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Phone: (800) 635-1196
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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 47, No. 2 February 1991
BEHAVIOR MODIFICATION FOR
Based on the theory that spiraling Medicare costs are due to
physician behavior, the Health Care Financing Administration
(HCFA) is planning a number of interventions to modify this
The theory has several underlying assumptions:
1. Physicians will do the amount of work required to earn
a certain level of income. If they are paid less per service,
they will eagerly perform more services. (Medical services, not
those related to an alternate occupation.) In fact, the amount
of service they will perform is precisely such that a $2 cut in
fees will be required to achieve $1 in savings for the federal
2. Physicians are so avaricious that they will perform
unnecessary services as long as they are paid for them, but so
selfless that they will continue to perform necessary services
even when they are not paid /(or even when they incur out-of-
pocket costs). But just in case,...
3. Sufficient oversight by a bureaucracy with the
authority to impose severe penalties will assure that the system
achieves the desired work output of assured quality.
Implementation of the theory will occur on several fronts.
Relative Value Scale
The 50% ``behavioral offset'' incorporated into the model
fee schedule released in September (per assumption #1) has caused
alarm in organized medicine. The AMA, which still supports the
RVS, has asked that the Medicare Volume Performance Standards
(MVPS) be used to correct any unexpected reactions to payment
cuts. But HCFA thinks it is essential to weight the correction
factor ahead of time in the interest of keeping payment reform
``We'll never be able to use MVPS to recoup past problems if
we lose on the first round,'' said HCFA Administrator Gail
Wilensky (Medicine and Health 1/7/91).
Wilensky is said to be a firm believer in the need for
``behavioral adjustment,'' based on her experience with a fee
freeze in the mid-80s. (Expenditures in Part B continued to
increase 10% per year.) She is also an experimentalist: ``Let's
get [the system] working and see what happens. If the system
doesn't make as much progress as we want, we'll think of some
other things to do'' (ibid.).
Defining a ``Visit''
HCFA would like to ``bundle'' all services provided during a
visit into a single fee. According to Wilensky, ``Medicare has
never chosen to apply the common-sense definition of what a visit
is, and we are considering revising the visit definition along
with everything else'' (ibid.).
The 1991 budget reconciliation has already declared most EKG
interpretations to be included in the visit fee (see AAPS
News, Jan 1991). Similar treatment for laboratory tests has
been proposed in an October 1990 monograph by Inspector General
Richard Kusserow. [For a free copy, write: HHS Inspector
General, Room 5259, 330 Independence Ave SW, Washington, DC
Kusserow notes that Medicare annual expenditures for
laboratory tests have doubled between 1985 and 1989, despite the
fee schedule method of reimbursement, reductions in payment
amounts, and restrictions on referrals to labs in which
physicians have an ownership interest.
Because of the sheer volume and complexity of laboratory
testing, Kusserow believes that the cost of policing individual
claims would not be recovered through denials. Restoring patient
copayments would have an ``uncertain'' effect on utilization, he
states. Therefore, Kusserow believes that the only answer is the
extirpation of the fee-for-service (FFS) system that promotes
Under Kusserow's plan, Medicare would no longer pay for
individual laboratory tests but would treat them as an
indistinguishable part of a physician office visit. To
illustrate how a ``laboratory roll in'' (LRI) might be
calculated, Kusserow divided the $1.84 billion that Medicare
allowed for laboratory tests by 1.37 million office visits, to
give $13.50 per visit. The actual amount to be added to the
reimbursement for 90000 series procedure codes would vary by
specialty. Physicians would then be responsible for securing and
paying for whatever laboratory tests were necessary.
Patient copayments and deductibles would only come into play
at entry to the health care system, the most effective point in
LRIs would be expected to save $100 million annually in
administrative costs by eliminating over 25% of the line items
currently processed by Medicare carriers.
Precedents for this payment method include HMOs, DRGs, and
global surgical fees.
