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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 52, No. 6 June 1996
In 1993-94, when AAPS said that doctors could end up in
federal prison for performing a ``medically unnecessary service''
if the Clinton Plan passed, Clinton advocates called us liars.
None of them tried to defend these provisions; they were deleted
from the files posted on CompuServe. We produced the bill and
invited everyone to read it (see AAPS News Dec. 1993 and
In 1996, the Clinton plan to federalize medicine and create
a cash cow for federal prosecutors is back. Suddenly, without
notice, 100 pages of ``anti-fraud and abuse'' provisions
materialized in the House version of the Kassebaum-Kennedy Bill,
which was supposed to be a simple bill to improve the portability
of medical insurance. From there, they metastasized to the
Senate bill (S. 1028), which was originally 109 pages long.
No amendments were to be allowed on the Senate bill -
except for leadership (Dole) amendments.
The amendment to add Medical Savings Accounts to the Senate
bill failed, on a 52 to 46 vote, with Senators Bond, Chafee,
Gorton, Hatfield, and Kassebaum voting against their Party's
Nominee-Apparent for President. But the prosecutor's amendment
passed and the entire bill, as amended, passed the Senate 100 to
``No one had any problems'' with the crime provisions,
stated a House staffer at a Washington, DC, meeting. Then a
member of the audience, AAPS Director Theresa Smith, M.D., handed
him a copy of the April 25 AAPS FAX alert.
On Junkyard Dogs: Past Hearings on Fraud
``The AMA does officially support junkyard dogs, but as
long as they are FBI agents,'' stated Kirk B. Johnson,
General Counsel of the AMA, testifying before the Judiciary
Committee of the U.S. Senate, May 25, 1994.
``We believe it should be a Federal crime to defraud either
the Federal Government...or a health care plan even if it
operates exclusively in the private sector....The FBI has the
experience in private sector criminal actions. We think they have
the resources,'' Johnson continued.
At the time, the AMA noted that very good doctors sometimes
got ``caught,'' especially if they served Medicaid patients in
inner cities or in rural areas where they lacked the expertise to
understand the rules. The AMA also recognized the severity of
the criminal penalties, specifically referring to a 12-year
prison term being served by Dr. Carol Sims Robertson for
``inappropriately'' prescribing Tylenol 3.
Overall, the AMA ``commend[ed] the Administration and the
Congress for providing a number of constructive approaches to the
problems of fraud and abuse.'' However, it strongly urged that
the Attorney General, rather than the IG of HHS, be responsible
for ``coordinating'' federal efforts and opposed the ``bounty
system'' of financing.
Lack of medical necessity could be a very lucrative source
of income for prosecutors, judging by past experience (when it
was just a cause for denying claims). A study by the General
Accounting Office, presented in testimony before the House
Subcommittee on Regulation, Business Opportunities, and
Technology, March 29, 1994, showed the following:
In FY 1993, carriers denied 112 million Part B claims ($17
billion worth), constituting 19% of all claims submitted. About
9% of the dollar amount was for services deemed to be ``medically
unnecessary'' by medically untrained clerks who processed a new
claim every 72 seconds. Denial rates varied widely from one
region to another. The GAO concluded: ``We have no doubt
Medicare carriers throughout the country are arbitrarily and
improperly denying claims for several hundred thousand Medicare
beneficiaries each year.''
Let's calculate: If a $10,000 fine were imposed for each
``medically unnecessary service,'' prosecutors could demand up to
(.09)(112,000,000)($10,000) = $100 billion/year.
The Nature of the Beast
[Keynote address by AAPS Executive Director Jane M. Orient,
M.D., at the 8th National Managed Health Care Conference in
Washinton, D.C., 4/29/96.]
I was hoping that Lt. Gov. McCaughey would tell me why I'm
here-perhaps to be on display, as a relic, a fossil, an exhibit
labeled ``superfluous woman.'' I am not now, nor have I ever
been, contracted with any managed-care organization.
You have probably heard it said that solo practitioners like
me are in the first stage of medical evolution-dinosaurs, on our
way to extinction. Let us think about the nature of that beast,
Dinosaurs were huge in size and mighty in strength. They
could trample a small mammal like me underfoot, or eat me for a
light snack. There is some controversy about whether dinosaurs
were cold-blooded animals, but they were not noted for
compassion. They were Kings of the Earth. Whether carnivorous,
omnivorous, or herbivorous (terms I have heard applied to HMOs by
an HMO executive), they had to eat a lot. No time for sympathy
for their prey, even if their reptilian brain permitted it. Or
rather, their brains. These neurologically interesting beasts had
two brains, and that was one of their problems. The larger one
was at the wrong end of the spinal cord, and the orders kept
coming from the top.
