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Tucson, AZ 85716-3450
Phone: (800) 635-1196
Hotline: (800) 419-4777
of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 47, No. 8 August 1991
BEHAVIORAL ADJUSTMENT AND THE RVS
Physicians were ``betrayed,'' say spokesmen for organized
medicine. Even Rep. Pete Stark (D-CA) is dismayed by the
Relative Value Scale (RVS) fee screens that were published in the
June 5 Federal Register. He accused White House Chief of Staff
John Sununu and the Office of Management and Budget of a
deliberate effort to ``make sure that the nation's doctors have
reason not to trust the government and have reason to resist any
expansion of national health care'' (BNA's Medicare Report
(Stark's remark should not be construed as showing sympathy
for physicians. He has also stated that Medicare cuts would
simply mean that a rural doctor couldn't buy a Porsche.)
The AMA agreed with the RVS in principle, trusting that it
would be implemented in a fair and equitable manner and that it
would not be used as a budget-cutting device. While total
expenditures for physicians' services will not be reduced, they
are projected to be about $3 billion less in 1996 than they would
have been under the current system.
The AMA criticism focuses on the conversion factor, which
was cut by 16% to compensate for the increase in volume projected
by HCFA. The conversion factor is multiplied by the relative
value units to give the fee. HCFA has determined the conversion
factor to equal precisely $26.873, ``based on lack of data'' (to
quote one of HCFA's own more felicitous expressions) and numerous
There are few data to show how physicians respond to cuts in
fees. One limited 1976 study of Colorado physicians supports a
50% ``volume offset.'' Another study found that expenditures per
beneficiary increased almost 30% during the 1984-1986 Medicare
fee freeze (Medicine & Health 7/1/91). Still fewer data exist
for increases in fees; HCFA assumes no response by ``winning''
All Physicians May be ``Losers''
Because of the low conversion factor, the anticipated gains
under the RVS have been halved and the losses doubled.
Internists will see a reduction of about 4% rather than the
expected 14% increase in their Medicare fees. Family prac-
titioners may be the only ``winners.'' However, a modest
increase in fees for office visits could be cancelled out by
several other factors:
1. For drugs administered in the office, physicians will
be allowed to charge only 85% of the wholesale price.
2. Physicians will not be allowed to charge for ad-
ministering an injection in the course of a visit (unless it
3. With some exceptions (e.g. lumbar puncture trays), the
cost of supplies is ``included'' in the fee for an office visit.
4. No fee may be charged for reading EKGs done in
conjunction with a visit. According to HCFA's interpretation, a
preoperative EKG ordered by a surgeon and read by a cardiologist
who does not see the patient is part of the surgeon's visit. (In
other words, almost all EKGs are part of a visit, and only the
``technical component'' may be billed.)
5. Nonparticipating physicians may have been compensating
for low reimbursements by balance billing. Their new limiting
charges-125% of the fee schedule amount in 1992 and 115%
thereafter-might be less than their current MAAC.
6. No added payment will be allowed for modified codes,
say for prolonged detention, extra travel, or late hours.
7. No one knows how the new coding system for office
visits and consultations will map onto the old one (the ``cross-
walk'' problem); physicians may find their visits effectively
In a free market, supply and demand are brought into
equilibrium by the price mechanism.
When the normal mechanism is disconnected, ``behavioral
adjustments'' occur instead of a price change. HCFA has
attempted to deal with this phenomenon by plugging escape routes.
For example, ``border crossing'' to obtain higher reimbursements
by physicians or lower charges by patients is to be minimized by
making fees uniform over a sufficiently large geographic area.
During the world's 40 centuries of experience with wage and
price controls, two types of adjustments have predominated: (1)
cuts in quality and (2) decreased availability. Because the RVS
would pay ``limited license practitioners'' such as chiropractors
and optometrists as much as physicians for services with the same
code, more services may be rendered by such practitioners.
Instead of doing more work for less pay as HCFA assumes they
will, physicians may do less of the work that pays poorly.