While cost-effective monitoring for overutilization might be
impossible, Kusserow does not see the same difficulty in
reviewing for underutilization. He states that practice guide-
lines will help, but even without uniform national guidelines,
PROs could use local standards of practice to initiate sanctions
against physicians providing inadequate care. [Are sanctions
more profitable to HCFA than denials?] He does not believe
physicians will take the risk of a malpractice suit for the sake
of the ``small sums'' involved in ordering a lab test.
From Capitol Hill
CLIA Delayed. Because of the objections raised by over
60,000 physicians, the Office of Management and Budget (OMB) has
told HCFA to rewrite the proposed regulations. HCFA has also be
directed by Congress to carry out two suggestions made in AAPS
comments: a regulatory impact assessment and a study of the
correlation between the personnel standards and the quality of
This is the first time that physician-related proposals have
been recalled for further work by a congressional and White House
directive. The new regulations will also require a period of
Meanwhile, some states are rushing to adopt their own
regulations for physicians' office laboratories, which might be
even more stringent than federal standards.
AAPS believes that CLIA should be repealed.
Medicaid Deficit Reduction. New York Governor Mario
Cuomo has the answer to reducing the deficit without cutting
Medicaid payments to physicians. He is simply asking providers
to kick back a portion of their payments. The ``assessments''
amount to about $200 million.
Advance Directives. The Omnibus Budget Reconciliation
Act of 1990 extends to Medicaid providers requirements similar to
those in force for Medicare. Providers, HMOs, nursing
facilities, and other entities must maintain written policies and
procedures for advance directives. All adult patients must be
given written information, and the existence (or lack) of an
advance directive must be documented in the patient's medical
More Stringent Controls for Medical Devices. The Safe
Medical Devices Act (PL 101-629), signed by President Bush in Nov
1990, requires ``device user facilities'' to report to the
Secretary of HHS any instances in which a medical device might
reasonably be suspected to have caused injury to a patient.
Formerly, only manufacturers were required to report defects.
Additional requirements for manufacturers include post-market
surveillance for new devices and a system for tracking the
distribution of devices that could have serious adverse health
consequences. An exemption from the requirements is granted for
devices designed to diagnose or treat a condition that affects
fewer than 4,000 individuals within the US, if no comparable
device is available.
Violations of this law will subject an individual to a civil
penalty of up to $15,000 per violation, up to a limit of $1
million for all violations adjudicated in a single proceeding.
Basis for Geographic Practice Cost Index. To arrive at
relative value units, government subcontractors may use
questionable data, pleading lack of time and money. Rental costs
are based on apartment rents; earnings on data for workers with
five or more years of college rather than for physicians; and
office overhead for primary care physicians on averages that
include specialties with very little overhead. For most prac-
tices, the resulting estimate of 45.8% overhead is far too low.
Sandy Goodsite, President of Professional Medical Management,
Inc., who has worked with more than 100 Southern Arizona
practices, advises physicians to take a careful look at the
complicated formulas used to calculate their fee schedules.
Parallel Views on Practice Guidelines
``Another potential Hollywood-style hassle could be practice
guidelines. I think that such guidelines could alleviate many of
our current practice hassles by helping everyone know what
constitutes effective medical care'' (Charles P. Duvall, Past
President, ASIM The Internist Nov-Dec 90)
``Doctors are just like other Englishmen: most of them have
no honor and no conscience: what they commonly mistake for these
is sentimentality and an intense dread of doing anything that
everybody else does not do, or omitting to do anything that
everybody else does'' (George Bernard Shaw, The Doctor's
Understanding the Underground
....In the Soviet Union and Eastern Europe, nearly all
useful production comes from black markets. The same is true in
most third-world countries....
The informal sector thrives everywhere that government
regulations, taxes, and labor laws prevent people from supplying
and acquiring the goods and services they want at prices they can
afford. In fact, the size of the informal sector is the perfect
measure of how much a government has overstepped its bounds.
The US therefore has an enormous informal economy.... [S]ome
recent studies have shown that in every major city, all forty
sectors of the standard industrial classification have a major
informal component. The informal economy is thus a major source
of our prosperity, and one of the reasons that we are not as poor
as we ``ought'' to be, given the size, cost, and intrusiveness of
One way in which informal businessmen avoid detection is
subcontracting....The work places of these subcontractors violate
every labor code in the book, but they are known for high
quality, low prices, and quick service. Consumers seek them out,
and would-be subcontractors ask if they too can't be
``exploited'' by having their own home business....