Tyrannosaurus rex was not the pinnacle of an
evolutionary progression, but was more like an experiment that
failed. Massive as they were, these beasts had lot of inertia.
They couldn't adapt, and after a period of dominance, they
vanished, leaving behind only a few bones and teeth.
Now you may argue that managed care organizations are not at
all like dinosaurs because they have the ability to change their
environment and to wipe out their competitors-the shrews, the
moles, the rats, the beavers, and other pesky small mammals.
Legions of specialists are slated for the unemployment rolls, the
middle-aged and old-fashioned are headed for retirement and
oblivion, and the medical schools are reeducating a new
generation of ``providers.''
But there is a small problem with the rosy projections of
the future of managed care. The problem is called human nature.
Many throughout the ages, from the Grand Inquisitor to
Robespierre and Josef Stalin, have tried to remold human nature,
turning humankind into more admirable forms such as honeybees,
ants, or sheep. All of them failed...
Because of human nature, socialism doesn't work. The black-
shirted variety-corporate socialism or fascism-doesn't work.
Neither does the red-shirted variety, which is poised to replace
a few corporate cartels with a single government purchaser. That
is called ``single payer'' but means 250-some million payers, who
are forced to fund the single purchaser and buy medical care for
everybody while they are forbidden to pay directly for care for
Socialism of any color requires unanimity. It cannot allow
fair competition by independent practitioners. It can try to
persuade them to join, it can buy many of them out, it can drive
them to bankruptcy (the business of insurance being exempt from
the antitrust law under the McCarran-Ferguson Act). But some
independent physicians will still resist. And dissension will
arise even in the ranks of the participants. Some will not be
sufficiently cold-blooded, and some will insist on thinking for
themselves. Very soon, socialism must resort to governmental
The Kassebaum-Kennedy bill, which is supposed to be about
insurance portability, empowers the federal government to
imprison medical dissenters, even for life, and to confiscate all
the fruits of their labor. All that is required is a paid
informant and a zealous prosecutor. All physicians will have
committed a ``federal health care offense'' as defined in this
act, say by providing a ``medically unnecessary service'' or
failing to submit electronic records in the required format.
As Mao Zedong taught in his little red book, political power
grows out of the barrel of a gun. But even guns cannot make
socialism work. The human yearning for freedom is not a random
accident of nature, or a matter of taste or breeding. It cannot
be removed by eugenics, by education, by rehabilitation, or even
by brute force. This managed-care Beast is a throwback, not a
new mutation. Call it the Wave of the Future, as previous fascist
movements have been called. But this Wave will also break. The
only question is, how many human aspirations and ``covered
lives'' will it sweep away?
The Law of the Land
``Our government is an agency of delegated and strictly
limited powers. Its founders did not look to its preservation by
force; but the chain they wove to bind these States together was
one of love and mutual good offices....
``[I]n the abundance of caution, [the founders] declared
that everything which had not been delegated was reserved to the
States, or to the people....
``I need not, then, go on to argue from the history and
nature of our Government that no power of coercion exists in it.
It is enough for me to demand the clause of the Constitution
which confers the power. If it is not there, the Government does
not possess it. That is the plain construction of the
Constitution-made plainer, if possible, by its amendment.''
The Rise and Fall of the Confederate Government, pp.
Correspondence from the LLCS
Assigned vs. Unassigned Claims. We recommend that
physicians should not accept assignment. The reason is simple
self-protection and prophylactic litigation strategy. Whenever
the government begins an investigation or attempts to take a
position against a physician, the first ``move'' will be to
assert back charges or to suspend and withhold payments.
Obviously, the government would prefer, for administrative
reasons, to operate on an assigned basis only. While the
unassigned procedure does not in any way insulate the physician
from the Civil Monetary Fines provision of the law, it does
insulate him from the obvious financial trauma.
Thomas Spencer, Esq.,
[Ed. note: For ethical reasons, AAPS has always recommended
that physicians accept payment directly from patients, not from
Exclusive Contracts. Exclusive contracts are quickly
being implemented all over the country. The pattern is now a
familiar one. Physicians who have enjoyed longstanding hospital
privileges are suddenly informed of the termination of such
privileges due to the hospital's entering into an exclusive
contract with another group. Such denial of privileges often
deprives physicians of a means for earning their livelihood.
