapy Association hopes to fill. The AMTA, which was established in 1943, is the national organization for massage therapists. Through AMTA, certified massage therapists can obtain liability insurance, and malpractice insurance, as well as its professional publication, the Massage Therapy Journal, and an organizational newsletter.
In addition, the AMTA sponsors a series of periodic continuing education programs, conferences and conventions that are designed to bring members together so they can share experiences, compare techniques and learn about new innovations in the field of massage therapy. Under current national president, Robert King, the AMTA has been at the forefront of giving real credibility to
the profession, Davidson says.
RECOGNITION: Apparently some of that effort is beginning to pay off. Elaine Beaver, president of the Pennsylvania Chapter of AMTA and the organization's Membership Chairperson, notes that a growing number of hospitals and individual physicians now recognize massage therapy as a legitimate and important method of therapy.
"We're receiving prescriptions and referrals for massage now, which is something that doctors just disregarded prior," says Beaver. "I work by referral with physicians and attorneys, and this would be by prescription. So they're acknowledging it, and that's a bonus for massage therapists."
Part of the reason for the healthcare community's growing acceptance of massage therapy as a legitimate technique is the emphasis that has been placed on other types of "alternative care" in recent years.
As Davidson notes, the type of care provided sometimes depends on the attitudes and beliefs of the individual patient. Many people opt for what might be considered "traditional" medical treatments, so that when they are sick or injured, they enlist the services of an MD. Other people choose to go to a chiropractor or osteopath. Today such practitioners are gaining increasing acceptance by both the medical community and the general public.
"Before you couldn't even mention a chiropractor around a U.S. Olympic official," Davidson says. "Now you can. It's really shifted around a bit as far as their understanding and willingness to work together."
It is that need for the different factions -- especially athletic trainers, physical therapists, and massage therapists -- to work together which Davidson emphasizes in her work and in her attempts to promote the concept of massage therapy. Usually people can do that if they're not threatened by one another, and if they understand what each other's roles are, she says.
Davidson, who began her career in the healthcare field working as a respiratory therapist in a center city hospital trauma unit, says she has had a unique opportunity to see the trend in medicine gradually shift from an atmosphere of stand-offishness to one of greater acceptance among different practitioners of each other's roles. This is especially important when judged within the context of knowing when to refer a patient to a specialist in another area, she says.
"I think one of the number one responsibilities of any healthcare professional is to know when it is outside of your professional responsibility -- knowing when to refer to a physician, or another professional who has much more expertise, or if the patient needs special equipment, X-rays, or whatever," says Davidson. "That's one of the most important things I see with my field -- educating the therapist as to what the contraindications of massage are and when they should be giving massage therapy, and when they should be referring out."
ALL BENEFIT: Davidson says she maintains a very good rapport with all the sports medicine facilities in Philadelphia, as well as various physicians, orthopedists, chiropractors and other appropriate healthcare professionals.
"I have a very good rapport with those people because I want to know what's going on," she says. "At the same time, they also want to know what's going on. So we work with each other. That's the way it should be."
But it's not athletes alone who stand to benefit from massage therapy. For example, there are massage therapists in New York City working with AIDS patients in New York City. From corporate executives all the way down to the neonatal, to the mother who is prenatal -- all can benefit from massage therapy, Davidson says.
We even get involved in teaching the husband or partner how to do massage on his pregnant wife. How to relax her and the baby. We've even had massage in the birthing rooms, so that right away we teach families infant massage," Davidson says. "Then it goes all the way up to geriatrics and hospice programs."
RELIEVING STRESS: Corporate executives also are discovering the benefits which massage therapy can offer, and have begun to feature massage therapists in some of the larger corporate fitness centers around the country.
One person who definitely believes in the potential benefits of corporate massage is AMTA Pennsylvania Chapter president Elaine Beaver. What makes corporate massage different, is the fact that it is done with the patient fully clothed, and the required time period is much shorter.
“We're talking about seven minutes of hands-on therapy for alleviating stress," Beaver says. "That means seven minutes of work, mainly on the shoulders, neck and back area. That's seven minutes during which a person would not have had a cigarette. It really makes sense, and I think it will really take off."
In fact, in other cities, such programs already are in place. One of the best known consumers of the service was Apple Computer, which hired massage therapists for its employees during the design phase of the Macintosh personal computer. Other companies in New York and San Francisco also have turned to certified massage therapists as a means of managing stress in the workplace, and in most cases the cost is picked up by the firm's insurer. Hopefully, it will just be a matter of time before that kind of benefit is common in Philadelphia, Beaver says.
SEVEN-MINUTE BREAK: "Corporate massage is something that is just delightful," she adds. "And from speaking with coworkers, so far, I've found it to be something which they definitely would be interested in. It's a seven-minute break -- and I, personally, would prefer it any day to a cup of coffee."
According to Beaver, corporate massage, will probably be the next area of popularity and attention for AMTA and associated massage therapists -- and will closely follow on the heels of sports massage.
And as far as Gayle Davidson is concerned, that's just fine. From her perspective, it doesn't matter where the attention is focused, as long as accurate information does become more and more available to the public. She adds: "The bottom line is, massage therapy is probably the only profession that can affect every individual across the board without exception."
By Thomas Derr
PA, US -- It's an all too familiar scene for many caseworkers. The elderly patient who is in need of nursing home services -- and who may even have set aside a small amount of money in hopes of supplementing his or her Medicare income -- suddenly discovers Medicare simply does not pay for nursing home care. And the meager savings that he or she has set aside disappears almost immediately.
"Everyone thinks Medicare will pay for it, but it won't," says Joan E. Lynaugh, Ph.D., F.A.A.N., associate professor at the University of Pennsylvania's School of Nursing. "It truly is one of the most unpleasant surprises to either the middle-aged child or the older adult -- even to the most sophisticated people. They just can't believe the person in the nursing home or the social worker in the hospital when they tell him that all of this insurance they've been buying isn't going to do them a darn bit of good."
RUDE AWAKENING: It's a widespread phenomenon. In fact, according to David M. Eisenberg, Ph.D., Director of Long Term Care for the Philadelphia Corporation for Aging, a recent survey conducted by the American Association of Retired Persons found that nearly 80 percent of respondents believed that Medicare would, if necessary, cover their long-term care needs.
"It doesn't," Dr. Eisenberg says. "And if 80 percent think Medicare covers something it doesn't cover, then people are in for a rude awakening -- and they get that rude awakening. We see them rudely awakened when they come to us seeking nursing home care."
The realization suddenly hits these people that they either will have to pay for the care out of their own pockets, or quickly become impoverished so state medical assistance will pay for it. In fact, the financing of long-term care in the United States is so expensive that about half the cost of institutional long-term care is covered out of pocket by families, with the other half being picked up by medical assistance.
Furthermore, of all the people who enter nursing homes as private pays in a year in the United States, fully half of them spend down to poverty level within one year.
"They exhaust all their assets and spend down to poverty level so that they become wards of the state, essentially -- they become medical assistance eligible," Dr. Eisenberg explains.
For many elderly citizens, that "spend down" process won't take long at all. According to a recent report by the Urban Institute, 13 percent of the nation's elderly live below the poverty line, which is $4,775 for a single person older than 65, and $6,023 for an elderly couple. In 1985, the poverty level for Americans 65 and over was 12.6 percent (compared to 14 percent for the general population), with an additional 8.3 percent rated at "near poverty" -- leaving a total of more than 21 percent of elderly citizens near or below the poverty line.
CATASTROPHIC CARE CONTROVERSY: The Reagan Administration's recently announced plans to increase Medicare part B coverage for catastrophic care would do nothing to mitigate this problem. The proposal, developed by Health and Human Services Secretary Otis R. Bowen, would assess Medicare recipients an additional monthly premium of $4.92 in return for coverage of an unlimited number of hospital days, and a cap of $2,000 on the beneficiary's personal payments.
But according to a spokesman for the Senate Committee on Aging, less than one percent of the Medicare population actually will end up using these costs. In addition, the plan would not extend coverage to include any item that is not already covered by Medicare. It would not extend coverage to include prescription drugs (which cost elderly Americans nearly $10 billion annually), physician's costs that are apart from hospital costs, or, most important, the cost of long-term care -- which is by far the greatest economic threat facing elderly citizens.
"It's very simple to explain," Dr. Lynaugh notes. "No matter how much money an individual or couple has saved, if they can't manage their care outside of the nursing home, they will have to pay cash for that care until they run out of money."
IMPACT: The impact on the individual or the family is obvious. Perhaps less obvious is the impact on the nursing home. By definition, the state has an interest in keeping its medical assistance costs as low as possible. That means the number of nurses and amenities provided to Medicaid nursing home patients is also kept at a minimum. Therefore, any nursing home that has a substantial number of medical assistance patients in its patient mix will probably have a marginal financial solvency.
As a result, one of two things has to happen, says Dr. Lynaugh. First, the nursing homes have to control the percentage of Medicaid patients they serve in order to remain solvent. Those patients then must remain the hospital, or go without care.
"The other thing that happens is that these people who are in their 70s, 80s, or 90s -- with a chronic illness that prevents them from living at home -- they're really stuck with extending their savings and their family's inheritance to pay for this care," Dr. Lynaugh says.
According to Dr. Lynaugh, skilled nursing care costs an average of about ninety dollars a day -- more than $30,000 a year. And there are few ways around that expense, because it is essential for any patient with complicated medications, or who requires supervision of care by a registered nurse. Of course, the level of care can vary significantly from nursing home to nursing home.
THE TEACHING NURSING HOMES: Interestingly, Dr. Lynaugh notes that introducing a higher level of care in nursing homes could actually lower overall healthcare costs. The concept involves what Dr. Lynaugh calls "the teaching nursing home."
The idea is to get schools of nursing in universities to team up with nursing homes. It legitimates the nursing home in a sense, but it also implicates the schools of nursing in the problems that the nursing homes have, she says.
Nursing homes often suffer from a lack of skilled professional help, she says. And if there is an insufficient number of people who are well-trained, it stands to reason the residents are going to get less than adequate care.
By introducing a better prepared nurse in the nursing home (one who can make patient care decisions right there on the premises) there will be less need to send nursing home patients to acute hospitals for minor emergencies -- which is much more expensive.
"That's a real advantage on two levels," notes Dr. Lynaugh. "One, it saves a lot of money, and two, it's a lot less hard on the nursing home patient who is usually a very old person who is not going to do well in a hospital situation."
The dilemma, however, is that the money does not come from the same pot, Dr. Lynaugh says. Currently there is no incentive to keep the patient out of the hospital, which is reimbursed by Medicare. However, if Medicare were at risk on both sides of the equation, then a more rational system of incentives and disincentives might be put in place.
"The idea is to try to get the health-care system to face up to both the critical and the fiscal issues that are inherent," Dr. Lynaugh says.
TWO POLAR EXTREMES: There are other programs in the works, but they are few and far between. As PCA's Dr. Eisenberg notes, the real challenge is to establish a continuum of care that includes long-term care options that supplement institutional care.
Currently such a continuum does not exist, he says. Instead, the continuum is heavy on the two polar extremes -- the families and the institutions.
"There isn't a whole lot in between," Dr. Eisenberg says. "Medicare does not cover long-term in-home care. In Pennsylvania, Medicaid doesn't either. A lot of the services that are needed in order to keep someone at home healthfully -- personal care for example -- are not covered by Medicaid."
The only public financing available for in-home long-term care comes through agencies such as PCA, Dr. Eisenberg says. And PCA now has extremely long waiting lists for homemaker services.
How these institutional and in-home long-term care options will be balanced -- and who will be doing the balancing -- are two of the major issues confronting officials in both the private and public sectors. And for the moment, no one is willing to take full responsibility.
COST SHIFTING: "What we are seeing under the Reagan administration is this massive cost shifting from system to system," says Dr. Eisenberg. "When DRGs went into effect, the Health Care Finance Administration basically shifted the burden from an inpatient to an outpatient emphasis. But at the same time, the Medicare intermediaries started very tightly constraining home health benefits under Medicare. That was a further shift onto the states -- onto medical assistance and onto families."
To solve this problem, it will be necessary to develop a system of rational planning for some kind of reasonable approach to financing long-term care, Dr. Eisenberg says.
"But until this happens, we're likely to continue to see this massive cost shifting between feds and state, and between different systems," he says. Further complicating the issue of long-term care is the fact that the problem is not limited to the elderly population. The same problems can be readily detected with the chronically mentally ill people, and with the developmentally disabled.
"One of the reasons we have so many street people around is because the state decided to get out of the institutional business, and it never followed through with in-home care," explains Dr. Eisenberg. Therefore, although the business of how to take care of people who need long-term care is more than just an aging problem, it is clear that the elderly population is fare greater than any other subgroup.
ROLE OF PROVIDERS: Another key issue that must be dealt with involves the roles which providers can be expected to play. Currently there are a number of provider sectors, including hospitals, nursing homes, home health agencies, hotel chains, and even department store chains -- who are all starting to think of themselves as a focal point for the delivery of services to the elderly.
Hospitals especially are looking at possibility of vertical integration. That is, they are starting to look at themselves as a focal point for meeting the needs of the elderly beyond the acute care state -- even to the point of owning and operating nursing homes.
The golden ring which each of these provider sectors hopes to grasp is a foothold in the enormous elderly market. And once reimbursement mechanisms are worked out satisfactorily, the potential for control of the market is huge, notes Dr. Eisenberg.
At the same time, however, he cautions that while providers possess a powerful incentive to sell what they create, it may be far different than what the elderly population actually requires. It also may be different from what the public wants to pay for.
WHO CONTROLS? "Another big issue in the organization of long-term care services as they develop is -- who should be in control?" says Dr. Eisenberg. "Who should be the focal point for the development of long-term care services for old people? One of these provider sectors? The government? An honest broker middleman such as PCA?"
One of the most talked about options for financing long-term care currently is being promoted by Rep. Claude Pepper, the chairman of the House subcommittee on health and long-term care. The bill, H.R. 65, would cover a number of health care items currently outside the realm of both private insurance and Medicare -- such as dental care, eye care, hearing care, prescription drugs and physical exams.
As Richard Browdie, Deputy Secretary of the Pennsylvania Department of Aging, notes, "While this country does not like the idea of nationalizing its insurance problems, when it comes to long-term care, the government is the only insurance company big enough to cover everybody."
One possible alternative to Pepper's plan would be to have the federal government reinsure private insurance companies against catastrophic losses. Such a plan essentially would create a national health insurance strategy for long-term care while privatizing its actual administration. At the moment, however, such plans are being considered in "think tanks" not in legislatures, Browdie notes.
EXPERIMENTAL POLICIES: Some private insurers are offering experimental policies that would enable some elderly people, who otherwise would have to be admitted to nursing homes, to stay at home. The services offered would include housekeeping, cooking and shopping, physical therapy, overseeing medication, and helping with bathing and dressing. An added twist is that the new policies do not require prior admission to a hospital or nursing home.
Dr. Lynaugh notes that the AARP recently began offering a long-term care policy to members in eight states through the Prudential Insurance Company of America. In addition, the Travelers Insurance Co. recently began offering policies that include nursing home care, home health care and adult day care benefits to employees of large corporations, while Aetna Life Insurance Co. recently signed a similar agreement for state workers in Alaska.