The informal sector serves all classes in society, but those
who really depend on it for essential services like child care
and transportation are the poor. This puts a new spin on the old
leftist claim that America offers one system for the rich and one
for the poor. Except that it has been liberal policies in taxes,
regulation, and unionism that have created the problem.
The informal sector is no paradise....Informal firms must
always be less efficient than open firms in a free market....It
is, however, instructive that informal economic arrangements work
as well as they do. It should increase our skepticism about the
``benefits'' of government services....
It is an illusion to think that the informal economy could
be wiped out through tougher enforcement. Even Stalin and Mao
couldn't do it. But it could be abolished peacefully: by
repealing the oppressive laws that create the informal sector.
Such laws stay on the books...because of the continuing power of
interest groups that seek protection from competition in a free
market. Eliminate these laws, and we will gut the special
interests...and raise everyone's standard of living. Most
importantly, we would...increase respect for the rule of law,
which the government has done so much to undermine.
Jeffrey A. Tucker, The Free Market Dec 1990
Ludwig von Mises Institute, Auburn University, Auburn, AL
AAPS Scores Victory in Supreme Court of
On December 18, 1990, the Supreme Court of Florida granted
the Jurisdictional Statement filed by the Association of American
Physicians and Surgeons (AAPS), James F. Coy, MD, Sidney R.
Steinberg, MD, and Claud A. Boyd, MD, to hear and consider their
challenge to the constitutionality of the Florida Birth-Related
Neurological Injury Compensation Act (NICA). The decision is a
most important victory for AAPS.
NICA, enacted in February, 1988, provides for compensation,
irrespective of fault, in birth-related neurological injury
claims. Florida-licensed physicians who practice obstetrics may
choose to become a member of the fund by paying an initial
assessment. All other Florida-licensed physicians are required
to pay an annual assessment, whether or not they render any
obstetrical services, even if they do not practice in Florida.
Worse yet, the Act authorizes the Commission of Insurance to
raise the assessment in his discretion. The assessment has
already been raised from $250 to $500 per year. Physicians who
fail to pay are turned over to the Florida Department of
Professional Regulation to have their licenses revoked.
AAPS and three Florida-licensed members of its board of
directors (two of whom do not reside or practice in Florida)
filed suit in the Circuit Court in and for Leon County, Florida
(see AAPS News Aug 1989). The suit alleged that the Act
violated the ``due process'' and ``equal protection'' clauses of
the US and the Florida Constitutions as well as the ``privileges
and immunities'' clause of Article IV, §2 of the US
Constitution. Further, they alleged that the Act
unconstitutionally delegated the power to tax.
At the time the AAPS case was filed, the Florida Medical
Association (FMA) then had pending a case challenging the
validity of the Act. The FMA case and the AAPS case were
consolidated for trial, and the case was tried in June, 1989.
The Circuit Court upheld the Act, and both the FMA and AAPS
appealed the decision to the District Court of Appeal for the
First District in Tallahassee. There, in July, 1990, the
Appellate Court affirmed the decision of the Circuit Court.
AAPS therefore filed its Jurisdiction Statement asking the
Supreme Court of Florida to hear the case. The FMA also filed
such a statement. However, the Court voted to refuse to accept
jurisdiction in the case brought by the FMA, although noting that
it would allow the FMA to file an amicus curiae brief in the AAPS
case. The FMA Motion for Leave to File a Brief Amicus Curiae was
granted December 31, 1990.
Like all state supreme courts, the Supreme Court of Florida
rarely accepts Jurisdiction Statements. That the Court did so in
the AAPS case indicates that it believes that the issues raised
by AAPS are of such importance that the highest court in the
state must address them.
Kent Masterson Brown, AAPS Legal Counsel, will argue the
case for AAPS on April 10, 1991.
AAPS thanks the American Health Legal Foundation for its
support of this litigation.