Specialists may no longer have time for routine office visits.
Physicians may stop accepting Medicare patients. (The percentage
of physicians taking new Medicare patients dropped from 83% in
1989 to 79% in 1990).
Some physicians, who see the RVS as the salvation of primary
care physicians, say that it must be defended against ``Nean-
derthal proceduralists.'' The AMA fears that the low conversion
factor ``threatens to undermine physician payment reform.'' But
free market advocates hope that it does.
Comments on the fee screens must be received by HCFA at PO
Box 26686, Baltimore, MD 21207, by August 5. Refer to BPD-712-P.
For additional information, call AAPS at 800-635-1196.
Oregon Cuts Funding for 122 Medical Services
The Oregon legislature has decided to draw the line at
medical service #587 in order to pay for health coverage of
120,000 uninsured residents at an added cost of $28 million
(instead of the $45 million needed to extend the current benefits
``Nonessential'' services that will not be covered include
treatments for: acne, psoriasis, myasthenia gravis, trigeminal
neuralgia, hydrocele, congenital anomalies of the female
genitalia, tendinitis, chronic bronchitis, cholesteatoma, sar-
coidosis, sprains, acute conjunctivitis, synovitis, candidiasis,
erythema multiforme, acute tonsillitis, and metastatic cancer
with less than a 10% 5-year survival rate.
The state hopes to put the plan into effect in 1992 but will
need a waiver from federal Medicaid rules.
Administrative Waste and Magical Thinking
According to a June 4 study by the General Accounting
Office, a single-payer health insurance program similar to
Canada's would save enough in administrative costs to finance
insurance coverage for the 30-plus million uninsured (BNA's
Medicare Report 6/14/91). The same argument has been made in the
New England Journal of Medicine (324:1253-1258, 1991) by Steffie
Woolhandler and David Himmelstein of Harvard Medical School and
the Public Citizen Health Research Group.
Woolhandler and Himmelstein claim-and the media frequently
repeat-that the US devotes from 19.3 to 24.1% of medical
expenditures ($400 to $497 per capita) to administration, while
Canada spends only 8.4 and 11.1% ($117 to $156 per capita) in
this way. However, their assumptions are dubious. As pointed
out by Robert Doherty of ASIM (Internist May, 1991), they
attribute the total overhead for physicians' offices, excluding
malpractice insurance, to administration.
Reducing the administrative overhead (in their view)
requires ``simplification,'' for which the sine qua non is ``uni-
versal comprehensive coverage under a single, publicly ad-
ministered insurance program.'' The assertion that savings
automatically follow from the destruction of the private
insurance industry has been called ``magical thinking'' by Carl
Schramm of the Health Insurance Association of America.
Woolhandler and Himmelstein make no effort to determine how
much of 37% increase in US ``administrative'' costs between 1983
and 1987 is due to acts of Congress and regulations of HHS. Nor
do they suggest using Shriners' hospitals as a model, rather than
the Canadian government, although they note that these hospitals
devote only 2% of their revenues to administration.
``The synchronous growth of bureaucratic profligacy and
unmet health needs is reminiscent of Dickens' somber tale of six
poor travelers who were relegated to outbuildings when the hostel
built for them was fully occupied by its charitable
administrators,'' say Woolhandler and Himmelstein.
Yet they would they prescribe more of the same.
News Briefs from Canada
Medicare Dying. Because of cuts in the federal
budgets, transfer payments from Ottawa to provincial health plans
may cease, causing the death of the Canadian national health plan
as early as 1994, according to a report by the Toronto Board
of Health. When the federal government no longer transfers cash,
it will lose the ability to enforce the Canada Health Act, and
provinces will be free to institute private insurance and extra
billing (Globe and Mail 7/7/91).
Doctor Suspended for Exceeding Quota. Dr. Robert
Perron was suspended from the staff of Cité de la Santé Hospital
in Laval, Quebec, solely because of surpassing his annual quota
of 107 deliveries. The hospital attempts to force women to go to
other hospitals far from home to give birth. ``We simply can't
afford to become a giant baby factory,'' said the chief adminis-
trator; it would compromise other health-care services. Many
women could safely give birth at home or in birthing centers, but
government policy prevents development of these options (Globe
and Mail 6/7/91).