One of the keys to the success of the new ventures, says Dr. Eisenberg, will be the organizations' ability to identify and cope with the fact that older people have multiple and interrelated needs that run across different service systems and may involve acute health, mental health, nutrition, social and other problems.
NEED FOR CHANGE: "The point is that professionals tend to see problems in terms of the solutions with which they are most familiar," Dr. Eisenberg says.
"Sometimes you need someone who has a broad understanding of a patient's problems to meet his or her needs."
The problems are magnified further because financing is also done by system, he adds. Therefore, any solution must take into account the wide variety of problems elderly patients face. But whatever happens, the current system of financing has to be changed.
"Any approach to financing care that impoverishes such a large group of people
regularly is grossly unfair. We have to be able to do better than that."
By Thomas Derr
PA, US -- The numbers are startling. They show the disease accounting for one out of every nine deaths in the population -- one out of three among men and women aged 25 to 34.
The numbers also show blacks being far more at-risk then whites, with a death rate of 428 per 100,000 as compared to 174 per 100,000. The year was 1900, and the disease that was causing such widespread public alarm was tuberculosis.
And as Joan E. Lynaugh, Ph.D., F.A.A.N., associate professor at the University of Pennsylvania's School of Nursing, notes, there are a number of comparisons that can be drawn -- not between TB and AIDS, per se, but rather in the way the medical community and the general public has tended to approach them.
MISCONCEPTIONS: According to Dr. Lynaugh, one of the most apparent commonalities between the AIDS and TB epidemics involves the way AIDS victims are viewed. During the late 1800s, incidence of TB often was seen to be a function of lifestyle. New immigrants to this country, the urban poor and other downtrodden classes all were potential carriers of TB. And because TB cases tended to be concentrated among those groups in highly congested urban areas, it was widely espoused by some rabble rousers that the cause of the disease could be traced to the inherent squalorous lifestyle of these groups, or to some genetic dysfunction.
As a result, new immigrant groups and poorer classes often became scapegoats for the TB epidemic.
"There also were lots of misconceptions as to how TB could be spread," says Dr. Barbara Bates, a lecturer at Penn's School of Nursing who also has strong historical interests. There were fears that one could contract TB as a result of things the didn't make any difference whatsoever -- licking envelopes, public libraries and laundries, touching dirty straps on public trolleys, from silverware, or from sleeping in a public railroad car. In fact, Dr. Bates notes that many cities' anti-spitting laws were enacted as a result of the fear that TB could be spread through the expectorant of a TB victim.
"The fact is, TB is not an easy disease to contract," Dr. Bates says. Generally speaking, TB is transmittable only when an individual has experienced close and prolonged contact with a patient who has the disease, and when they are situated in an environment where ventilation is extremely poor, she says.
Before the realization that most illnesses were caused by microorganisms such as bacteria and viruses, it was popularly believed that they were brought on by nighttime air or some malady-producing invisible gases. For that reason, it was a common practice to keep doors and windows tightly sealed against fresh outdoor air. When new immigrant families came to this country and found it necessary to conserve their limited resources by living together in crowded, congregate
situations, the result was an ideal environment for a TB epidemic.
The observed threat of a TB outbreak merely added to the prejudice which the immigrant poor experienced upon their arrival, Dr. Bates says. That prejudice extended to the workplace, as well. Dr. Bates notes that, just as many AIDS patients today are finding, TB sufferers in the late 1800s were often shunned or fired from their jobs.
As a result of pressure from parents and public school authorities, TB-stricken teachers found it difficult to get jobs or insurance.
As Dr. Robert Sharrar, director of the Office of Health Promotion and Disease Control for the Philadelphia Department of Public Health, notes, there is just as much public alarm about disease transmission in the current AIDS controversy.
SYPHILIS: Dr. Sharrar prefers to compare the current AIDS uproar not with TB, but with another sexually transmitted disease that had serious social and medical undertones until a cure for it was found.
"The thing is, AIDS can only be spread by intimate sexual activity -- intercourse -- or by intravenous exposure to contaminated blood, and from the mother to the child in-utero just about the time of birth," Dr. Sharrar explains. "So the modes of transmission are clearly different from tuberculosis."
According to Dr. Sharrar, a more suitable comparison might be made to syphilis, which also is a sexually transmitted disease, and which claimed 14,000 lives in 1941 -- before penicillin was developed.
"The difference is that you don't die of syphilis," he says. "What you end up dying from is the long-term complications that occur, maybe 20 years after the fact. With syphilis, the death wasn't quite as immediate as it appears to be with AIDS. But again, you're dealing there with a sexually transmitted disease for which there was no cure."
In addition, Dr. Sharrar notes that there is a good deal of debate about whether or not AIDS victims pose a threat to co-workers, fellow students and other people with whom they have normal, casual contact.
"I think the issue that keeps popping up is should a patient with AIDS continue to work? And the answer to that is 'Yes' -- AIDS is not spread by the kind of contact that takes place in the workplace," he says. "You don't spread AIDS by using office machines, telephones, drinking fountains, or through any other kind of contact which typically comes into play at work."
In fact, a recent U.S. Supreme Court ruling -- which ironically involved the case of a TB sufferer -- makes it illegal to dismiss an employee on the basis of AIDS.
TWENTY CASES A MONTH: Nevertheless, employers do have a vested interest in helping to find a cure for AIDS as well as to control the spread of the disease. Recent projections show that by 1991, loss of productivity due to AIDS-related illnesses and premature deaths could cost American industry approximately $55 billion. In Philadelphia, 633 cases of AIDS have been reported since 1981. Currently the Department of Health receives reports of an average of 20 new
cases each month.
According to Dr. Sharrar, the Center for Disease Control projects that if the outbreak continues at its current pace, the Philadelphia metropolitan area will have approximately 5,000 cases of AIDS. That marked increase will undoubtedly place a burden on the medical care system, he adds.
"One of the points I keep making when I give my talk on AIDS is that this is one disease that everybody has to know about, because it could, in fact, affect each and every one of us," Dr. Sharrar says. "Therefore, an educational program for employees becomes important in this respect."
As Dr. Sharrar notes, an employee who becomes infected with the AIDS-causing virus and who goes on to develop AIDS will certainly cost his or her company a lot of sick time. At the same time, these individuals will be cut off from what statistically is the most productive periods of their lives. Losing such employees will mean the added need to hire and train new employees to fill those
positions -- always an expensive proposition to most companies.
"Most of the cases so far have been young to middle-aged men of all racial and ethnic backgrounds. So if you are talking about people from 20 to 49 years of age getting AIDS, you're talking about people who normally would be independent, productive, creative, and doing their thing," he says.
One of the most dangerous generalizations is that AIDS is a disease of only a certain class of people, he adds. Because AIDS is a sexually transmitted disease, every member of society is at risk of developing the disease.
EDUCATION: "I know of no sexually transmitted diseases that is unique to the gay population," Dr. Sharrar says. "Whatever sexually transmitted diseases occur there also occur in the heterosexual population."
Whether or not the disease will spread in the heterosexual community as it will in the gay and intravenous drug using community may be debatable, but even if is transmitted to only one to five percent of the cases of heterosexuals -- that still translates into an enormous number of cases. And that's why it is particularly important to make sure that accurate information is made available
to everyone, he adds.
"So I think education is very important to protect your employees to guarantee that they will be able to do the work you want them to do," Dr. Sharrar explains.
Hopefully, that belief will serve as a driving force for the development of an effective means of caring for AIDS patients, notes Dr. Susan Day, director of the Medical Clinic at the Hospital of the University of Pennsylvania. She feels that challenge can be met best through the mobilization of people in many different fields -- not just the medical care field alone.
PRIVATE SECTOR INITIATIVES: And for an example of how this might be brought about, one again can examine the historical lessons of the TB controversy, says Dr. Lynaugh.
With the TB epidemic, various initiatives from the private sector -- often led by benevolent groups such as churches and social reformers who sought to provide proper shelter, food and nursing services to stricken, generally helpless patients.
These voluntary organizations, working in conjunction with representatives of the medical and nursing professions, then enlisted the help and support of other entities -- including private business and media.
"Eventually everyone gets involved in what they see as being an important crusade," notes Dr. Bates.
Two significant results of the growing movement against TB were: the development of specialized facilities for TB patients; and greater efforts in research to find a cure for TB.
Naturally there were a few drawbacks. First, no one knew for sure what a proper treatment for TB should involve. Some of the more common treatments included lots of cool, fresh air and lots of food. TB patients tended to deteriorate physically as their disease progressed. By increasing food intake, it was reasoned, TB patients would build up their bodies and thereby overcome the disease. Through such treatments, in fact, some individuals did seem to improve.
As a result, facilities that showed limited success with a number of people were able to promote themselves and thereby attract additional miracle-searching TB patients.
FAMILY & FRIENDS: Although the value of such institutional care from a medical standpoint may be questioned, the establishment of a systemized care system did prove fundamentally useful -- in terms of hope and shelter -- to individuals who lacked money and/or the critical support of family and friends, says Dr. Lynaugh.
As Dr. Susan Day notes, there are many AIDS patients in the same boat -- with very little social support from either friends or families. And a number of specialized AIDS hospitals already have been established, in part to respond to this situation.
On the downside, the pressure that was exerted by many local health agencies to separate and isolate TB patients in such institutions caused great consternation among both TB patients and the general public.
Although in most cases a patient legally could not be forced to stay in a sanatorium, laws such as the New York City anti-spitting ordinance could enable local police to incarcerate a "careless consumptive" in a hospital against his or her will.
That situation may pose even more dramatic problems in the current AIDS controversy, suggests Dr. Bates.
"Even from the testing standpoint, concern by the patient about subsequent public reactions could cause problems," she says. "Once you start separating and labeling a group of people, it is more likely that they will simply refuse to be tested. So widespread AIDS testing could prove self-defeating in the long run."
Part of the answer is greater emphasis on mass public education. U.S. Surgeon General C. Everett Koop's campaign to increase understanding of the disease, and President Reagan's recently announced special AIDS commission represent a step in the right direction and has focused more research dollars and attention on the problem.
But as Dr. Lynaugh notes, the search for a cure is only part of the problem. Until that cure is found, society cannot overlook the need to care for AIDS sufferers who must live with the disease.
ALLOCATING RESOURCES: The current situation creates serious ethical dilemmas relating to resource allocation, adds Dr. Bates.
"How do we provide custodial care to patients who are diagnosed at an early stage of the disease? How do we pay for custodial care? The public is much less willing to spend money on comfort and care of people who are not going to get well," she observes.
Part of the answer may be in changing insurance programs. Two insurance companies in Pennsylvania recently announced they would begin covering the costs of testing and of prescriptions for the drug AZT, which has been approved by the FDA for treatment of AIDS patients. The costs of such prescriptions are expensive, however, running about $10,000 a year.
BUSINESS COMMUNITY'S RESPONSIBILITY: How society will deal with the turmoil that expensive AIDS treatments will bring may depend ultimately on the attitudes of the business community, notes Dr. Lynaugh.
"Business doesn't thrive on a society in turmoil," she says. "That's why business has a special interest to promote the image and the reality of a healthy community."
Given the experience of the TB epidemic in the late 19th and early 20th centuries, the business community therefore is in the most strategic position to urge innovations and to bring about greater efforts in education, research, and, most important, the care of AIDS patients, she says. By taking a lesson from the past, business, health professionals, and community groups may yet develop an
effective means of working together to deal with society's newest devastating and economically burdensome disease.
Until that time comes, the society that conquered TB, smallpox and polio is again reminded that we are still, after all, mere mortals.
By Thomas Derr
PA, US -- ONE of the effects wrought by recent changes in Medicare and private insurers' payment systems is that hospitals and other health care services have been scrambling to find new, innovative ways of raising additional revenues while cutting back on inefficient or unnecessary costs.
One way this two-pronged interest has been accomplished is through the rise of joint venture operations between various health care entities.
"Joint ventures are among the hottest things going in the health care field," says Jeffrey B. Schwartz, a partner in the law firm of Wolf, Block, Schorr and Solis-Cohen. At the same time, however, he notes that although the topic of joint venturing is receiving an inordinate amount of publicity, joint ventures themselves still account for only a small percentage of the changes which the health care field is experiencing.
Schwartz explains that joint ventures can involve a broad range of interests, including: ambulance services, ambulatory surgical centers, comprehensive outpatient rehabilitation facilities (CORFs), durable medical equipment services, free-standing clinics, free-standing emergency centers or surgi-centers, home health agencies, independent clinical laboratories, mobile diagnostic services, outpatient renal disease services, pharmacies, CAT scan services, and magnetic resonance imaging centers.
There is a main underlying reason offered as to why health care entities might become involved in such joint ventures -- money. "I think the bottom line is that most joint ventures are done for economic reasons in terms of generating a profit," explains Henry C. Fader, coordinator of the Health Law Group at Fox, Rothschild, O'Brien and Frankel. But quite often, experts warn, that goal is far more difficult than it first appears.
WIDER INVESTMENT: Glenn A. Shively, a partner in the Management Consulting Services division of Coopers & Lybrand and a specialist in the health care industry, says that changes in the tax law combined with unprecedented levels of competition in the health care marketplace may ultimately spur wider investment in the joint venture market, which until now has been of interest mainly to physicians and others directly involved in health care.
Institutionally, joint ventures are still of value to non-profit hospitals, Shively believes. One potential advantage is that the joint venture entity may avoid being subject to the state's Certificate of Need (CON) program, whereby hospitals need permission to make major capital investments, says Shively.
Shively cites a number of reasons a joint venture could make sense for a non-profit hospital:
· It provides a mechanism for increased patient flow and increased revenue.
· It aligns the hospital with an experienced for-profit partner(s) with a particular expertise.
· It provides the opportunity to offer a broader array of high quality services to patients at potentially lower cost.
· It creates partnership opportunities between the hospital and its staff physicians.
· It can reinforce the image of the hospital as an innovative and competitive enterprise, concerned with the well-being of the community it serves.
But how has the Tax Reform Act of 1986 (TRA), with its broadside attack on tax shelters of all types, affected the viability of such health care joint ventures?
According to John J. Hopkins, a partner in Coopers & Lybrand's tax department, a properly structured joint venture will generate what the Tax Reform Act defines as passive income to limited partners.
"This is the only type of income one can use to offset passive losses from existing tax shelters, such as real estate limited partnerships," he notes.
Hopkins thinks there is a growing demand for investment vehicles which will produce passive income, and that this fact will soon generate greater interest in health care joint ventures among nontraditional players.
Prior to the Tax Reform Act of 1986 joint ventures that were based largely on tax shelter implications were easier to sell to physicians who might be interested in investing a certain amount of money in return for the tax sheltering of some of their income in the years ahead. For example, physicians who invested in joint ventures could often get investment tax credits on equipment purchased, and favorable depreciation on medical buildings, and so on. Also, losses that were generated could be taken by physicians against their practice income.
"You're really in a position now where you can't take passive losses in these investments and apply them against your practice income," says John C. S. Kepner, partner and chairman of the Health Law Department at Saul Ewing Remick & Saul. For the ventures to be salable to limited partner physicians, they have to be economic deals that stand on their own and generate sufficient cashflow to be marketable to physicians.
It also helps if the joint ventures are what is known as "passive income generators," he adds. In such cases, the joint ventures produce passive income, defined as an income which is not generated in the active business of a physician. This income can be used to offset losses from passive losses from other investments, as well. Thus, although the economics and the dynamics of the joint ventures may have changed, they may still prove to be viable business enterprises.