Courts are beginning to promulgate numerous opinions on this
issue. Most of these decisions are sympathetic to physicians who
suddenly lose their privileges due to an exclusive contract.
These precedents provide guidance as to when an injured physician
can obtain redress for such termination of privileges.
Two recent opinions on this topic have been issued by the
Illinois State Courts. In Garibaldi v. Applebaum, 273
Ill. App. 3d 536 (1st Dist. 4th Div. 1995), the Court held that a
hospital must adhere to its bylaws prior to the termination of a
physician's privileges. There the hospital bylaws required that
a terminated physician receive notice and rights to a hearing and
appeal. The Court expressly held that a ``hospital's bylaws are
an integral part of its contractual relationship with the members
of its medical staff.'' Id. at 540. Note, however,
that Illinois has a statutory requirement that hospitals adopt
and enforce bylaws for the protection of its staff.
But physicians who possess privileges pursuant to express
contracts with hospitals generally do not benefit from a
hospital's bylaws. In another Illinois decision, the Court held
that if a physician has privileges pursuant to an at-will
contractual relationship (subject to termination by the
hospital), then ``the hearing and review provisions of the bylaws
were not implicated by [the hospital's] termination of that
relationship.'' Bryant v. Glen Oaks Med. Ctr., 272 Ill.
App. 3d 640, 649 (1st Dist. 5th Div. 1995).
Often hospitals will fabricate a health rationale for an
exclusive contract, such as purportedly improved care or
reduction of hospital mortality, in order to disguise the real
economic motivation. For example, in St. Margaret Mercy
Healthcare Ctrs., Inc. v. Ho, Civ. No. 45A03-9510-CV-337,
1996 Ind. App. LEXIS 570 (3d Dist. Apr. 25, 1996), the hospital
had issued news releases announcing an exclusive contract for
open-heart surgery, which the hospital attempted to justify by
claiming that mortality rates were too high. Predictably, the
local press then ran stories criticizing the practicing
physicians who were excluded from the exclusive contract. There
the Court agreed that the excluded physicians have a valid cause
of action for damages against the hospital for defamation.
In some states a physician must exhaust all administrative
remedies before challenging an exclusive contract in court. The
Supreme Court of Ohio has expressly held that ``[a] physician in
a private hospital whose employment and/or hospital privileges
have been terminated must exhaust all internal administrative
remedies prior to seeking judicial review.'' Nemazee v. Mt.
Sinai Medical Center, 56 Ohio St. 3d 109, 564 N.E.2d 477
(1990). A licensed anesthesiologist who challenged an exclusive
contract in Ohio without first exhausting his administrative
remedies failed in litigation as a result. Quamme v.
Lancaster-Fairfield Community Hosp., Case No. 94-CA-33, 1995
Ohio App. LEXIS 1370 (5th App. Dist. Fairfield Co. 1995),
aff'd, 1995 Ohio LEXIS 1559.
Disputes over exclusive contracts are typically a matter of
state law. Access to the federal courts for this issue generally
requires allegation of an antitrust violation. One example of
such a violation can be found in Oltz v. St. Peter's
Community Hosp., 19 F.3d 1312 (9th Cir. 1994). There the
Ninth Circuit held that a health care practitioner has a cause
of action in antitrust for the termination of his privileges
pursuant to an exclusive contract with another group. The Court
held that an exclusive contract, standing alone, does not
constitute an antitrust violation, but an exclusive contract by a
hospital possessing large market share may constitute such a
violation. The advantage to challenging such termination under
the antitrust laws is that the successful physician can recover
treble damages, as well as attorneys' fees.
Andrew Schlafly, Esq.,
New York, NY
Westmoreland: O that we now had here
But one ten thousand of those men in England,
That do no work today!
King Henry: What's he, that wishes so?...
Rather proclaim it, Westmoreland, through my host,
That he that hath no stomach to this fight,
Let him depart....
We would not die in that man's company....
And gentlemen in England, now a-bed,
Shall think themselves accurs'd, they were not here;
And hold their manhoods cheap, while any speaks
That fought with us upon saint Crispin's day.