Bankruptcies Reach Record High. Compared with 1990,
bankruptcies were up 130% in Toronto and 77% across Canada
despite a supposed easing of the recession.
``Governments have created a negative atmosphere for anyone
trying to do business in this country,'' said a senior economist
at the Canadian Imperial Bank of Commerce. He pointed to record
high interest rates and never-ending taxes (Sunday Sun 5/25/91).
Lengthy Surgery Referred to Oregon. Ontario physicians
are only allowed to bill for two hours of endometriosis surgery.
Even if they are willing to work without payment after that,
there is the problem of getting the operating room and other
staff for the seven hours that might be needed. The solution: a
network for referring patients to a physician in Bend, Oregon
(Today's Health 12/90).
Administrative Expenses Unknown. For years after
introduction of Ontario government health insurance, the Ontario
Medical Association tried to get permission for access to actual
government books, without success. The two government levels
claim very low costs, but the bureaucrats have a penchant for
fudging the figures. A classic example of their phony account-
ing: when I was chairman of the Subcommittee on Tariff for the
Section of Otolaryngology of the OMA, the health ministry came
out with an incredibly high figure for the average annual
earnings of ENT specialists. I had done my own survey of all
such specialists and my figure was very much lower. After
discreet research, I discovered what had happened: the
bureaucrats had decided that if such a specialist earned less
than a certain arbitrary figure, he couldn't possibly be in full-
time practice and his name was expunged from their list! (William
Goodman, MD, Toronto).
A New Specialty? The quantity of medical services per
capita is higher in Canada than in the US, especially for
``evaluation and management'' services (N Engl J Med 323:884-90,
1990). Canadian emigrant Robert B. Gervais, MD, of Mesa, AZ,
suggests one possible reason: ``Canada is slowly becoming a
nation that `specializes' in treating the healthy or minimally
sick and avoiding the truly sick....Those who provide eye exams
to healthy 20 year olds, blood checks monthly to healthy 60 year
olds, etc., are happy to see the super-specialized providers
`punished' for doing `too much' care.''
AAPS Solidifies Victory over HHS in Actions Regarding
Last year, AAPS won a significant victory in the US Court of
Appeals for the Sixth Circuit when that Court ruled that, under
the then-existing law (42 U.S.C. §13951(h)),
nonparticipating physicians could lawfully bill for clinical
diagnostic laboratory services on a nonassigned basis. (See AAPS
v. Bowen 909 F.2d 161 (6th Cir., 1990).)
The Department of Health and Human Services (HHS) petitioned
the Sixth Circuit for a rehearing, but that court-all 15 judges-
refused. HHS never asked the US Supreme Court to review the
case. Instead, HHS went to Congress, which was then considering
the legislation that became the Budget Reconciliation Act of
1990. HHS managed to insert into the enormous legislative
package an amendment to the Medicare Act that forces
nonparticipating physicians to bill for clinical diagnostic
laboratory services only on an assigned basis. In addition, the
amendment made new requirement retroactive for five years. In
this way, HHS attempted to undermine the effect of the decision
of the Sixth Circuit by obtaining authority from Congress to
sanction physicians for direct billing even though this was
perfectly legal at the time.
Within four days of the signing of the Omnibus Budget
Reconciliation Act of 1990 by President Bush, AAPS filed suit in
the US District Court in Toledo, OH, challenging the
constitutionality of the retroactive effect of the new Act. AAPS
argued that the new Act was an ex post facto law and that it was
an unconstitutional invasion by Congress into an area reserved to
the courts (see AAPS News 12/90).
HHS has moved the Court to dismiss the second AAPS lawsuit.
The only means by which HHS believes that it could prevent the
Court from declaring the amendment unconstitutional is to assure
the Court that it will not enforce the retroactive provision.