THREE GROUPS: According to Kepner, there are basically three groups of possible participants in a health care joint venture -- the hospitals, physicians, and for-profit "entrepreneurs."
Currently the health care field is seeing ventures between various combinations of those groups -- just the entrepreneur and the hospitals; just the hospital and the physicians; the entrepreneurs and the physicians; and in some cases, multi-hospital ventures just alone, or in conjunction with the two other groups, says Kepner.
"The dynamics are quite interesting in that respect, and the business and legal issues that come up are influenced significantly by the specific kind of venture and who is participating," he adds.
In fact, the business dynamics are quite different if there is an entrepreneur involved who is not just in it for investment purposes -- in such cases the entrepreneur often plays the role of developer/general partner, and looks forward to having a significant degree of control over the project.
Such an arrangement provides a much different motivating force than joint venture situations that might involve several nonprofit hospitals -- who might be inclined to go to their participating physicians to raise additional equity if the need arises.
MRI PROJECTS: How capital intensive the specific kind of joint venture is will influence the way the deal is structured as well. Some of the more highly capital intensive projects involve Magnetic Resonance Imaging (MIR) centers, which are proving to be extremely popular.
"Because MRIs are so capital intensive, it is not atypical for several hospitals to get together to do one of those projects," Kepner explains. "It's also not atypical for an entrepreneur to be the primary focus."
An MRI project, which is very costly, is very different from durable medical equipment (DME) ventures, where the start-up expenses are not as significant and there usually are no exorbitant capital costs, such as the construction of a new building or the purchase of expensive new equipment.
"You don't need a lot of money to get going with a DME project," Kepner points out. "That will influence the structure and dynamics of the joint venture."
One person who has had a unique opportunity to see what can go wrong in health care joint ventures is Alan E. Morrison, senior principal, Health Care Advisory Service of Laventhol & Horwath. Much of Morrison's experience emanates from his firm being called in on an "after the fact" basis. Often, when the joint venture operation has already gotten into financial difficulties, the supporting bank or other financial institution will contact Laventhol & Horwath and ask the firm to
participate in a "work-out," a term derived from the banker's desire to "work something out" from the joint venture's unfortunate financial situation.
REASONS FOR FAILURE: Morrison notes that there are two major reasons why joint ventures often fail. The first reason is a failure on the part of the parties to the joint venture to establish what their common economic interests are. Without common objectives and an established means of working together to reach those objectives, parties that are frequently competitors in other arenas will have a tendency to pull apart, rather than together.
The second -- and most common -- mistake that joint ventures make is to initiate a joint venture project for providing a particular service largely on the belief that the simple act of doing something creatively will create a market for that service.
"I have seen a number of joint ventures that were structured wonderfully, their legal documents were in excellent shape, but the people involved overlooked one thing -- there was just no business," says Morrison.
One of the more popular joint ventures for hospitals and physicians, or hospitals and independent for-profit companies involves the area of home health care. Although the hospitals may see what it thinks is a potential market for a home health care service -- based on the belief that a certain percentage of its discharged patients will require follow-up home-based medical care -- that does
not guarantee that there is a strong enough based of clients to support a new business enterprise.
FILLING A NEED: The joint venture will not create the need just by offering the service, says Morrison. It may still succeed, but it will do so because such a need really did exist, or because the new joint venture was able to carve enough of a market share out of its already existing competitors so that it would be successful.
"Too often, I think the parties tend to overemphasize the importance of the legal and financial structuring of their joint venture," says Morrison. "And in so doing, they tend to ignore the basic business perspective. In other words, does the joint venture make sense?"
Anything can be a joint venture if it makes good business sense, Morrison says. That's true either on an inpatient basis, which might involve a hospital using leased nursing services from another hospital, or on an outpatient basis, such as radiology or ambulance services.
One key area of concern for hospitals and physicians in particular is what Medicare and Medicaid determine to be examples of fraud and abuse, or of illegal remuneration, notes Schwartz, of Wolf, Block, Schorr and Solis-Cohen.
On the surface, it would seem preferable to be able to attract those physician/investors who are going to be referring patients to the new MRI, surgi-center, or DME venture. If a physician is an owner of a joint venture, he or she probably would he more likely to send patients to that center because, as an investor, he or she wants to help ensure the success of that venture. The problem is, that kind of referral may be illegal.
According to Schwartz, it is unlawful for physicians to knowingly and willfully solicit or receive any remuneration "directly or indirectly, overtly or covertly, in cash or in kind, for referring persons for any item or service or for arranging for acquisition of goods or services for which payment may be made in whole or in part under Medicare or Medicaid."
The theory offered above does not take into account whether or not the joint venture operation really is the best place to send a patient for the best quality care, or whether or not the physician will unduly utilize or over-utilize that facility because it will make money for the center -- and therefore create more revenues to distribute to the investors.
CRIME AND PUNISHMENT: Under Medicaid and Medicare, it is a criminal act for a physician to receive remuneration in exchange for a referral. The crime is punishable by up to five years imprisonment, a $25,000 fine, and suspension from the program, notes Schwartz. In addition, the statute is very broadly worded, so that federal authorities do tend to enforce it very strictly.
But there are ways of accommodating the law, notes Fader, of Fox, Rothschild, O'Brien and Frankel.
"If the physician receives his return on an investment in proportion to the amount of patients or business he sends to the center, then you clearly have a problem -- and there are millions of ways you could fashion joint ventures to arrive at that result," Fader says.
The acid test is often whether or not counsel to the partnership is able to give an opinion that there is no fraud and abuse problem, he says. Most good attorneys do not lightly give opinions, especially when it involves interpreting criminal statutes.
One key factor that should be considered in structuring a joint venture to avoid fraud and abuse problems is that the investor's return should be in proportion to the amount of his investment, as opposed to his amount of referrals.
"If you have one twenty-fifth of the ownership, you should get one twenty-fifth of the profits, losses and cash flow from the partnership," Fader explains.
CAPITAL RATIONALE: A second factor to consider is that physicians should be at some risk. In other words, there should be some need or rationale for the physician's capital apart from just generating referrals for the investment.
Needed capital for an expensive capital project is a good rationale, Fader suggests: "It's different if you're investing twenty-five dollars, as opposed to addressing $10,000."
Finally, Fader says his firm likes to see an independent utilization review program in place at the joint venture. In such cases, the partnership hires a medical consultant to come out, look at referred cases and determine if they have been appropriately referred. Such an activity could protect investor physicians from charges of inappropriate referrals as they relate to the Medicaid and Medicare fraud and abuse statutes, Fader notes.
Another problem relating to the tax-exempt status is currently being considered by the Pennsylvania state legislature. In 1986, one state representative from Erie County introduced legislation that would have placed restrictions on the ability of nonprofit hospitals to transfer funds to related corporations to fund for-profit activities. A series of public hearings were held across the state on the topic; these hearings are expected to be continued this year.
Apparently, the legislator is concerned that some hospitals are taking unfair advantage of their nonprofit status by getting into for-profit ventures and thereby have an unfair competitive edge with free market businesses. A similar analogy on the federal level can be seen in the recent loss by Blue Cross/Blue Shield of its tax-exempt status.
That is potentially a very important development and could affect joint ventures because it could inhibit the ability of hospitals to provide funding for these ventures, says Fader.
TRANSITIONAL PHASE: One thing that is beginning to change as a result of the increased joint venture activity of these health care providers is that there is less and less of a separate, "tripartite system" among the hospitals, the physicians and the insurers, says Laventhol & Horwath's Morrison. More and more, these three entities are going through a transitional phase that likely will bring about a more integrated health care provider network.
Of course, this has been one of the major goals from the hospital's point of view for some time. Many times, in fact, in situations involving a hospital/physician venture, the hospital could do by themselves if they wanted to, says Fader. But what they are mainly trying to do is to find a way to create staff loyalty, and to encourage physicians to continue referring patients to their particular institution.
"Part of what is going on out there is that hospitals are wooing physicians either within their primary service area, or trying to go outside of their particular area to get people in," Fader explains. "I think a good example of that is Graduate Hospital, which for a long time was just a community institution. But they started all these programs almost on a regional basis to try to attract patients which they normally would not have gotten."
One of the ways they do that is by setting up a center for some specialized service, such as sports medicine clinics or nutrition counseling, or cosmetic surgery -- which is done in joint investment with their physicians -- and say, "We will package you, market you, all of that. If you invest X dollars we think you will make money out of physician fees, and we will make money because you
will be sending patients into our hospital," Fader says.
Basically, the hospitals are trying to convince physicians in their area that their institution is the place where they should practice medicine.
ALL-IN-ONE SERVICE: Another possible reason for a hospital's interest in such activities is that at some point in the future it will be able to offer an insurance provider such as Blue Cross or HMO, all the services that provider might need for its patients within one institution.
"So as a result of generating loyalty from their physicians, they hope to be able to package themselves as being able to provide a lot of services to this very important segment of the market today," Fader says.
Nevertheless, Morrison says he has seen too many projects fall short to get excited about many joint venture programs, and both sides -- hospitals as well as physicians or independent entities -- should think carefully before they decide to get involved in a joint venture.
One of the key political issues in dealing with hospitals is what seems to be a general expectation -- albeit an unspoken one -- that if things do not work out as well as projected, that the hospital will somehow bail out the joint venture operation. But that doesn't always happen, Morrison says.
Obviously it is a good idea and it's important to make sure that all the technical issues -- the legal, reimbursement, accounting and so on -- are sorted out. But the real issue, the one that can never be overlooked, is whether or not the joint venture is a good business decision, says Morrison.
"Health care is a market-driven field; people seem to forget that. You need to have a strong client base," he says. "No joint venture I've worked on has ever failed because of a technical issue. "That's why anyone who is considering a joint venture should look at it from a realistic perspective.
"Chances are, if it seems too good to be true, it is."
By Thomas Derr
Philadelphia, PA, US -- ANYONE who has been a regular viewer of the long-running (now syndicated) television show M*A*S*H should be able to appreciate the basic concept of Pennsylvania's recently activated trauma center system.
Generally speaking, the term "trauma" refers to any form of physical energy that results in tissue injury -- usually the term is applied to critical injuries sustained through a criminal act or accident, such as shootings, stabbings, vehicular crashes, fires, bad falls, and the like.
According to Dr. Stanton Carroll, director of the Trauma Center for Albert Einstein Medical Center, Northern Division, the basic concept of the trauma center system was established earlier in the century during the world wars.
"It was based on the concept of military medicine, where there were front-line hospitals, and attempts were made to get wounded soldiers to the place where they could receive the best treatment rapidly," explains Carroll. "That came to involve the use of both air and ground crews. If you look at the history of medical treatment from World War I through World War II, through Korea, to Vietnam, the time between injury and treatment dropped anywhere from 12 to 18 hours to sometimes less than an hour. At the same time, the survival rates went up."
That was a concept which many health care professionals thought should be translated into the civilian population. In some places, such as West Germany, systems were developed that were based on the military-type systems. Carroll says. And the initial results were extremely encouraging.
"I believe in West Germany, for example, within a five-to-10-year period the rate of mortalities on car accidents was cut in half," he says.
A BETTER CHANCE: The central theme of the concept is that patients who meet certain medical criteria would stand a significantly better chance of surviving if their initial acute care treatment took place in a hospital with a trauma center -- as opposed to their being treated in a non-trauma-center-type institution.
Here in the United States, major civilian studies were done in the San Francisco area, which tended to support that idea. Of course, most people who may require hospital treatment don't require a trauma center.
"If you were to look at all the trauma that occurs in the country, you would see that 90 percent of the people that have some kind of traumatic injury can go to any regular, well-equipped hospital emergency room and be treated," Carroll says.
Nevertheless, trauma remains one of the most serious health hazards facing society today -- and also one of the least recognized. Statistics show that trauma is the leading cause of death among people between one and 44 years of age. For children aged one to 14, the numbers are even worse
-- nearly 60 percent of all deaths result from trauma in the age category. That's more than five times the number of children that die each year as a result of cancer (10 percent).
In the general public the numbers run as follows:
· More than 160,000 Americans die each year as a result of trauma;
· 350,000 trauma victims are permanently maimed each year;
· It is estimated that one out of every five patients who die from traumatic injuries, dies of survivable injuries.
· Trauma costs the American economy $563 million per day in lost wages, with the total cost of trauma -- counting lost wages, medical expenses and indirect work losses -- amounting to about $85 billion each year.
ECONOMIC IMPACT: According to Dr. John Templeton, Jr., associate professor of pediatric surgery and associate director of the trauma service at Children's Hospital, people under the age of 44 tend to be at or near their highest levels of economic productivity. For that reason, the economic impact of trauma-related deaths and injuries -- many of which are preventable, he emphasizes -- is even more severe than the impact of cancer and heart disease. According to Templeton, nearly four million future work years are lost each year due to trauma. By comparison, heart disease (which impacts a predominantly older population) is responsible for the loss of 2.1 million future work years; while cancer is responsible for the loss of 1.7 million future work years each year.
Currently there are four Level I trauma centers in the Philadelphia area: Einstein Northern, Hahnemann University, Thomas Jefferson University, and the state's first designated pediatric care Level I trauma center, Children's Hospital. To receive designation as a trauma center, hospitals must be able to guarantee a range of medical services, according to Dr. Charles C. Wolferth, director of Hahnemann's Division of Trauma and Emergency Services and professor of surgery.
These services include the 24-hour-a-day presence of a certified trauma surgeon and an assistant surgeon, a neurosurgeon, certified nurses, an anesthesiologist, a respiratory therapist, a blood bank, a laboratory, a radiologist, and additional services for acute spinal cord injury management, CAT scans, burn care, and a wide variety of surgical specialties. Each Level I trauma center also must have a lighted helipad in close proximity to the hospital emergency department.
CRITICAL DIFFERENCE: From the medical care standpoint, there are only a few differences between Level I and Level II trauma centers -- the main difference is in the hospital's commitment to education and community outreach. And in the long-run, it is this difference that may mean the most to the community which the trauma center serves.
One of the obvious educational programs which the trauma centers initiate is training of police and other frontline personnel who may end up in a situation where they must administer initial first aid or triage services to a potential trauma patient. But there are other important community programs in the works as well.
"Being a trauma center gives us a new interaction with the communities we serve, and gets the hospital into the position where it becomes more of a community establishment -- as opposed to just a place down at the corner," says Carroll. "We get involved with educational processes in the schools. I talk to Lions Clubs, school groups, etc. It moves the hospital almost into the realm of a
church, synagogue, or a local charitable organization, because you are out there interacting with the community."
To Children's Hospital's Dr. Templeton, that community education role looms most important in terms of prevention. He notes that Children's Hospital currently is engaged in an early education program that tries to help show children how trauma happens, how they can prevent accidents, and what actions they can take in certain emergencies.
"In the inner city, we especially try to instill in the children the importance of having their homes adequately protected by smoke detectors, so we can try to prevent many of the needless deaths and injuries that result from fires," Templeton says. "Kids love to be proselytizers, so we try to get them to be the fire wardens of their homes by working with their parents to get smoke detectors and make their homes safe from fire.