Henry V, Act IV, scene 3, William
Jack in the Box. True to the ``jack-in-the-box''
lampoon that I forwarded previously, the State-sponsored Medicaid
Managed Care Organization in our area has now ``threatened to not
let doctors play their little game'' in order to ``pressure''
them into signing up. Physicians in our hospital met in an
``emergency meeting'' and were told that ``if we didn't sign the
Medicaid HMO contracts'' by the end of the day, the HMO program
``would die and they wouldn't be able to offer it again for at
least two years.'' I was ready to jump up and cheer loudly: at
last, an HMO leaving the territory, defeated with its tail
between its legs. Instead, the reaction was one of urgency to
sign up so that the ``poor plan'' wouldn't die-even though an
attorney had not yet reviewed the contract! The leader of the
physicians' organization urged doctors to ``trust'' the HMO
people, although they had misled physicians from the beginning,
saying that managed care was mandatory for Medicaid recipients.
Excited by this blind trust and disregard for common sense,
Mr. Stan Lundine (former Lt. Gov. under Cuomo), is
``facilitating'' the managed-care takeover of Medicare through
the Chautauqua County Health Network. Mr. Lundine is skilled at
acquiring grant money, one of the main uses of which is to apply
for more grant money.
Why can't people see these things? Perhaps the answer is the
dumbing down of education (which ``liberals'' like because it
keeps people dependent on them). Nearly half of American high-
school seniors believe that the following phrase is found in the
U.S. Constitution: ``from each according to his ability, to each
according to his need'' (Post Journal 4/26/96).
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY
[Ed. Note: Huntoon Lampoons on managed care, Sets 1 and 2, now
available for $5 each.]
When Insurers Demand a Tax Number. In my 35 years of
practice, I have never accepted a third-party payment; I have
refused to give out my Social Security number. I personally
handle all the innumerable inquiries about this matter, never
delegating this to an employee, however trustworthy. I have had
little or no difficulty. My reply has been: ``As I don't accept
payment from anyone but the patient and have no contractual
relationship with anyone else, the law does not require me to
give you that number, which is confidential to me and the tax
authorities. However, I can understand that your computers read
numbers only and because I'd like to help you, I'll be happy to
give you my Illinois license number.'' This satisfies them 99%
of the time. But if I am told that payment cannot be made to the
patient if I do not give them the number, I ask (politely) to
speak to the President. I never get to talk to the head honcho,
but I do get to re-explain things to a supervisor who usually
concedes that my license number will do. If, however, the
blackmail continues, I say with obvious regret that I shall be
compelled to tell my patient about this and advise him to file a
complaint with the State Dept. of Insurance because the insurer
is acting in bad faith. The patient is paid very quickly after
that. The only exception to this, in my experience, is with self-
insured firms, and I don't have an answer to that one.
My attending physician's statements are prominently stamped:
``Physician does not accept assignments: please pay patient and
Donald Quinlan, M.D., AAPS Director, Chicago, IL
It's Sickness Insurance. I don't use the term
``health insurance.'' My policy does not guarantee my health or
provide monetary compensation for the fact of becoming unhealthy.
It provides for paying costs of medical care. Nor do I use the
term ``health care'' in describing physicians' services. I take
care of my own health, which includes (among many other things)
seeking medical care when needed.
In my view, these terms were coined as marketing and
political ploys to get the public to buy or agree to (and vote
for) something-feeding a fantasy of immortality in an era of
heightened health awareness. They have become slogans for those
seeking to control, distort, and dilute the medical profession.
The terms did not exist until fairly recently. They used to be
``medical insurance'' and ``medical care'' [and still are, in
AAPS News -- Ed.]
Norman Cohen, Redlands, CA
The Doctor Is Sick. I am writing a letter to my
patients to inform them that the doctors in their town are sick
and in need of emergency care. The illness is not physical, but
professional, ethical, and moral. The disease is managed care:
which means less care, less choice, less quality, and no
continuity of care....For speaking out against managed care, I
may get dropped from my patient's plan....We must turn to our
patients-they may be the only ones who can heal us.
Eric S. Mudafort, M.D., Bradenton, FL
June 1. Board of Directors, Airport Marriott, St. Louis.
Sept. 26-28. IATROS meeting, Troon, Scotland: call Dr. Tim
Winning, Berato, Barrs Brae, Kilmacolm PA 13 4DE, Renfrewshire,
Scotland, phone: 01505 874473.
Oct 10-12. 53rd annual meeting, La Jolla, CA.
Sept 17-20, 1997. 54th annual meeting, Chicago, IL.
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