According to HHS, this would render the issue ``nonjusticiable,''
or no longer ``ripe'' for judicial intervention.
AAPS has strongly contested in Court the arguments on the
issue of ``ripeness.'' Still, the documents filed by HHS confirm
the inevitable victory of AAPS in protecting physicians who, up
until the effective date of the new Act (Nov. 5, 1990), billed
for clinical laboratory services on a nonassigned basis. Eileen
Boyd, Assistant Inspector General, stated that:
To impose sanctions under §1833(h)(5)(D) of
the Act, the OIG must prove that a physician violated
the statute knowingly, willfully, and repeatedly....We
believe that the Sixth Circuit decision would provide
substantial support to an argument by physicians that
they reasonably believed that the statute did not apply
to them, and they therefore could not knowingly and
willfully have violated it....
The fact that Congress made the statute
retroactive does not alter this burden of
proof....Although Congress can rewrite the law, it
cannot rewrite the past concerning what was in a
physician's mind when he failed to take assignment for
laboratory services performed in his office.
HCFA and OIG have agreed that cases based on
violations of the statute occurring before the November
5, 1990, amendment should be referred to the carrier.
Where the carrier finds that a nonparticipating
physician has violated the assignment provision for
laboratory services after November 5, 1990, it will
warn the offending physician of the amended statutory
provision and that continued disobedience will result
in reference of the matter to OIG for
[A complete copy of the memorandum is available on request.]
The Soviet Lesson for America
Soviet bureaucracy's major ``achievement'' was the total
alienation of the individual from the decision-making process,
and from any real participation in the life of society....
The only difference in America is that the Soviet people
were subjected to abrupt, forced alienation while we are now in a
slow process of voluntary alienation. Citizen's responsibilities
were taken from the Soviet people; we are handing them over
freely. So, what took 70 years in the USSR might take 270 years
here, but this is only a quantitative and not a qualitative
Any bureaucratic machinery has an innate tendency to grow.
Even Stalin could not reverse this process, and we do not have
Stalin's tools at our disposal. The only device left to us is
... the power of the purse...[the] reduction of spending through
control of taxation.
Excessive taxes occur when people pay to shift the burden of
their personal responsibility...onto the shoulders of bureaucrats
hired to do needed tasks. This is a form of ransom. ``I pay my
money-you do the job.'' This liberal credo is the time bomb
which eventually will destroy our society....
[W]e must increase two things: 1) direct personal
involvement ... in the lives of our communities, 2) charitable
donations....Properly run charitable organizations direct more
than 70% of the collected money to the cause they support. This
is much better than the efficiency of our federal bureaucracy....
Yuri Tuvim, PhD, former Soviet citizen
[Call AAPS for a complete copy of Dr. Tuvim's article in The
The Price of Federal Money
What all of us at Hillsdale College fear is the next
invasion of bureaucratic power....Already discussed in
bureaucratic memoranda is the idea that tax exemption is really a
loss of government revenue: as if the government already owned
all of our earnings, and merely lets us keep some at its own
[Hillsdale has never accepted a penny of federal funding.]
They might as well announce, ``You take our money, we own
you''....What is especially galling about this is that
``federal'' money was forcibly extracted from us in the first
place. When they ``give'' some of it back, it comes not with
strings attached but chains.
George Roche, PhD, Imprimis 10/90
[Dr. Roche, President of Hillsdale College, will be the
banquet speaker at the AAPS annual meeting in Lexington, KY,
AAPS welcomes Drs. Carl S. Axibal of Cape Coral, FL; Thomas
J. Berger of Great Falls, MT; Stephen Berque of Westwood, NJ;
Vivian K. Bethala of Emerson, NJ; John N. Carlson of Sarasota,
FL; Philip L. Case of Freehold, NJ; Frederick F. Fakharzadet of
Parasmus, NJ; Joel Fischer of Mt. Laurel, NJ; Raymond D. Fowler
of Great Falls, MT; Ronald Freireich of Riverdale, GA; Saul B.