FORUM FOR PUBLIC ISSUES: In another vein, the trauma centers can also serve as a kind of nonpartisan forum for public interest issues, adds Hahnemann's Dr. Wolferth. He notes that many areas of Pennsylvania, especially rural areas, still don't have an emergency 911 system. By working with appropriate community and government leaders, trauma center representatives can serve an extremely useful purpose in the community by promoting such projects which can have a direct positive influence on the health and well-being of the community the hospital serves, says Wolferth.
"Some of this education effort will be pushing for certain changes in laws," adds Carroll. "Let's say for example, a seat belt law. Clearly, in many people's studies, if there were a seat belt law that said you had to wear a seat belt, lives would be saved. You may never be able to get that kind of impetus, but with this kind of educational and organizational process, that's a help. The drunken driving concept, helmets on motorcycles, perhaps even gun control in the future. I think the community gets an organization that's nonpartisan and helping it on an educational level and as a movement or force to the city and the country. And I think that's a role we will be placed in because we're going to see this kind of problem. So the community gets a whole bunch of benefits."
Clearly, however, not every institution has the resources, manpower, ability, or inclination to provide such an important role to its surrounding region.
"The basic fact is, there are a number of institutions that simply do not meet the qualifications required for trauma center designation," says Michael J. Bradley, vice president for Health Services and executive hospital director for Thomas Jefferson University. "Mainly you will find that it's the large teaching hospitals, those who have the capability of providing the enormous resources and
required commitment to rehabilitation, research, education and quality assurance who are being designated as trauma centers."
NEARLY NIL: For many hospitals who are already caught in the financial crunch that is being promulgated by the Medicare prospective payment system and other programs, the likelihood of initiating an expensive trauma center program is nearly nil.
"Given the limited number of patients that can be expected, and the expense of paying qualified general surgeons and neurosurgeons to remain on call, one wonders whether or not some hospitals will really be able to afford to institute a trauma center program," notes Dr. Jerome J. Vernick, director of the Thomas Jefferson University trauma program. "I know one institution that is paying more than $1.5 million to meet the on-call physician standards set forth in the adult trauma center requirements. Now that money doesn't bring even one more patient into the hospital -- it just allows them to meet the standards."
Locally there are 1,000 major trauma cases that occur per one million people in the adult population per year, Dr. Vernick notes. Thus, the Philadelphia area can logically expect to see about 2,000 to 3,000 trauma cases each year.
Naturally, some other serious cases that don't really require the services of a trauma center ("over-triage" cases) can be expected, and may help to fill any patient void. But even so, it doesn't seem economically feasible to buy a new trauma service just to take care of a few patients, Vernick says.
Luckily, Jefferson doesn't fall into that category, he adds.
"It's an endeavor that you undertake while realizing that it may not be underwritten by the amount of revenues which that particular endeavor generates," explains Bradley. "Some people look at you -- including our trustees, who may give you a blank stare and say: 'Tell me again why you want to do this.' And it's hard to explain that institutions have a unique behavior, and a moral and ethical obligation. If we have the capabilities and the need is there, then that's what we should be doing."
'TAKE THE PLUNGE': If everything that was initiated in the history of American medicine had to stand on its own merits from a financial perspective, many innovations and developments would not have happened, Bradley says. In the case of many new programs, sometimes it's necessary just "to take the plunge and make the commitment and, as time goes on, prove the necessity and eventual merits and success of the case. And that proof often follows later on," he adds.
Similar sentiments were expressed by Children Hospital's Dr. Templeton. "From a cost viewpoint, it is a very expensive undertaking," says Dr. Templeton. "One of the reasons is the amount of staff involved. Typically, it takes more than twice the number of people to treat children as it does to treat adults."
Children who are brought into a hospital setting often have many more developmental reactions to their diseases and treatment programs, he explains. As a result, there is a need in the hospital to provide more services, such as bedside counseling, play therapy, as well as traditional school classes, family-oriented therapy and training and even church services.
Another challenge which is unique to a Children's Hospital is the need to keep rarely used pieces of equipment and supplies on hand and available, so that any child may be cared for immediately under any circumstances.
"Compared to adults, children have a very small anatonic structure, and staff at regular hospitals often don't have either the necessary equipment or the expertise to use it," Dr. Templeton explains. "For example, a child’s larynx is positioned differently than an adult's -- unless you worked with children every day, you might not realize that at first. It also takes special training and skill to be able to get an IV into a tiny vein that you can barely see -- but the medical staff of a Children's Hospital have to be able to do that the first time, especially in a trauma case."
SPECIALIZED EXPERTISE: Another example of the specialized technical expertise which Children's Hospital must maintain involves the physiological nature of the young patients. Water makes up a higher percentage of a child's body weight -- which can make the determination of proper drug and fluid dosages difficult, Templeton says. Again, the ability of the medical professional to make the right decision swiftly often depends on his or her direct experience in pediatric medicine.
"All of these reasons point to the compelling need for a pediatric trauma center in this region." Templeton explains. "And it is that need which we are seeking to fill."
At the same time, all the trauma center doctors agree that the program should not be looked upon as a means of getting "a step up" on a potentially competing hospital. Any additional psychological prestige which a hospital is able to garner as a result of being a designated trauma center is not likely to mean much from the standpoint of bringing in a significant number of patients that it
would not otherwise have gotten, says Jefferson's Bradley.
"Not all hospitals can be all things to all people anymore," adds Hahnemann's Dr. Wolferth. "That's why we should recognize the kind of commitment which hospitals that are designated trauma centers are trying to make. At the same time, we can recognize that other hospitals which should not be trauma centers might specialize as cancer research centers or transplant centers."
By Thomas Derr
Philadelphia, PA, US -- Thanks to the Tax Reform Act of 1986, Blue Cross and Blue Shield plans across the country now enjoy a tax status that is comparable to commercial property and casualty insurance carriers.
Commercial insurers will probably greet this news item with glee. After all, their Washington lobbyists fought long and hard to persuade Congress to take away the Blues' tax-exempt status.
Consumers, no doubt, will be somewhat less enthusiastic. As the Blues' costs of operations rise, thousands of subscribers will probably be shelling out more for their premium payments.
"The other insurance organizations felt that there was unfair competition," explains B. Michael Watkins, partner in charge of the tax department at the Philadelphia office of Peat, Marwick, Mitchell & Co. "The Blue Cross/Blue Shields were competing in their marketplace for customers, and for premiums. Other insurance companies felt it was unfair that they had to pay federal income taxes on their profits, but the Blue Cross/Blue Shields did not have to pay federal income taxes on their profits."
That explains the extensive lobbying effort in both the House Ways and Means Committee and the Senate Finance Committee. Both groups apparently decided that something was amiss in the competition because the Blue Cross/Blue Shields were tax exempt.
"Therefore they came up with the revocation of the Blues' tax-exempt status and the treatment now starting in 1987 to tax the Blue Cross/Blue Shield plans as, in effect, property and casualty insurance companies," explains Watkins.
NOT FROM FIRST DOLLAR: According to the new law, each Blues plan will now be taxed as if it were a stock insurance company. Based on that guideline, the Blues' taxable income will be taxed at a 40 percent rate. But under a special provision, that income will not be counted from the first dollar. Instead, the taxable income will include anything over 25 percent of the organization's total
claims paid and administrative expenses.
According to Paula Cholmondeley, senior vice president/finance and chief financial officer for Blue Cross of Philadelphia, that measure was inserted to ensure that the financial health of the organization is safeguarded.
"They had to assume that the Blue Cross/Blue Shields were still providing a service for the community," explains Watkins. "And their service, simply, is to provide insurance to a broad range of customers and users of insurance. Now the government had to be careful that they didn't put such an onerous tax burden on the Blue Cross/Blue Shield plan that it would impact on the ultimate providing of insurance coverage and services to those customers."
That's why the Blue Cross/Blue Shields did get a few breaks -- situations of more favorable tax treatment -- more than even now-existing property/casualty insurance companies have. Primarily, the federal regulators wanted to ease them into this new taxable status, Watkins says.
"The government is saying it has determined that you should probably be trying to maintain reserves that are at least equivalent to the 25 percent," says Cholmondeley. "And only when you go above the 25 percent does Uncle Sam feel that you are generating enough profit where he wants a piece of it."
TWISTS AND TURNS: But the plot still has a few twists and turns left in it.
"In addition to having to be concerned about whether or not our profit exceeds the 25 percent in claims and administrative expenses, there is another tax calculation that we also have to go through called the Alternative Minimum Tax which has a rate of 20 percent," explains Cholmondeley.
"The Alternative Minimum Tax is a different calculation and it is done purely based on the amount of book income that you have. And basically, what it says is that when you compare the two calculations, even though you may not be subject to tax under one tax guideline, you could still be subject to tax under the other."
In addition, the Alternative Minimum Tax calculation offers no special reserve deduction. Should the Blues have any reserve income, that income must be added back into the Alternative Minimum Tax calculation.
"Under the Alternative Minimum Tax calculation, you do not get the shelter of setting aside 25 percent of your administrative expenses as a reserve," explains Dick Leonard, tax manager for Blue Cross of Philadelphia. "The Alternative Minimum Tax is basically designed to say, 'Although we recognize you are an insurance company and need to maintain a certain level of reserves, we still want you to be subject to the payment of some level of tax. We don't want you to get away totally tax-free.'"
But even the tax rates noted above will likely be changing in a matter of months.
"The Blues currently are dealing with either the 40 percent corporate rate for 1987, or the 20 percent Alternative Minimum Tax rate for 1987," notes Watkins. "That corporate rate will go down to 34 percent in 1988, presumably. It's scheduled to go down, because the tax rate changes for Tax Reform go into effect July 1, 1987. So, in effect, you only get half a year's impact of the tax
decrease in 1987. The full impact of the tax decrease doesn't take effect until 1988. At that point it will go down to 34 percent."
ONE DECLINES, ONE STAYS to be many corporations now paying tax rate will be declining, the Alternative Minimum Tax rate of 20 percent will stay the same. According to Watkins, the reason for the two different rates is just to make sure that each organization does pay some fair amount of taxes.
"If a company has book income, no matter what they do from a tax planning viewpoint, they are likely going to be in this 20 percent tax bracket," says Watkins. "Whereas if they have enough taxable income, then they will be in the ordinary tax bracket. There is a whole theory of rationale as to why they enacted and beefed up the alternative minimum tax, not just on Blue Cross/Blue
Shield organizations, but on all corporations. There are going to be many corporations now paying alternative minimum taxes who were previously escaping federal income taxes. Companies as large as General Electric and people of that stature."
"Apparently, it was the large corporations' creative handling of the tax code that caused Congress to say 'Hey, this isn't fair, how can a multibillion dollar company not pay any income tax, yet Joe Blow wage earner has to pay out 20-30 percent of his wages in taxes?'" says Watkins. "So they came up with this Alternative Minimum Tax which is so broad and sweeping that it does obviously
impact on Blue Cross/Blue Shield, as well as any other corporation."
According to Cholmondeley, tax experts at Blue Cross are still studying the new laws and what their impact on Blue Cross programs will be. One Blue Cross of Philadelphia program that will be basically unaffected by the change, is Delaware Valley HMO, which has been taxable all along.
"We imagine that we will have to reach conclusions on this during the first half of 1987," says Cholmondeley. "But that doesn't mean there necessarily will be any immediate change in what we do in the marketplace. Once we determine what the impact is, then we will have to decide what the best way is for Blue Cross and also Blue Shield -- who are our partners in this -- to respond. In addition, we also have to talk to the insurance commissioner. So rates are all subject to their scrutiny and review."
CRYSTAL BALL GAZING: The crystal ball of Peat, Marwick, Mitchell's Watkins appears to be a little more clear. Obviously, any organizations that pay income taxes have to adjust their product prices to account for those taxes in determining what their overall net return on investment is going to be or what their net income levels have to be, he says.
"So since the federal government has imposed income taxes on these organizations, it more than likely will have some kind of a ripple effect on increasing premiums that individual customers and policy holders are going to have to pay," Watkins explains. "The fact is, you have just added another expense to doing business for the Blue Cross/Blue Shields which did not previously exist -- and obviously they can't just absorb that. Their structure was set up where they were making whatever level of profit they thought was suitable and necessary to operate their businesses. Now they have another expense level -- federal income tax -- and they now have to include that expense
in determining their premiums. Their cost of business has gone up so they are going to have to have more premiums to pay for that cost of business going up."
Whether this ripple effect will have a short-term or a long-term upward impact on premium prices is unclear, he adds. But the implications will likely soon be felt, and probably as soon as the Blue Cross/Blue Shield plans determine what the impact of the new tax law is on their particular operation.
According to Watkins, the Blues will have to make their determinations, see what the costs are and then decide just how much they can pass along, while taking into consideration what the competition is providing.
"Then they have to decide whether or not it can be passed along in one year, two years or three years, or however long it may be. I really assume we will start seeing some of it fairly soon, depending on the competition and the competitive impact of Blue Cross/Blue Shields being able to increase their premiums in relation to other competitive products that may be on the market," says Watkins.
COMPLICATED STRUCTURES: Cholmondeley says she would caution against attempting to draw more of a conclusion than there really is. She notes that Congressmen can never "be 100 percent" sure that when they make some of their budgetary decisions as to how to raise income, that they are not necessarily able to foresee all of the potential impacts a change like this can have, because the whole economic structure is so complicated, she says.
"I think somewhat it is going to be harmful indirectly," Cholmondeley says. "But in the long run I think it probably is going to be more harmful or detrimental to the average consumer on the streets."
One of the things that Blue Cross has always prided itself on is trying to develop a strong enough relationship with the insurance commissioner that the organization is very responsive to its subscribers in terms of trying to hold rates down as low as possible.
“And I think we have evidence of that in some of the large refunds given back to subscribers. Whenever we have seen our reserves accumulating, we have always tried to turn that back and refund them to our subscribers or use them to keep our subscribers' premiums as low as possible," Cholmondeley says.
"When you tax organizations such as ours, you indirectly impact the consumer because you reduce that flexibility for us," she asserts. "The only lesson I think that can be learned is that the federal government has determined it needs to take its fair share, so to speak, of our profits. In the past, they were foregoing them so that those profits could be used for the consumer. Now they have decided it is necessary for them to take those profits into the federal government coffers."
PREMIUMS GOING UP: That is probably the most negative impact on the general population -- that premiums are bound to go up, agrees Watkins. He adds that the Blue Cross/Blue Shield plans will try to hold increases in line; they will be forced to, somewhat, due to competitive pressures.
That competitive aspect could be the key factor in determining just how far the Blues' premiums will rise.
"Just because your costs go up doesn't mean you pass those costs along to your customer," Watkins explains. "If there is a competitive product out there that is so strong and well entrenched, and it is competing with the product of a Blue Cross or a Blue Shield, they may not necessarily be able to increase their pricing on that product."
"I think it's hard to pinpoint what the impact will be on specific products. Furthermore, I'm almost certain that it won't be the tax law that will be determining how they price their products. It will be the competitive nature of the industry -- even though they now will have to take into consideration taxes as another cost element."
By Thomas Derr
Philadelphia, PA, US -- In recent years, the battle for supremacy among HMOs in many sections of the country has been nothing short of a slugfest.
The competition among HMOs in Philadelphia meanwhile, has, until recently, seemed rather tame by comparison -- as if the Marquis of Queensbury himself were refereeing the match. Now, apparently, the gloves have come off. And from the looks of things, the fight for Philadelphia may be the best donnybrook of them all.