AMA Middlemen to Watch the Watchers of the
The AMA was low bidder on a $1-million, 5-year contract to
serve as mediator between PROs and their overseer, the SuperPRO
(a California-based firm called SysteMetrics). The new Super
Super PRO is officially known as the Physician Consultant
The duty of the 2,100 volunteer physician consultants will
be to adjudicate disputes between the PROs and the SuperPRO on
issues of appropriateness or quality of care. (PRO work on
coding and DRG validation cannot be appealed to AMA consultants.)
The physicians must choose between the positions of the PRO and
the SuperPRO and outline their findings in a one-page summary.
The SuperPRO does not have the authority to modify PRO
actions. Its opinions are reported to HCFA and may influence
decisions on PRO contract awards (AM News 11/23-30/90).
Physician Rights Under Medical Staff Bylaws
As hospital medical staff bylaws are revised, physicians
should be alert to provisions protecting their due process
rights-or to lack of same, as in footnote 2 of the enclosed
pamphlet. Are the physician's staff privileges (and thus his
livelihood, especially in the shadow of the National Practitioner
Data Bank) subject to arbitrary revocation, with or without
cause? One hospital attempted to insert a clause that stated, in
effect, that staff privileges were contingent on the doctor's
fitting in with the hospital's strategic plans:
In acting on a new application or a request for renewal
of appointment for staff membership and clinical
privileges,. . . consideration shall include the
Hospital's current and projected patient care, teaching
and research needs and the Hospital's ability to
provide the facilities, beds and support services that
will be required. In making the required need/ability
determinations, consideration will be given to
utilization patterns, present and projected patient
mix, actual and planned allocations of physical,
financial, and human resources to general and
specialized clinical and support services, and the
Hospital's and Medical Staff's general and specific
goals and objectives.
This provision, which would have given unlimited discretion to
the hospital's representatives, was deleted from the revised
bylaws after an alert county medical society officer called them
to the attention of the community.
Binding arbitration is one method of protecting physicians'
rights and shielding hospitals from antitrust actions. It can
assure that peer review is done ``with clean hands'' (in the
words of by the Semmelweis Society).
Model provisions for peer review that could be incorporated
into medical staff bylaws will be presented at the January Board
of Directors meeting in Atlanta. (Call AAPS for details after
January 26, 1-800-635-1196.)
Bylaws, arbitration, and other medical staff issues will be
the subject of the regional medicolegal seminar planned for April
26, 1991, under the cosponsorship of the St. Louis Metropolitan
(Reprints of the pamphlet are available, $12 per 100, bulk
prices on request.)
AAPS welcomes Drs. Paul M. Allen of Pascagoula, MS; John T.
Austin of Bossier City, LA; Peter C. Balacuit of Monrovia, CA;
Griffith C. Barlow of Glendale, CA; WB Belsom of Monroe, LA; B.L.
Bercaw of Naples, FL; R. Dale Bernauer of Lake Charles, LA;
Robert R. Bowes of Santa Ana, CA; Patrick J. Brandner of Las
Vegas, NV; Albert H. Capanna of Las Vegas, NV; Anthony J.
Castiglia of Templeton, CA; Brian Chung of Whittier, CA; David C.
Cook of Whittier, CA; John C. Cooksey of Monroe, LA; Jewell L
Daniels of E. Orange, NJ; Peter T. Di Napoli of Palm Harbor, FL;
Victor L Dragon of Palm Harbor, FL; R. Michael Duffin of Hemet,
CA; Robert A. Fiddes of Whittier, CA; James P. Fitzgerald of
Whittier, CA; Robert G. Gagliano of Las Vegas, NV; Richard L.
Glatzer of Miami, FL; C. Thomas Gott of Las Vegas, NV; Bert G.
Hassler of Arcadia, CA; William V. Healey of San Antonio, TX; C.
Fred Hering of Monrovia, CA; Steve Jackman of Springfield, IL;
Paul Jacobsen of Whittier, CA; Paul W. Knoop of Reno, NV; Thomas
W. La Grelius of Torrance, CA; Jon L. Landeen of Logan, UT;
Rendel Levonian of Pico Rivera, CA; James H. Machikawa of
Montebello, CA; James T. Malouf of Logan, UT; Theodore F.