Gilson of New York, NY; David J. Goldberg of Westwood, NJ;
Kenneth E. Green of Crestwood, KY; Robert B. Hill of Haddonfield,
NJ; Martin C. Hyman of Roselle Park, NJ; Carl R. Lepis of Asbury
Park, NJ; J.W. McMillen of Beaver, WV; Ernest Aubrey Murden, Jr.
of Portsmouth, VA; Donald Nathin of Dumont, NJ; Reynaldo O.
Olaechea of Crossville, TN; Fred Palace of Morristown, NJ; Larry
E. Patterson of Crossville, TN; James H. Peoples of Kinston, NC;
Juergen Relestock of Santa Ana, CA; Lawrence A. Rosen of
Ridgefield, NJ; John H. Scott III of Pikeville, KY; Robert T.
Williams of Murray, KY; Terry Wood of Winchester, KY; Hsn-Vai Wu
of Somerset, NJ; Ira Zucker of Westwood, NJ; and Morris Imaging
Associates of Morristown, NJ.
Nominating Committee Report
The nominating committee, chaired by Donald Quinlan, MD,
submits the following slate:
President: John Boyles, Jr., MD
President-Elect: Nino Camardese, MD
Secretary: Donald Quinlan, MD
Treasurer: R. Lowell Campbell, MD
Directors: Lois Copeland, MD; W. Daniel Jordan, MD; Andrew
Mance, MD; Charles McDowell, Jr., MD; Gregory
Polito, MD; and Joseph Scherzer, MD.
To be considered at the annual meeting, resolutions must be
submitted, in writing, to Resolutions Committee Chairman R.S.
Jaggard, MD, 10 E. Charles St., Oelwein, IA 50662, by September
A Surgeon Comments on the RVS
In a community of 7,000 with a shortage of physicians, a
board-certified Fellow of the American College of Surgeons is not
able to limit his practice to general surgery. Sometimes, he
manages, on his own, a patient who might be referred to five
specialists in a large clinic. Yet his fees are to be
downgraded. He writes to HCFA:
Additionally, because I do have to manage so many of my
surgical patients' problems, I will see them back repeatedly for
their heart or lung problems after their surgery and yet, HCFA
has denied these visits, saying these should be bundled in with
the postoperative care...If this continues, I am going to have to
demand that my patients, once I have operated on them, start
seeing general practitioners or internists for their medical
problems as I cannot afford to keep seeing them, using up
valuable office time, without some recompense. The bottom line
is, I am working 70 hours per week...Yet you are going to punish
me...by declaring I am paid too much. Therefore, I am protesting
the RVS and the whole concept.
Indeed, I would like to state that the government should
admit that they have no place in guaranteeing medical care. If
medical care is declared a right, then I think food, housing,
heat, electricity, water, etc. should all be declared rights and
supplied to those who cannot afford them....
If the government insists on managing medical care, then
medical care will become like the NASA catastrophes, the Hubble
telescope, the S&L crisis, the impending bank failure
catastrophe, and the Post Office. Indeed, the only purpose of
governments is to wage war....
If we are unwilling to abandon the concept of the government
providing health care, the government [should accept] that it can
afford only a two-tiered system. Let the government state what
they will pay for each procedure and then let the free market
system take it from there....If the doctor has an overwhelming
practice, which I find is my situation, he can set an additional
fee....Any attempt at leveling out care by paying just one fee
and not allowing balance billing will result in further rationing
of care...Those that will suffer first will be those that we have
the most hassles from. That is Medicaid and Medicare. I have
fewer hassles from those that have no third party payer and in
fact, they receive the best care. I am tired of bureaucrats
saying the poor are not receiving care when I know that I treat
them all the time. I don't worry about hustling them out of the
hospital faster as insurance companies and Medicare want us to
Donathan M. Ivey, MD, Crossville, TN
[Copies of AAPS comments on the RVS available on request.]
Oct. 17-19, 1991. Annual meeting, Lexington, KY, Griffin Gate