According to certain informed sources, over the next two years there may be as many as a dozen different players involved in this high stakes battle. One of the most recent entrants is Keystone Health Plan East, a new HMO entity which is owned by Pennsylvania Blue Shield.
"I think what's happening in Philadelphia is that only 10 to 12 percent of the population right now is enrolled in HMOs," notes Linda Taylor, director of marketing for Keystone Health Plan East. "That's a relatively low figure. It means 88 to 90 percent of the population is not enrolled in HMOs. And that's why I think there is so much activity in the area today."
COMPLICATED ORGANIZATION: An indication of just how complicated that activity may become can be found in the organization of the Keystone Health Plan itself. According to Robert Shryock, marketing director for Keystone Health Plans, Inc.
Keystone Health Plan East is one of three independent but related HMOs which Pennsylvania Blue Shield operates in the Commonwealth. Both Keystone Health Plan of Central Pennsylvania, which operates in Harrisburg and the Lehigh Valley, and Keystone Health Plan West, which is based in Pittsburgh, are owned 50-50 by Pennsylvania Blue Shield and the local Pennsylvania Blue Cross organization. Keystone Health Plan East, however, does not have a Blue Cross affiliation -- it is owned fully by Pennsylvania Blue Shield.
Why? One of the reasons is that Blue Cross of Philadelphia recently purchased its own HMO organization -- Delaware Valley HMO -- and has since expanded its service area beyond the organization's original base in Delaware County to include the entire five-county region of Southeastern Pennsylvania. The Blue Cross unit even became the first federally qualified HMO to operate in the state of Delaware.
According to Jim Dare, marketing director for Delaware Valley HMO, based in Concordville, the organization's new approach is designed to deal with the anticipated expansion of competing HMO organizations in the area.
"Just to give you some perspective on the trends in this market, we became operational in 1978. At that point there were really only four players in the market, and one of those was from New Jersey," explains Dare. "That has changed. What you are now seeing is a proliferation. Now we can identify about a dozen players that we'll see in this market in the 1987-88 time period. Of these dozen players, the largest is HMO PA/NJ, and the second largest is Delaware Valley HMO. We have some unique advantages that we hopefully will continue to have."
FUTURE ROLES: But will an increasing number of players and a greater awareness of HMOs on the part of the general public ignite enough increased demand to carry all the new HMO groups that are being planned? Probably not, say most observers.
"It is conceivable that some HMOs will decide that they are not in business to be a medium or large-sized player, but they are here to command a relatively small niche and they will be content reaching that niche and not going beyond it," explains Dare. "We may see some of that, but I think we can definitely say there will not continue to be 12 relatively important or strong players here. The market just does not seem to bear up in the presence of some of the strong players who already have their foothold."
But that doesn't mean that some of the new HMOs will not be playing significant roles in the future marketplace.
"With all the new competitors, it's a new arena, but only the strong will survive. There's no question about that," says Keystone's Taylor. "I think what will happen is a lot of the HMOs that have been in existence, along with the new ones, will definitely fall by the wayside. We will not in 1990 or 1992, have nearly as many HMOs as we have now. There is no way all the HMOs can be successful."
RETAINING CLIENTS: One of the advantages on which Dare is pinning his hopes is his organization's ability to retain clients. Delaware Valley HMO claims it has the highest member retention rate of any HMO in the Philadelphia area.
"That figure shows that Delaware Valley HMO continues to be sensitive to the market and primarily to what the employers are looking for," he says. "Because the employers are the buyers, they are going to be looking at these plans very, very intently. And they are going to be making decisions in the coming years that they have not made in past years. We're sensitive to that, and we think we are in a better position to respond to what those employers are looking for because we have the experience."
Similar sentiments are expressed by Lynne Morgan, executive director of John Hancock Health Plan, which until recently was the Philadelphia Health Plan, one of the original "big four" HMOs that has resided in the city for several years.
"I think the Philadelphia market is one of the last to see what has happened in the rest of the country as far as continued growth of managed care systems -- both PPOs and HMOs," says Morgan. "I think it is going to mean extreme competition. We still have to provide a benefit package. And if we're federally qualified, that will be dictated to us by the feds. It's generally better
benefits than a regular, straight indemnity plan."
Morgan sees "something on the order of eight or nine entrants" coming into this market at the present time. But she also suggests that distinct advantages remain for those HMOs who have been in the city the longest, and who have had an opportunity to develop significant name recognition.
"Furthermore, I think any increased competition will only serve to put us in the limelight more," she adds. "In the event that there is a shakeout in the local HMO industry, the names that people know -- the John Hancocks, HMO PA -- we'll all do fine. The increased awareness will help us: It will be difficult for people who are not well capitalized and who don't have the backing to follow
through. So in two to five years there should be a consolidation."
HEALTHAMERICA BECOMES MAXICARE: One area organization that has already become
part of such a major consolidation is HealthAmerica, one of the original founding four HMOs in the Philadelphia area. HealthAmerica recently joined a national network of HMOs which includes Maxicare, a million-member plan concentrated mostly west of the Mississippi; Healthcare USA; the Independence Health Plan of Michigan; GenMed in Southern California; and HealthAmerica, which had most of its concentration east of the Mississippi.
These HMOs consolidated into Maxicare, which is now the largest investor-owned HMO in the country, according to Philip Hertik, executive director of Maxicare/HealthAmerica in Philadelphia. Hertik looks forward to operating within the new, more financially solid network, which he thinks will offer a number of benefits to his Maxicare/HealthAmerica group, including: a strong reputation for well developed management systems and well developed approaches to provider contracting,
excellent market success and better promotion capabilities.
Hertik foresees using Maxicare's greater marketing and financial resources to build on its existing market share.
"We've developed a good quality reputation in the Philadelphia area already," says Hertik. "We also market to a fairly large number of employer groups where we feel we've established good relationships. And we think that's very important. Our feeling is that the employer groups will be less and less interested in offering a large number of HMOs to their employees, and that they
will become more selective and more discriminating in their evaluations of the various plans -- to the point where they only offer those they think are of high quality, and accessible, and so on."
In fact, Hertik sees greater discriminating tastes
on the part of employer groups as being the single most important factor in the
changing HMO arena.
"That factor goes hand in hand with the growth in the number of plans and the competitiveness issue," Hertik says. "In addition, we have to be aware of the entry into the marketplace of major insurance companies which are attempting to develop HMO subsidiaries and developing multiple product lines, as well."
MULTIPLE PRODUCT LINES: Hertik sees a movement toward multiple product lines on the part of both the HMOs, coming from their traditional perspective, and also the insurance companies, coming from their traditional perspective. Each appears to be headed more toward a middle ground of offering multiple product lines to employer groups, particularly in what is often called "the triple option" type of products.
Possibly the best example of that triple option is currently provided by Blue Cross of Greater Philadelphia, which, as noted, recently purchased Delaware Valley HMO. That purchase surprised a number of observers who began to wonder what would happen with the Blue Cross Personal Choice program, which the organization introduced during the spring of 1986 with a highly controversial marketing campaign that was targeted against existing HMO systems.
But where some people see the Blue Cross HMO as a schizophrenic action, Blue Cross prefers
to look upon it as a way of filling different market niches.
"I think Personal Choice will be set up as a stand-alone unit, and there will be some cross-selling or synergistic opportunities taking place," says Gary Michaelson, vice president of marketing for Delaware Valley HMO. "If you look at the trade magazines and forecasts, there is a strong belief that the PPO marketplace is going to have a particular niche. If that is true -- and it seems to be true in other parts of the country and it is therefore reasonable to assume it can be transported to the Philadelphia marketplace -- then there is going to be a need for PPO. Whether it is going to be formatted exactly as it is now, that is open for discussion, just like out formatting is open to
discussion. We're all going to react to changes in the marketplace, but I think the blurring that is taking place between indemnity products, PPO products and HMO products is going to become even greater, depending on what regulations come out of Washington."
According to Elaine Gallagher, vice president/sales for Personal Choice, Blue Cross of Greater Philadelphia, the acquisition of Delaware Valley HMO will not have any adverse impact on Personal Choice. In fact, the ultimate overall result will be a very positive impact on Blue Cross of Greater Philadelphia, she predicts.
TRIPLE OPTION: "We are soon going to be in a position to offer employers the triple option," says Gallagher. "That will position Personal Choice as the PPO product, DV HMO as the HMO product, along with our traditional product. So we're not really looking to materially change Personal Choice, or even the way in which we have marketed Personal Choice. "We've been very successful and I really don't think I want to tamper with success at this point in time."
The bottom line is that Personal Choice and Delaware Valley HMO represent two different products which Blue Cross can put in front of employers and employees in the Delaware Valley.
"We think that is going to give us a strategic marketing edge over our competitors," says Gallagher. "No one in this area that I am aware of has been successful in putting together. Many have tried and many have failed."
"Personal Choice is a different product -- it's not an HMO," says Keystone Health Plan's Taylor. "And there is room in the market for more than one product. Just like General Motors sells Chevrolet as well as Oldsmobile. There is a similar type of situation here. There is room for more than one product, and what is happening is that more and more people will be switching out of
traditional health care coverage and going into alternatives. Instead of calling it an alternative to HMOs, I would prefer to say it is an alternative to traditional health care coverage. It's just a different form of health care."
Taylor also sees advertising as playing a major role in the future of HMOs.
"HMOs are now beginning to advertise on TV, radio and in print more and more. There was a time when advertising was never done, certainly not on TV, and not for health care of any sort," says Taylor. "You just didn't see it. But those days are changing. I think once advertising becomes commonplace, the educational process will speed up quite a bit because people will begin understanding what the HMO is all about."
SIGNIFICANT ADVANTAGES: She notes that HMOs can offer significant advantages in terms of cost effectiveness and convenience, both of which will become more and more important as awareness of HMOs increases in the Philadelphia area.
"For example, women in this country still die of uterine cancer, and they don't have to," explains Taylor. "They do have to catch the cancer early enough, but because many women don't get their annual or semiannual PAP and pelvic tests, those problems sometimes are missed. And that's what HMOs help to do. In my own case, I know it's a lot easier for me. It's convenient -- I just make a phone call. I don't have to worry about paying for the exam and that makes a difference. I think it makes a difference for a lot of people."
There is a huge potential out there for additional HMO enrollment, she adds. But only the strong HMOs will continue to be here.
"And those will be HMOs with the right type of backing, the right type of reputation, the right type of relationships with both employers and physicians. I think that's really key," Taylor says. "Relationships are key -- how you set up in the beginning, how you continue to operate, what your structure is, all those things will be key in the future. "I think the fun is about to begin. What will happen is that the strong HMOs will be here, and the others will not."
Who's the Doctor?: Insurers or Physicians?
By Thomas Derr
PA, US -- The implementation of DRGs and other cost containment mechanisms undoubtedly has had enormous impact on the continued growth of health care spending.
Theoretically, by refusing to pay for "unnecessary" or "uncalled for" tests and therapies, the DRGs are limiting expenditures that might otherwise have added to a patient's hospital bill.
That's all well and good. Or is it? As Dr. William Kissick, who holds an endowed chair as the George Sekel Pepper professor of public health and preventive medicine in the school of medicine at the University of Pennsylvania, and who is also a senior fellow at the Wharton School's Leonard David Institute of Health Economics, explains:
"A physician is presented with a clinical problem and tries to address that clinical problem in terms of a therapeutic strategy. Now that therapeutic strategy often involves a selection among an array of drugs, therapies, diagnostic studies and so forth. He or she tries to make the selection in the best interest of the patient in order to benefit the patient as much as possible. So there is all sorts of complicated decision-making going on."
Under the DRG program, the physician who has been making all of those decisions on behalf of the patient, is now obliged to make cost decisions too. The problem is that the physician has been trained to make biomedical decisions -- not cost decisions.
"Therefore, the way organizations such as the insurance companies, the government, and so forth have approached this problem is to say: 'OK, physician, you make the clinical decisions and we'll make the cost decisions,'" says Kissick.
"I think this is what makes physicians madder than anything else," he says. "And it would make me mad -- if you are my patient and I set out to treat you, and then before I can treat you I have to call an insurance company and have a clerk tell me whether or not I can do it. Now, in my eyes, the clerk is practicing specialty medicine."
FAIRLY STRAIGHTFORWARD: Obviously, the answer is not that simple, Kissick adds. And for the most part, a physician's decision to order a certain test or to prescribe a certain type of therapy will be fairly straightforward.
"The problems lie in those enormous gray areas in medicine, where the clinical diagnosis is unclear, the treatment patterns may vary considerably throughout a community, and more important, the peculiarities of the individual patient come into play," explains Charles F. Pierce, Jr., president of the Delaware Valley Hospital Council, Inc. "And I think it is in this gray area where there is mounting concern. It is probably because Medicare is the biggest payer, but clearly they also have one of the most aggressive programs."
Pierce notes that with a predetermined set of standards, many kinds of procedures are outpatient procedures, and seem to be somewhat inflexible in dealing with patients. Although there may be a standard way to deal with a patient on an outpatient basis, that standard way may not be appropriate for all patients.
"You may have a patient who is disoriented and who lives alone. True, that's custodial care, but that kind of custodial care may be necessary for the treatments to be successful," Pierce says. "I think that's the area where we have a lot of anxiety and growing amount of antagonism between the physician and the payer. Furthermore, I think this is an issue in which we can expect to see a
growing amount of antagonism and analysis, at least for the short-term future."
The possibility that economic restrictions may unduly influence a physician's practice of medicine has other serious legal ramifications as well. Dr. Joshua Barnett, M.D., is a neuroradiologist at Presbyterian Hospital. At the same time, he is a graduate of the Harvard Law School and he teaches summer classes at Temple Law School.
"It does raise an interesting question, and that has to do with malpractice," explains Barnett. "We hear a lot about defensive medicine, which is a very difficult topic to define. People often talk about it as if it were something very easy to distinguish. Some physicians will say: 'Well, I ran such and such a test, but I wasn't sure the patient really needed it.' It's the idea that you had to give this patient a complete work-up and because you were being very defensive and very 'malpractice conscious'."
Such a situation may happen, Barnett concedes, but he adds that he can't imagine it being a part of a physician's train of thought.
"I think there must be very few physicians who say: 'Well, I'm not sure I really need that X-ray because I'm going to protect myself from a future malpractice suit.'" Dr. Barnett adds. "It's just a very odd way of thinking. But everybody talks about it. People write commentaries on it and lawyers talk about it."
INFLUENCE OF REGULATORS: But the growing influence of federal government and
insurance company regulators cannot be ignored.
"Essentially, the government is saying: 'Listen, you have four days to take care of this patient and we're going to pay you X number of dollars for it, plus we're not going to pay for investigation of certain things," Barnett says. "For example, we aren't going to pay for a particular procedure which may detect a disease that has an incidence of one in 1,000, because we don't think it's cost
effective to do 1,000 procedures to detect one illness whether it be cancer or anything."
The medical profession became very upset about the new limitations and the subsequent malpractice implications which might result.
"For example, if a hospital can't do a CAT scan because it can't get a certificate of need, then what is the status of the ambulance that picks up a patient who has a head injury and takes him to that hospital rather than another hospital that has a CAT scanner?" asks Barnett. "You can't have it both ways. You can't say we can't do such-and-such, but we're liable for not doing such-and-such. That's just too big. You know, lawyers are nothing if not innovative and they will seize on that, but whose fault is it? It's clearly not the hospital. It's not the physician."