Marshburn of Whittier, CA; Roderick T. McDonald of Arcadia, CA;
MH Melmed of Englewood, CO; George W. Merkle of Carlsbad, CA;
Haig Minassian of Whittier, CA; Tom Mitts of Visalia, CA; Martin
Naughton of Reno, NV; Tom Neel of Carrollton, TX; Larry Nestor of
Huntington Beach, CA; Bonna Rogers Neufeld of Fresno, CA; Richard
A. Nicholls of Ocean Springs, MS; Declan R. Nolan of Anchorage,
AK; Mark W. Odou of Montebello, CA; Bruce L. Odou of Montebello,
CA; Anchorage Fracture and Orthopedic Clinic of Anchorage, AK;
Kenneth R. Pervier of Anchorage, AK; Arthur R. Polin of Palm
Harbor, FL; Clifton C. Presser of Lutherville, MD; Thomas E.
Price of Roswell, GA; Wallace A. Reed of Phoenix, AZ; N.B.
Richter of Clifton Heights, PA; Henry C. Rowe of Hayes, VA;
William E. Ryan of Pennington, NJ; W.W. Sadowinski of Whittier,
CA; Marc P. Salomone of Palm Springs, CA; Alfredo O. Santesteban
of Bedford, TX; Edward Schauer of Farmingdale, NJ; Richard J.
Schneider of Greenbrae, CA; Wm. F. Schubert of La
Canada-Flintridge, CA; Howard D. Slobodien of Metuchen, NJ; Joel
Smietana of Montebello, CA; Thayer A. Smith of Downey, CA; John
M. Snyder of Anchorage, AK; Jerry H. Titel of Tustin, CA; David
Vastola of North Palm Beach, FL; George B. Von Wichman of
Anchorage, AK; Raymond J. Votypka of Cleveland, OH; J.W. Weber of
New London, WI; Patrick Francis Wheehy of Newport Beach, CA; and
Francis J. Williams of Newport Beach, CA.
The Graduates of Italian Medical Schools, a New York based
association founded in 1966, has voted to join AAPS.
An excerpt from the G.I.M.S. December newsletter shows their
insight into what America is supposed to be about.
From an article titled ``The Stamp Act: Carta Bollata and
Marche da Bollo British Style'':
In 1765 the British Treasury mandated that in the Colonies
all documents beyond love letters and shopping lists be written
on Government-issued paper, or validated by government stamps.
Violators would be prosecuted in an Admiralty Court, without jury
(per direttissima they would say in Italy). Nine states
protested but were silenced. So, they stopped importing British
goods. The merchants in England got the message and convinced
the Treasury that the Stamp Act was the wrong thing to do, and
the law was repealed in 1766. This proves two points: Two
hundred years ago, Americans fought for their rights, together.
They had what it takes! Money was already then the most
Letter to the Editor
This is in reference to Otto Scott's The Gelded that
accompanied the December AAPS News.
Near the bottom of panel 4, Scott says that not only have
the managers of American industry and business been gelded, but
that our mililtary leaders and, in fact, the American majority
have been muzzled, or ``treated as mutes.''
I would change one letter in the last word-``t'' to ``l,''
``mutes'' to ``mules.'' Mules have all of the appearances of
virility without the capacity. They do not breed. They cannot
propagate. They are intentionally produced, bred for one
purpose-to be passive, obedient beasts of burden.
Once gelded we are drones, workers, controlled automatons.
The ``new man,'' harnessed to obediently ``giddy-up,'' ``whoa,''
``gee,'' and ``haw'' at every command. Obey or get whipped.
Curtis Caine, Sr., MD, Jackson, MS
Jan. 26, 1991. Board of Directors meeting, Embassy Suites
Hotel, Atlanta, GA.
Apr. 26, 1991. Medicolegal seminar, cosponsored by St. Louis
Metropolitan Medical Society, St. Louis, MO.
Apr. 27, 1991. Board of Directors meeting, St. Louis, MO.
Oct. 17-19, 1991. Annual meeting, Griffin Gate Marriott,