The real risk will become apparent if or when money begins to be emphasized as the bottom line instead of quality, because no physician and no lawyer is going to defend a malpractice case on the grounds that something was not done for a patient because there was no money to pay for it, Barnett adds.
"I think the government has, in essence, said: 'We're going to squeeze you a little bit, but you had better keep on doing what you were doing, because we're certainly not going to hold you harmless in any liability," he says. "And I think physicians have responded by doing exactly that. They've said: 'OK, we're being squeezed. It was inevitable, but it is not going to influence the quality of our medical care.' They were able to do that because of the hospital's being able to cut costs in various areas of medical care. But how much more they can cut it, I have no idea."
One person who has strong feelings on the limitations being placed on physicians is Dr. Frank Bove, president of the medical staff at Methodist Hospital, and medical director of the hospital's Home Care Division.
"I don't think (the government regulators) are really practicing medicine, but what they are doing is putting such restrictions on us so that you are damned if you do and you're damned if you don't," Bove says.
For example, with a given disease, the hospital is allowed to keep a patient for a maximum of six days, Bove explains. If the patient is kept for a seventh day or longer, the hospital does not get paid for the extra time.
"Now, if you abide by that and by some magic get the patient out in six days and, by golly, he has to come back in four days, they get you by saying: 'This is a readmission for the same reason that he was admitted in the first place.' In that case, they won't pay the hospital for the second admission because it's a readmission. And not only that, they say: 'You people should not have discharged the patient in the first place.'"
CATCH-22: Bove calls it a "Catch-22" situation that is having a slow but growing effect on his medical staff.
"We're starting to get denials of admissions that occurred last April and March," he says. "The regulators write to the patient and they tell the patient that he or she should not have been in the hospital. And they somehow word it so that it sounds like it's the doctor's fault that all this happened. And on top of all that, they tell the patient that he is now responsible for the hospital
bill because they're not going to pay for it on the grounds that the doctor could have done what he did on an outpatient basis."
The denial of payment can be appealed if the hospital is notified and is able to respond within a set period of time and, in fact, most cases are won on appeal. According to DVHC's Pierce, many insurance companies, and other third party payers, particularly Blue Cross, have a very quick appeal mechanism.
"When their reviewer says a case was not an appropriate admission, the physician can challenge him and generally they get together very quickly," says Pierce. "That is not the story we're hearing about KEPRO."
KEPRO is the Pennsylvania Medical Society's peer review organization that by law must review all admissions and treatments for Medicare. KEPRO performs its duties through an agreement with the Department of Health and Human Services and its subgroup, the Health Care Finance Administration, a contract it has with the Commonwealth of Pennsylvania. Much of the controversy mentioned by both Pierce and Bove seems to stem from "the arbitrary nature" of KEPRO's Medicare denials, as well as the fact that the HCFA has, in essence, instituted a quota system for the denials which KEPRO must meet.
"That makes the physician the guy in the middle, because he has a patient who is sick and he has the hospital that he wants to keep alive and viable. Otherwise, where will he put patients if the hospital goes under?" says Bove.
"So in order to protect both the patient and the hospital, you really have to be a genius," he adds. "At the same time, if you do send the patient home a little bit quicker but they come back again, then, according to KEPRO, you're not a good doctor because you didn't keep the patient in long enough.
According to the University of Pennsylvania's Kissick, the ideal answer will probably never be found.
"In my experience, the best way that is approached in our society is at Kaiser-Permanente," explains Kissick. Kaiser-Permanente has been called the prototype of the modern Health Maintenance Organization (HMO). Founded during the 1930s as part of Kaiser Industries, the organization went public in 1945 and has since grown to include more than five million people in over a dozen states.
According to Kissick, the Kaiser-Permanente organization features a plan that structures the tension between the physicians in the medical groups, and the administrators and the plans in the hospitals.
"Basically, they organize the physicians into group partnerships. And those group partnerships' physicians negotiate for resources along with hospital administrators -- the management side. And the two of them negotiate as peers for resources from the plan, which is the beneficiary resource. And they have developed and perfected that over 50 years," Dr. Kissick explains. "They say it's a compromise, and there is no right answer. The best analogy for me is in the legal system. We don't know what 'truth and justice' is. But if a jury says "yea," it is, by definition, just and true. Well, Kaiser says the two elements negotiate. And they come to a clinical cost compromise."
COMING TOGETHER: According to Dr. Kissick, the modern HMO is the preferred model
because it (hypothetically, anyway) offers a means by which the physician and the patient can come together in a collaborative relationship.
"The bottom line is -- we cannot do everything that needs to be done for the health care of all the people in our society. The ideal state is impossible. Now what are the approximations that we develop? That is the generic, abstract problem. And what we are encountering is that as we try various approaches, there are unforeseen side effects. And there is a lot of complaining,
frustrations and mistakes," Kissick says.
"The president of Kaiser several years ago said it very well," he adds. "We are not the panacea of healthcare, anymore than we were the pariahs in 1950. And in 1950 they were really on the outs."
The problem is that American medicine has been "idealized" for its emphasis of free choice of physician, sole practice, and fee for service, explains Kissick. But that ideal has been built in a non-market economy in which a third party or a fourth party was paying the insurance.
"If I admit you to a hospital, you theoretically get two kinds of services. You get my services and you get hospital services," he says. "The hospital has been a schizophrenic organization historically, because the hospital administrator is responsible for the budget and whether or not the hospital lives or dies. But all the purchasing decisions are made by the physician. The physician decides how long you are going to be in the hospital, what we do to you, what laboratory
studies are done, etc."
That situation is further compounded by the fact that both the physician and the hospital have historically sent their bills to a "disinterested" third party -- Blue Cross, Blue Shield, Metropolitan, or Prudential.
"And they just paid whatever bill we sent them," Kissick says. "The hospital was paid retrospective cost reimbursement. Once they made the expenditure they sent the bill. And, as I have said in the past, that's the equivalent of my giving my American Express card to my daughter and telling her that I will reimburse the expenses on a monthly basis. So what the hell is going to happen?"
Not only is the doctor getting his fee for service reimbursed, but he or she is also determining both the services and the fees. These services and expenses are then reimbursed by third-party agencies that for many years simply totaled up the expenditures, increased the premiums, and passed the costs on to major private payers.
Of course, the implementation by the federal government of Diagnostic Related Groups has had an enormous impact on the hospital part of that payment structure.
"Because of the DRGs, the hospital now is reimbursed a pre-set lump sum for, say, a myocardial infarction, but the doctor still charges his or her fees," Kissick explains.
LUMP SUM PAYMENTS: One of the government's most recent propositions, he adds, is to pay the hospital one lump sum for the hospital services as well as the physician services, and then let the hospital and the physician decide who gets how much. In other words, treat the two groups as a single entity.
"Well, what the government is trying to do is what Kaiser already does," he says. "Kaiser treats the medical services and the hospital services as a single entity. Now the government is saying let's try that for the hospitals of the country and the doctors of the country."
But will the government be able to do it as well as Kaiser-Permanente? Probably not, mainly because of the enormous scales involved. The Kaiser plan covers a total of about five million people. The government's plan would involve more than 30 million Medicare beneficiaries.
Anyone who has ever witnessed the federal bureaucracy's attempts to handle an operation on a grand scale -- whether it be the postal service or an international arms transfer -- can draw
their own conclusions about how successful such a health plan would be.
The bottom line is: we still have not seen the final shakeout from the government's health care cost containment mechanisms. Clearly something must be done to forestall the upward spiral of medical inflation. But at what price?
"During the '50s, '60s, and on into the '70s, a physician's clinical decisions were unconstrained by cost considerations," says Kissick. 'No cost is too great to save a human life' was the exaggerated statement. Now what we are facing is the reality that resources are not limitless."
But what can be expected of the modern physician in view of increasingly limited resources, increasingly limited treatment options and ever-growing malpractice insurance premiums?
Perhaps Presbyterian Hospital's physician/attorney, Dr. Barnett, offers the best answer: "Physicians ask me, 'Well, you're a lawyer. How do I protect myself against being sued?' I say it's very simple. You just practice the best medicine you know how. That's all. There's nothing magic about it. You don't order tests the patient doesn't need, you just do what you were trained to do and that's basically it."
By Thomas Derr
PA, US -- A nurse is not a nurse is not a nurse. So says Ann O'Sullivan, Ph.D., R.N., at
the University of Pennsylvania's School of Nursing. What prompts this Gertrude Stein-like statement is what Dr. O'Sullivan describes as an exciting and innovative alternative for individuals educated in the nursing profession who are not satisfied with "traditional" nursing roles.
"Nursing, per se, is a very provocative profession," says Dr. O'Sullivan. "It's provocative because you can do many things in nursing. You can do what most people know as nursing -- bedside nursing, changing bedpans -- the kind of thing that gets played up on soap operas each afternoon, or you can get involved in the corporate world -- working to support the efforts of the corporation in many different ways."
CORPORATE SECTOR: According to Dr. O'Sullivan, as many as one-third of the nation's one and a half million nurses are currently involved in the corporate sector, and their responsibilities vary. In one realm, corporation nurses are involved in doing hands-on clinical kinds of nursing, which can include managing employee illnesses or doing corporate physical examinations.
"Primary care nurses work with individuals, and have a lot of hands-on experience in diagnosing and treating common ailments and illnesses -- things that traditionally have been part of the realm of medicine, such as headaches, stomach aches, muscle aches and strains, ear aches, sore throats, and so on," she says. In the past, only physicians diagnosed and treated those kinds of problems, but now nurses who have been trained with the necessary knowledge and skills can provide those services in hospital clinic rooms, in private physician offices, or in a corporate environment, according to Dr. O'Sullivan.
Many corporations are hiring that kind of nurse to complement their staffs of physicians for a number of reasons, she notes. First, nurses command a salary which is less than that which must be paid to physicians, even though the type of work performed by the nurse and doctor may not be markedly different -- particularly as it involves physical examinations or treating minor ailments.
DOVETAILING: "Nurses also tend to enjoy performing these kinds of services more than the physicians because the physicians have been educated to do a lot more -- the minor ailments were never their primary focus in the first place, and so they did not maintain their expertise or interest in doing just those minor common illnesses," says Dr. O'Sullivan.
On the other hand, nurses who are educated to handle such minor illnesses find the work dovetails nicely with their level of expertise, she says. Because these nurses are interested in doing that kind of work, they tend to enjoy their jobs more, and they stay with their jobs longer. In addition, their work in these positions can lead some nurses to go on into more specialized areas of health
care -- such as patient education.
"When nurses talk to parents of children, we call it anticipatory guidance. But in adults it is referred to as wellness, self-improvement, or self-care, and that is what a nurse would talk to an employee about -- this idea of self-care," says Dr. O'Sullivan.
ONE-ON-ONE: Nurses and nurse practitioners who have a community or occupational health focus have proven to be particularly adept at this kind of individual, one-on-one intervention, as well as with groups of people, says Judith A. Smith, Ph.D., R.N., also of the University of Pennsylvania's School of Nursing. For example, in the corporate environment, workers who are required to sit before computer monitors or at their desks for eight hours each day can be susceptible to a variety of job-related problems, such as stress, eye strain, and other problems that are often associated with a sedentary life-style.
"The nurse would provide some sort of exercise routine, or would initiate a program to aid relaxation, or would check their vision to see if they are suffering from eye strain -- thereby addressing those kinds of potential problems that might affect a particular group of employees and add to people's ill health," Dr. Smith says.
One area company which uses nurses to work with corporate clients is Corporate Health Management Center of the Delaware Valley, which marketing representative Sandy Weiner describes as "a healthcare cost containment and health promotion company" which provides a wide variety of services to firms that may employ from 100 to 15,000 people.
SCREENING: "We will often use nurses in our business either in a marketing role or in a screening project. An example of that would be a blood pressure screening held at a corporate site in which we would use nurses, nursing students or nurse practitioners to help with the screening," says Weiner.
Weiner's company also provides cardio-vascular screenings and risk assessments at corporate work sites. During these activities, CHMC will bring in doctors, cardiologists, exercise physiologists, phlebotomists for taking blood, as well as nurses, Weiner says. And the nurses play a "very, very key role as far as making sure the tests are being done properly -- which is a different responsibility than when they are working under doctors in a hospital situation," she says.
It is often the nurse's responsibility to determine which tests are appropriate for different employees, Weiner says, noting that the nurse is trained to assess various risk factors that can foreshadow the probability of many serious diseases or conditions.
It is not cost-effective from the corporation's standpoint to run the full battery of tests on all employees, says Weiner. For example, you might want to give an EKG to an individual who is 35 or 40, but if that individual is a marathon runner, that test would be a waste of the company's money. At the same time, if a 20 year-old company secretary is overweight, smokes, has diabetes,
and a family history of heart disease, then the test would be warranted. Deciding on who should and should not undergo certain tests is the nurse's responsibility.
CONFIDENTIAL PROBLEMS: In addition, CHMC works with companies to establish Employee Assistance Programs -- preventive counseling services that are set up by the company to offer confidential help to employees who may have personal problems that may affect their work. Typical problems involve alcohol, gambling, and substance abuse, but they can include cases related to single parenthood and situations in which employees must care for terminally ill or elderly and infirm relatives at home.
"We maintain an 800 number for employees to call, 24 hours a day, seven days a week. That phone service is staffed by psychiatric nurses. They might talk to a caller once and work out the problem on the phone, or in a crisis situation, they may have to refer the caller to an appropriate crisis intervention facility, and then follow-up to ensure that the necessary service is provided. That involves something which is a little bit different from 'typical' nursing duties," Weiner says.
"From our company's standpoint, the main thing is that, depending on what kind of background the nurse has, or her personality, he or she could have many skills that are transferable to the corporate world," Weiner adds. "Nurses usually have very good people skills. And that advantage, plus their health care background, makes them a wonderful asset for companies such as ours."
UTILIZATION REVIEW: Another area that has proven to be a major avenue of employment for nurses in the corporate world involves utilization review. Utilization review, case management, and risk management are similar areas wherein a corporation may hire nurses to go over employees' medical records to determine whether or not the most appropriate health care service has been
Corporations are finding that nurses are especially adept at this type of work because they usually have had hospital experience, they understand medical charts and the overall concept of patient care, as well as the kinds of debilitating and handicapping conditions that figure so prominently in
job-related injuries or long-term illnesses.
LAWYERS often hire nurses in lieu of or in addition to insurance examiners to review medical records, says Penn's Dr. O'Sullivan. In addition, rather than hiring a physician to review a medical record, lawyers will often hire a nurse to give them direction and guidance as to where malpractice may have been involved in a particular case.
"From the insurance perspective, it is important to investigate the idea of: 'How can you manage this case better so that we can get this person up and on his feet and doing something? Perhaps a worker can't do what he or she was once able to do, but what other employment opportunities might be open to them?" notes Dr. O'Sullivan.
Corporations also have hired nurses to go into hospitals and see that their physicians are managing cases as appropriately as possible. There have been instances where patients have been kept in the hospital a day or two later than was medically necessary because an earlier discharge had not been planned, or because the patient did not have a hospital bed at home, or because a visiting
nurse service had not been assigned to the case in time, says Dr. O'Sullivan.
Nurses can play an instrumental role in seeing that the healthcare delivery system is utilized most effectively to best satisfy each worker's health needs, she says.
MANAGERIAL: In fact, managing the healthcare delivery system is something at which nurses should be particularly adept, says Claire M. Fagin, R.N., PhD., F.A.A.N., dean and professor of the University of Pennsylvania's School of Nursing.
"There is no nursing job in the world that is not managerial," says Dr. Fagin. Even new nurses must exercise management skills in the handling of the 5, 6, 7, or 8 patients that are put in their charge, she adds.
Dr. Fagin notes that more and more nurses are becoming involved in areas of the healthcare marketplace that are "quasi-care" and "quasi-educational" in many respects. Utilization reviews, fitness programs, and patient education programs at corporate sites are good examples of what nurses can do outside the typical hospital setting, she adds.
“When you think about it, who else has the overall perspective and sensitivity to patient needs that a nurse has?" Dr. Fagin inquires. "Only the nurses have the chance to see what's going on everywhere in the healthcare environment. And now we are beginning to take advantage of the opportunities that are out there."
Dr. Fagin says that the nursing school at the University of Pennsylvania is at the "leading edge" of institutions providing educational programs for nursing students which go beyond the traditional hospital care setting.
"Our purpose is to educate students so they can address the health care needs of today's and tomorrow's marketplace," notes Dr. Fagin. The growing presence of nurses in the corporate world represents one very important example of how that approach has been successful, she adds.
QUALITY CARE: Marie Constance-Ross, R.N., serves as the Administrative Director of Medifit, a subsidiary of Med-Services Management Co., Bala Cynwyd, a healthcare cost containment consulting firm which offers a comprehensive approach to corporate health planning, with special emphasis on the areas of utilization management, hospital bill review, and health care plan design.
According to Ross, her Medifit staff consists of registered nurses who use their professional background to ensure the effective administration of quality care for corporate clients, as well as by monitoring charges so that only those which are appropriate are paid.
"Our staff members look closely at the medical records of our corporate clients' to determine if the health care which was administered was appropriate. If we find that there was, in fact, some mis-utilization, we then negotiate on behalf of the client for an appropriate modification of the bill," says Ross.
In addition, her nurses will compare the corporate employees' medical records against the hospital bill to verify that all billed services were actually necessary and provided. Ross says the process is much the same as that which a restaurant diner performs when comparing the menu bill against dinner items that were ordered. On the average, such comparisons (and subsequent negotiations) can save her clients ten percent off their medical hospital bills.
"In one instance, we actually saved a total of $400,000 for a corporate client," Ross says. "When you begin to talk about numbers of that magnitude, it's easy to see how important such cost containment programs can be, especially for those corporations that are self-insured."
Ross notes that her nurses are highly trained professionals with strong backgrounds in the clinical areas. Furthermore, because of their background in the healthcare provider arena, her nurses tend to be cognizant of the needs of the consumer, and are thus able to reach creative solutions by working from both ends of that spectrum -- a factor which also helps protect the healthcare rights of her corporate clients.
ENVIRONMENTAL PROBLEMS: A third means by which corporations make use of nurses is in an environmental arena. Basically, this involves investigating the environment in which an employee works, and then dealing with any problems or potential hazards that may result from it.
One individual who has been directly involved in such activities is Phil Greiner, a registered nurse who did his master's degree training under Dr. Smith at the University of Pennsylvania, and who is now an assistant professor of nursing at Villanova University, and executive director of the Wellness Council of Southeastern Pennsylvania.
The Wellness Council is a federation of corporations in the Delaware Valley who work together to emphasize employee health, with the idea that workers are more productive if they can be encouraged to manage their own health better, he says.
"We have observed a groundswell of support within the business community," says Greiner. "Company executives have begun to recognize the value of such programs. They agree that wellness programs can be of significant benefit to their employees and, in the long run, be a positive influence on their own attempts to hold down employee health care costs."
As an example, Greiner notes that an antismoking program implemented by Tenneco resulted in a cost savings of approximately $635 per employee per year in company health care costs. At the same time, and to the pleasant surprise of Tenneco's directors, there were additional, indirect cost savings attributed to the new nonsmoking environment.
"They found that ventilation costs fell significantly because there were no more smoke fumes to get rid of, and there was no longer any need to replace furniture and carpets that were damaged by cigarette burns," says Greiner.
EDUCATING EMPLOYERS and the general public about these kinds of healthy benefits is one of the major challenges facing the nursing profession today, Greiner says. As the problem of drug and alcohol abuse continues to increase, educational counseling and support at the work site can be a positive step against the problem, he says.
But even though many company executives may agree that the programs are useful, it is still up to the promoters of the programs themselves (particularly if they are sponsored by proprietary groups) to market the concept. As Greiner notes, a growing number of programs are being offered to companies and corporations of all sizes. And many times, the trained nurse can also act as a very effective marketer of the programs.
ENTREPRENEURIAL STANCE: In fact, it is often those nurse, who become adept at marketing who often stand out the most in corporate health programs. And in some cases, nurses have even taken a strong entrepreneurial slant to their corporate roles.
At Quakertown Hospital, Winnie Hayes, Ph.D., R.N., C.R.N.P., has developed a for-profit organization in affiliation with the hospital to serve the varied healthcare needs of a broad range for corporate clients.
"Although Quality Health Services is affiliated with Quakertown Hospital, it really is a separate entity, and its market objectives are far different from the limited area serviced by the hospital," says Dr. Hayes. "We actually serve clients on a nationwide basis."
Dr. Hayes notes that Quality Health Services works in three broad service areas: Utilization Review, which is overseen by Kathy Walker, R.N.; Occupational Health and Safety, which Dr. Hayes oversees; and Industrial Hygiene, which is the responsibility of Rachel Rosenstoch, R.N., M.S.
By using nurses in these roles, Dr. Hayes feels she can provide her corporate clients with a much-needed professional insight into the ever expanding and increasingly complex healthcare delivery system. Thanks to their professional knowledge and experience, the nurses can help companies make the most effective healthcare choices.
SMALLER COMPANIES: One target group for Quality Health Services is smaller companies who before would probably not be able to afford the same kinds of healthcare coverages as they now can, Dr. Hayes says. But thanks to the Quality Health Services' programs, many smaller companies can now offer their employees health benefits packages that are "as extensive as can be found in a Fortune 500 company," she says.
Most small employers don't have the in-house talent or resources to put together the kind of health promotion or wellness programs which the nurses at Quality Health Services can establish for them, Dr. Hayes says.
She adds that it is the nurses' experience in the healthcare delivery system which makes them more cognizant of how the healthcare industry works -- especially who's paying the bills. As a result, they are able to create programs whereby corporate clients can realize a greater cost savings via a more effective utilization of more appropriate healthcare services, she notes.
This for-profit type of program is becoming more and more common among hospitals, says Penn's Dr. O'Sullivan. Many hospitals are trying to develop a corporate arm that will provide a source of much-needed revenues.
"The nurses at Quality Health Services go to many small and medium-sized companies on behalf of this corporate arm of the hospital, and set up programs that are clinical -- the one-on-one kind of care with the clients, or environmental -- so they can do something such as decreasing the employees' hazards which would then decrease the insurance premiums the company's 'experience rating.' That's a buzzword in insurance -- you're rated based on how many hazards your people have, and how much you use your insurance policies," Dr. O'Sullivan explains.
As a result, the nurses at Quality Health Services are able to work with these little industries to get them a better rating -- which represents yet another way that nurses are working with corporations both large and small to influence the good of the corporation, she adds.
EXPANDING ROLE: What Dr. O'Sullivan hopes this growing nonhospital trend for nurses will lead to is that people will finally begin to think of the role of nurses "as being beyond just passing bedpans, so that their sons and daughters will be encouraged to go into nursing as a profession," she says.
"Too many people are not aware of the different modes available in nursing, and the different alternatives that are available," says Dr. O'Sullivan. "They don't look at how the profession has grown and can grow in the future, and how one can grow as an individual within it."
By Thomas Derr
Philadelphia, PA, US -- In recent years, home health care has been the proverbial good news/bad news topic. Spurred on by the continually rising cost of acute care hospitalization, health care planners sought a less expensive, but effective alternative. They found it in home health care.
During the 1970s and into the early 1980s, home health care was one of the fastest growing segments of the health care industry. Medicare expenditures for home health care rose from $63 million in 1970 to well over $1 billion in 1981. During the same time period, Medicaid expenditures rose from $15 million to over $400 million.
Then, in 1983, Medicare instituted its new reimbursement system for hospitals. Thanks to the Diagnostic Related Groups (DRGs), hospital stays have decreased and formerly hospitalized patients are being sent home -- "sicker and quicker," as the saying goes. In fact, since the implementation of the DRGs, hospital discharges to home health have increased by 37 percent, according to figures released by the Senate Special Committee on Aging. So much for the good news.
BAD NEWS: According to data from the Health Care Financing Administration (the umbrella organization for Medicare), there has been a 133 percent increase in the denial rate for home health care benefits, and a 164 percent increase in the actual number of these denials since the advent of the DRGs.
The Senate Special Committee on Aging has more bad news. The rate of growth in home health services also has slowed since the implementation of DRGs. Medicare-covered visits increased by an average of 19 percent per year from 1980 to 1983, but only 8 percent in 1984 -- that's after DRGs took effect and the demand for home care services began to increase.
In addition, since the last quarter of 1983, when the DRGs were first initiated, home health care denials have nearly tripled. In fact, during the first quarter of 1986 alone, Medicare denied 47,855 claims, compared with 18,121 denied claims in the last quarter of 1983.
Thus, in spite of the fact that seriously ill Medicare patients are in need of home health care, increasing numbers are being denied this care. In short, the home health care safety net is being ripped apart.
CONFUSING GUIDELINES: The main culprit, according to most experts, is the Health Care Financing Administration's bevy of new regulations and policies and, as the Senate Committee on Aging has noted, "HCFA's use of vague and confusing guidelines" for providers -- many of which are unwritten and unpublished -- to limit the Medicare benefits.
Ann Morris, R.N., M.S.N., is director of Methodist Hospital's Home Health Services, which like most home health agencies provides skilled nursing care, physical therapy, occupational therapy, and speech therapy to home-bound patients on an intermittent basis. Morris calls the new HCFA policies and guidelines a "blizzard of paperwork," noting that HCFA and its fiscal intermediaries (which in this region is Blue Cross of Philadelphia) are now doing their medical reviews of home health care cases on the basis of new Forms 485 and 486 without seeking additional information.
"We are finding that well over 90 percent of our denials are what are called 'technical denials, rather than 'medical,'" explains Adele S. Hebb, president of Community Home Health Services of Philadelphia and its affiliate, Philadelphia Home Care. "In a medical denial, the HCFA's representatives question whether we needed to visit a particular patient at all or as often as we did. There has been virtually none of that in our experience. But we are beginning to be concerned over the number of denials which were technical either because out of literally hundreds of care plans that our nurses and therapists file each month, perhaps three or four would have a clerical error, or because HCFA determined that a patient was not homebound."
Hebb emphasizes, however, that the problem is not with the fiscal intermediary. Blue Cross is just carrying out HCFA's orders, she says.
NEED FOR CLARIFICATION: At a public hearing before the Senate Committee on Aging, held in Philadelphia on July 28, committee chairman Sen. John Heinz emphasized the need to clarify a number of the technical terms HCFA uses as a basis for denying Medicare reimbursements for care to home health care patients.
These clarifications are necessary, Heinz says, "to establish once and for all a clear road to care for the 1.4 million older Americans who so desperately need home health care."
A report issued by the committee also featured a number of "horror stories" to illustrate just how severe the growing problem of denials has become. In one, a 93 year-old female who was diagnosed with arteriosclerotic heart disease, pernicious anemia, rheumatoid arthritis and severe degenerative joint disease who left her home only to go to scheduled doctors appointments was
denied home health care benefits because Medicare determined she was not homebound. As of January 30, 1986, her condition had declined -- she also suffered a severe fall, her anemia and arthritis are worse, and she now is confined to her bed.
In another case study, a 78 year-old man was receiving Medicare home health services after repeated hospitalizations for liver disease, severe blockage of the bowels, and prostate problems. A tube was inserted into his right side to his bowel. This tube required daily changing under very strict conditions to guard against infections and improper drainage. In addition, he had a catheter,
and required weekly blood testing and help with his changing medications. As a result of an old stroke, he was unable to use his right side or to speak.
In January, 1986, it was determined that this patient was receiving more care than was medically reasonable and necessary, "despite his very limited abilities, his physician's orders for the home health care, and his obvious care needs." As a result, he began receiving less care and his condition continued to worsen. He died in May.
HOLES IN THE NET: "These services always served as a kind of net, which tended to catch the people in the worst situations," says Morris. "Now the holes in the net are getting bigger -- a lot bigger, and people aren't getting caught. They are just sitting somewhere without help, and some of them are going to make it and some of them aren't. I think it's a disgrace, because there is no reason why these kinds of services cannot be provided."
Furthermore, in the long run, unless the patient dies, the cutbacks in home health care can easily cost the health care industry even more, she adds.
"Those patients are going to come back to the hospital," Morris says. "You are putting the burden on the families and you're not giving them any help, and they are going to get overwhelmed more quickly and more easily. As a result, the patient will be readmitted to the hospital, not unnecessarily, because by the time they come back they will be sick again. And that is going to cost Medicare even more."
Many families in Pennsylvania rely on Medicare home health services in order to ensure that elderly family members can be kept at home and cared for properly, notes the Senate committee report.
IMPRACTICAL OPTION: But with Medicare home health care services being taken away, and hospitalization so costly, the only other alternative is usually long-term skilled nursing care in an appropriate facility, says Catherine Coble, a senior staff specialist, Continuing Care, with the Hospital Association of Pennsylvania. Unfortunately, that option is usually impractical as well, because of the high demand for nursing home beds available. Nationwide, the nursing home
occupancy rate is 95 percent, while in Pennsylvania, the rate is over 92 percent.
But even when beds are available, says the Senate committee report, HCFA administrative policies often limit Medicare patients' access to skilled nursing facilities -- many times on the basis that these patients should be receiving care in their homes. "The Administration then limits the availability of home care, leaving Medicare patients with few Medicare-financed care alternatives,"
the report says.
Mary Kay Pera, executive director of the Pennsylvania Association of Home Health Agencies, says that HCFA's increasingly narrow definitions of Medicare eligibility, as well as its strict interpretations as to what constitutes allowable and reasonable care, not only endanger the well-being of many current Medicare home health care recipients, but also will make it very difficult for some home health agencies in the state to not only serve their clients, but to survive as home care providers.
PROBLEMS WITH BILLINGS: But the problem involves more than Medicare denials, HAP's Coble notes. She says that HCFA's new 485 and 486 billing forms, which needed to be revised several times, helped produce a claims-processing backlog, which in turn has produced significant delays in Medicare reimbursements to home health agencies.
Other HCFA policies also serve to hinder the home health agency's cash-flow health. One is the revised appeal process concerning HCFA-denied reimbursements. Technical denials, for example, are no longer paid by HCFA under the "waiver of eligibility." The waiver of eligibility (Section 1879 of the Social Security Act) provides protection for the beneficiary and provider by allowing payment for denials in cases where it can be determined that the home health agency did not know or could not have reasonably known that the services were not reasonable and necessary, or constituted care.
At the same time, HCFA says only a beneficiary can submit a technical denial for reconsideration (not the provider, who has the resources and knowledge to do so). Moreover, once a denial is paid under the waiver of liability, it cannot be appealed.
"Many Medicare patients live alone and are too sick to make their way through the bureaucratic jungle to appeal these denials," notes the Senate committee report. "As a result, Medicare beneficiaries have no realistic protection under the Medicare program without access to a suitable representative."
Many times, home health care agencies will absorb the costs entailed in providing the home care services, rather than attempt to recover the money from the already financially strapped Medicare patient. Such uncompensated care cases also add to the burden already facing home health agencies.
GRAMM-RUDMAN: But there are other problems as well, notes CMHSP's Hebb, and some of the most serious involve "the peculiar way in which HCFA has applied the Gramm-Rudman cuts."
Despite the Supreme Court ruling which declared certain aspects of the bill unconstitutional, Gramm-Rudman-Hollings remains the principal statute regulating the outcome of the federal budget process. Essentially the Gramm-Rudman bill mandates a $144 billion cap on the 1987 federal budget deficit, with successive budget deficit reductions occurring in subsequent years until a balanced budget is achieved in 1991. In addition, the bill calls for certain automatic cutbacks to come into play if the budget does not achieve set quotas.
The legislation says that in the event the automatic cuts are triggered, Medicare is not to be cut more than one percent in the fiscal year ending in September, and not more than two percent in the fiscal year beginning in October.
From the home health care standpoint, HCFA has ruled that those one and two percent reductions must be implemented without reducing services.
"If they were saying: 'Look, we're only going to give you $990,000 for every one million you spend,' we would at least have a fighting chance. In that case, we could look for ways of becoming more efficient," says Hebb. "But that's not what they are saying."
REASONABLE COSTS: Unlike hospital DRGs, with their flat prospective payments, home health care is based on a reimbursement of "allowable, reasonable costs" under Medicare, notes Hebb.
"New HCFA says: 'Well, because of Gramm-Rudman, you will be reimbursed 99 percent of your allowable, reasonable costs, and beginning October, you will be reimbursed 98 percent of your allowable, reasonable costs. And if you are very, very efficient, that's wonderful -- we'll pay you less," says Hebb. "There is no way you can get your costs below what they pay you. No matter how much you reduce your costs they will reduce their payment to being 98 percent of that. No matter what you do, you get reimbursed less than you spend, and that's only counting those expenditures that already have been audited and agreed to as being allowable and reasonable."
The bottom line for many home health agencies is that they will no longer be able to afford to serve Medicare patients, says Hebb. Herb’s agency, which is a private agency relying largely on philanthropic funds to carry out its programs, delivered more than 200,000 skilled home care visits in 1985. Of those, approximately 29,000 were for uncompensated care.
Hebb expects to lose approximately $100,000 as a result of HCFA's plan to withhold two percent of the agency's cost reimbursements because of Gramm-Rudman. That means the agency will need to raise at least another $100,000 from philanthropic contributions and from private corporations if it is to continue to serve the Medicare public, she says. But paying for the home care of the medically indigent is another matter.
"The actions of HCFA have made it such that all of a sudden Medicare patients, who were full-paying patients, are now only partly-paying patients, and so they are diluting the pool of community support we receive," says Hebb.
Thus, instead of using the community dollars for indigent care, Hebb's agency has been obliged to spread the money around to make up for the dollars that have been taken away from the Medicare and Medicaid programs. As a result, funding for the "fall-between-the-crack" patients -- those who have no money and no Medicaid, is increasingly limited.
THEY NEED HELP: "The Reagan Administration says that poor people should be supported by the private sector, and that's what has been happening. We are supported very generously by the private sector," says Hebb. "The problem is that we are now in a position of greater need as a result of these changes in public support. The expectation of the federal government is that the private
sector is going to pick up the shortfall. It is going to be very interesting to see what happens."
"I hope they will, because if not, I don't know what we are going to do for our patients," says Hebb. "I hope that the private sector will either pick up the shortfall or put the pressure on their legislators to say: 'Hey, we want an efficient, economical government, but this is ridiculous. These people need care.'"
By Thomas Derr
PA, US -- SOME of the greatest changes in America's healthcare delivery system can be
attributed directly to recent revisions in Medicare policies. Hospitals, in particular, have been impacted profoundly by the changing Medicare policies.
The new DRG system alone can be held directly responsible for such factors as decreased average length of hospital stays, the rising popularity of home healthcare services, and increased interest among many hospitals in the establishment of other new, profit-making ancillary service ventures to help offset the decrease in Medicare reimbursement payments being experienced by most
hospitals in the Delaware Valley region and across the U.S.
Clearly, the financial aspects of Medicare's changing policies are especially salient to hospitals. Well, now a new set of Medicare policy revisions is in the works, with an entirely new set of probable financial implications for hospitals. And as that old healthcare observer from many years ago, Al Jolson, once said: "You ain't seen nothin' yet!"
The issue at hand is the manner by which Medicare provides capital spending aid to hospitals, and according to Charles F. Pierce, Jr., president of the Delaware Valley Hospital Council, Inc., it is the dominant issue facing hospitals today "in terms of hot interest and significance."
Up to now, Medicare essentially has treated capital spending as a pass-through, says Pierce. "What that means is that for many years, any hospital that had a project which went through the certificate of need process, and was able to obtain a C/N from Pennsylvania's health commissioner, than that was deemed a needed project, and it was fully reimbursed," says Pierce.
Although there was widespread recognition that there were many problems inherent with the C/N-capital spending issue, no one was able to come up with a solution that would be fair and equitable to all parties concerned. Even the social security amendments of 1983 -- which provided for the implementation of the earth-shaking Medicare prospective payment system (DRGs) -- addressed the issue of capital spending in only tangential terms.
Most hospitals that were in the process of developing new projects realized there would be some change, probably of a minor nature, that would constrict financing for future projects, Pierce notes, but no decision had yet been made. Pierce says it is important to note that when a hospital begins to develop a project that will require capital investment, the process usually takes from one to three years inside the hospital just to get going.
It sometimes takes that long just to gain a consensus among all the interested parties as to how the environment is changing, and how the proposed project will support the hospital in the new environment, he says.
"Nearly everyone agreed that there would be a greater need for outpatient surgery and other outpatient services, and you will find that most of these hospital projects usually called for a fairly substantial expansion of ancillary services and space. Very little was for additional new beds, because hospital planners know that the DRG system was bringing that game to an end," says Pierce.
As a result, many hospital boards across the country, hospital managers, financial feasibility consultants, bond attorneys, and investment bankers, were able to undertake the planning process for new projects with very little foreshadowing of what Medicare's future policies would be in regard to capital reimbursements. All assumed there would be a change, but that it would turn out
to be a minor change, says Pierce. No one knew for sure what the change would be, and until Medicare offered some concrete proposals on the subject, all they could do was speculate on it.
So much for past history.
MEAT AXE: In the June, 3, Federal Register, the Healthcare Financing Administration (HCFA), the umbrella organization under which Medicare operates, released its recent proposal for Medicare's treatment of capital reimbursements for hospitals. The bottom line implication of that proposal is that the Delaware Valley's 63 acute care hospitals stand to lose a total of more than $95 million per year by 1991, if that proposal is enacted.
"This proposal is Draconian. It is clearly a federal budget-saving measure, and essentially it winds up telling hospitals in this region: 'We'll pay you roughly half at the end of four years of what we are currently paying you in capital reimbursements,'" says Pierce. "That's not a healthcare policy, it's a meat axe."
Pierce notes there is at least one hospital, but frequently several that stand to lose more than a million dollars a year in each of the five counties of the Greater Philadelphia region. Heading the list is Albert Einstein Medical Center, which would lose more than $9.1 million per year by the end of 1991 -- a whopping cumulative total of $31.2 million over the next five year -- if the HCFA proposal is enacted. According to the Delaware Valley Hospital Council, Albert Einstein Medical Center has recently financed approximately $135 million worth of renovations. Thus, many hospital administrators are becoming extremely concerned about what Medicare will do next.
Pierce likens a hospital's capital cost debt to a mortgage payment. The payments are for buildings and equipment, and there is no way to cut back on them because the amounts are fixed in bond documents.
"While it is true that capital may amount to only nine to 12 percent of a hospital's budget, it's also true that hospitals are pretty well restricted in their ability to maneuver," Pierce says. "I think we are going to have dire consequences if those proposals go through. I just don't see where hospitals can make up a million dollars a year, year after year."
GO SLOW TACTICS: One can only speculate as to the ultimate ramifications of such proposals, but Pierce notes that hospitals will likely react as they have in the past when funding seemed to be in jeopardy.
"The first thing you do is postpone preventive maintenance. You don't put in any new programs -- perhaps you don't bring innovation and change to a complete halt, but there will be an incredible slowdown. Also, you don't hire new staff -- in fact, you look to holding staff at a minimum, and if those mortgage payments continue to mount, then you go to cutting back staff," says Pierce.
In addition, Pierce notes that the financial requirements for some institutions may be so onerous that the possibility of default will become increasingly likely. It is much less likely that such defaults will happen in Philadelphia than in New York City, but wherever they begin to happen, they will make hospital financing in general very difficult, he adds.
Another result of the proposed Medicare proposals would be an acceleration of cost shifting, Pierce adds. Cost shifting involves increasing the charges to private payers to make up for those bills that lose money for the hospital. Pierce concedes there is little flexibility for the hospital to maneuver in this area as well, but if its financial situation becomes particularly desperate, cost shifting may come to be seen as a viable course of action.
PLAN'S BASIC ELEMENTS: In response to the HCFA-initiated Medicare proposals, the Delaware Valley Hospital Council has devised its own plan. This plan contains three basic elements, the first of which involves a commitment to protect old capital.
"Our proposal, essentially, is that you take all capital up to December 31, 1985, and say that if a hospital has played by the rules in existence, then Medicare should make a commitment to continue those payments. It is a 'hold harmless' provision that we believe will provide some fairness to a very dramatic change in the system," Pierce says.
The second provision is designed to respond to congressional and administration concerns about controlling the runaway costs of health-care investments. Based on available data, and the fact that hospital projects generally take approximately three years to come on-line, the year of maximum payout is determined -- probably calendar year 1988. The amount Medicare would pay during that year then is treated as a pool, and tied to a construction index to account for inflation and other normal economic influences. That amount is then treated as a constant.
Finally, as old capital is paid off, the gap within that pool between the amount spent on old capital and what is left over serves as a base for investment in new capital.
"We think this plan establishes a responsible payment system that honors Medicare's prior commitments," says Pierce. "After all, to change the rules now on commitments that extend 30 years into the future is grossly unfair." The DVHC plan is also more viable, Pierce says, because it takes into account only those capital investments that are made in needed services. The HCFA proposal, on the other hand, will produce some drastically financial stresses "that don't relate
at all to whether a hospital is efficient or providing needed services," he adds.
Mark S. Levitan, President of Albert Einstein Medical Center, holds a similar position. He explains: "My idea is that old capital -- any project approved before sometime in 1983, when they put in the DRG program, and when they said they were going to then put capital into the DRG rates, should continue to be paid on a cost reimbursed basis. I feel that is a position which is equitable and fair to the hospitals."
Now the drama switches to the U.S. Congress, where legislators in both the House and Senate have been working on various alternatives that are not as harsh as the HCFA-initiated proposals, but are still designed to satisfy many of the Gramm-Rudman budget targets. For the past few months, the Senate Finance Committee has been involved in debate over various alternatives to the HCFA-initiated Medicare proposal.
One proposal still involved a capital savings plan, but with a longer phase-in period -- 10 years instead of four. In addition, a provision was included whereby a hospital whose capital payments are twice as high as the national average would be covered by an extraordinary exceptions clause.
NO CHANGE IN BOTTOM LINE: At the same time, however, the total budget would remain budget neutral -- which basically means if money is given to those hospitals whose payments are twice as high as the national average, that money must come from funds that would normally go to other hospitals, so that the total bottom line does not change. Similar legislation is being considered in the House, although there are additional "twists and gadgets" in it, Pierce says.
"One is that major moveable equipment will be phased-in over a three-year period. That would be equally disastrous as far as we are concerned, because roughly one quarter to 30 percent -- the ranges are enormous -- of a hospital's capital budget is for equipment. You would end up having to lay off nurses in order to be able to pay for a CAT scanner," says Pierce.
What actually happened in the Senate Finance Committee on July 23 came as something of a surprise to DVHC and many hospital administrators who were "expecting the worst," Pierce says.
PERCENTAGE REDUCTION: The Senate Finance Committee included in the reconciliation package that they will be taking to conference with the House a provision that continues current law for payment of capital to hospitals, but meets its budget targets for capital by taking a percentage reduction off those current law payments. That percentage reduction will be three percent for fiscal year 1987, four percent for fiscal year 1988, and five percent fiscal year 1989.
A spokesman for Sen. Dave Durenberger (R-Minnesota) says that the policy selected by the Senate Finance Committee means that if a hospital is eligible to receive from Medicare in FY 1987 an amount equal to $100,000 in capital reimbursement, it will get 97 cents on the dollar, or $97,000. That figure drops to $96,000 in FY 1988, and $95,000 in FY 1989.
"This is a step in the right direction because they appear to have come away from trying to create a formula that folds everything into the DRG payment rate," says Pierce. "Clearly, I'm not happy with the percentage reductions, but the concept of retaining the pass-through is very good. The percentage reductions will produce hardships, but nothing like the massive dislocations that will occur if the HCFA proposals are yet enacted."
IN A BOX: Albert Einstein Medical Center's Levitan is somewhat less enthusiastic. "What HCFA is proposing is Draconian, and terrible, and what the Senate is proposing is better, from that standpoint. I like it better, but I still think it's wrong," says Levitan. He notes that the Senate Finance Committee proposal (which still has a long way to go before becoming law) still tends to ignore the problem of protecting old capital.
On the subject of what will happen in the House/Senate reconciliation package, Levitan is just as blunt: "I haven't got a clue. I with I knew. All the hospital associations -- the American Hospital Association, the Hospital Association of Pennsylvania, the Catholic Hospital Association, the Federation of American Healthcare Systems -- everyone is going down this road, and they all have begun to look at the numbers and realize that unless we protect old capital, there is going to be absolutely dreadful damage done to the healthcare field."
"The legislators have a tough problem," Levitan continues. "They put us in the box, and it's really very unfair of them to say: 'Hey, that's the way it is, we're going to take the bottom out of the box.' That isn't very nice at all. A promise was made, and I think it is the government's obligation to live up to its promise."
ANOTHER GO-AROUND: Sen Durenberger's spokesman says his "gut feeling" is that the basic proposal outlined by the Senate Finance Committee will be what finally results once the reconciliation bill is passed. (As of this writing, no action has yet been taken in the House.)
"The longer term prospects for capital I think are still very much up in the air, however," says the spokesman. "And I'm almost certain they (Congress) will have to revisit the issue next year when the budget deficit reduction targets are much greater than we have this year, and I suspect there will be another go-around on it."
Or, as another well-known observer of the world by the name of Leo Durocher once said: "It ain't over 'til it's over."