Tucson Blvd. Suite 9
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. 10 October 1991
WHEN WILL THEY EVER LEARN?
The question of national health insurance is one of ``when''
rather than ``if,'' according to Dr. Bernard Leo Remakus, author
of The Malpractice Epidemic.
Therefore, he concludes that the time has come for us to
``gather our collective genius'' [sic.] and ``create the kind of
health care system that will benefit both patients and physicians
alike''-or else [the government will create something even
Writing in Internal Medicine World Report (Aug 1991), Dr.
Remakus outlines the characteristics that he believes would
enable national health insurance to ``work'' in the United
States. These include (1) optional participation, with a
parallel private system analogous to public and private schools
and (2) federal malpractice relief for participating physicians.
Unlike the Canadian system, which has effectively outlawed
private medicine, Dr. Remakus' proposal would permit physicians
and patients to choose nonparticipation. ``Just as Americans are
guaranteed a `free' public school education but can choose a
private education at their own expense, Americans would also be
guaranteed `free' medical services through the national health
program but would be able to obtain private medical care at their
own expense.'' Presumably, there would be no choice about the
payment of taxes to support the public system, only the choice of
rejecting the benefits.
A guarantee of the right to opt out would be an improvement
over the present situation under Medicare (see p. 2). But would
Congress support the idea of medical choice (unless the choice is
to reject life-sustaining treatment)? AAPS has asked each
Senator and Representative whether he favors allowing both
physicians and patients to opt out of Medicare and make private
arrangements. So far, the only two who have replied failed to
answer the question.
One portent of the likely response to choice in medical care
is the battle waged by public-school bureaucrats against choice
in the school system. Not only do they oppose the use of tax
funds for vouchers-they also object to private contributions for
this purpose. J. Patrick Rooney, President of Golden Rule
Insurance Company, is under attack for funding a $1.2 million
voucher program to allow low-income parents to send their
children to private schools.
Mr. Rooney started the Choice Charitable Trust after the
Indiana Legislature refused to pass a school choice program. The
scholarships pay up to 50% of the costs at an Indianapolis
private school with a maximum of $800. Most local private
schools charge less than $1,600 per year; the city schools spend
an average of $4,000 per student. Nearly 10% of the parents of
public-school children picked up an application when the program
was announced. Eli Lilly and other businesses are helping the
Public school board members are suggesting that parents shun
the voucher program, and AD Pinckney, president of the local
chapter of the NAACP, thinks that Golden Rule should give the
money to the public schools instead: ``to do anything else will
be disastrous'' (Wall St J 9/6/91).
If a program is federally funded, ``any legal action against
one of the program's participating physicians would also be an
action against the government,'' in Dr. Remakus' opinion. He
sees a dramatic change in the handling of malpractice claims as
an essential inducement for physician participation. Settling
cases through an arbitration board of the national health system
instead of the courts would reduce costs. Also, government-
funded malpractice insurance would help offset lost physician
income and would ``allow the medical profession and federal
government to labor together in good faith.''
Unstated by Dr. Remakus is the presumption that the
government will assure quality, perhaps through practice
guidelines prepared by blue-ribbon committees. Again there is a
precedent: the government assures quality of education in the
public schools, and committees of prestigious educators hand down
documents such as ``Curriculum and Evaluation Standards for
School Mathematics'' by the National Council of Teachers of
Mathematics (NCTM). In the public schools, a problem of
educational or mathematical malpractice simply does not exist.
After several decades of the New Math, which was authored
and tirelessly promoted by NCTM, American students scored an
average of 37% in the Second International Mathematics Study;
Japanese students scored 76%. Good students in the New Math
explore creatively and make rich, meaningful discoveries. They
are not bound by the rigid belief that problem solving means to
arrive at the correct answer using the right method. Yes, they
are computational illiterates, but NCTM has an inspired solution:
a computer in every kindergarten (Human Events 9/7/91).
Finding the Answer
Dr. Remakus has pointed to the model for a New Medicine to
solve the problems of access, cost spirals, and malpractice using
creative, innovative methods such as committee reports and
Given the results of the New Math experiment, one can only
ask: is dropping out a problem or part of the solution?
No Way Out?
A physician who sets up a private billing arrangement with a
Medicare patient may be breaking the law. Federal regulators
disagree about what is legitimate.
Aetna of Arizona spelled out requirements for nonpar-
ticipating physicians who wish to avoid Medicare regulations
(e.g. limiting charges and the requirement to file claims) by
making an agreement with the patient: (1) Agreements must be
available to all the physicians' patients. (2) The physician
must request written notification from the carrier to remove him
from the program. (3) The patient must sign a written
agreement, before receiving treatment, that the patient will not
receive reimbursement from Medicare. The agreement must state
that the physician may bill the patient more than the limiting
In a letter to regional offices, Kathleen Buto, HCFA
director of policy development, stated that Medicare was not
bound by such agreements.
``If a patient disregards the agreement and complains to the
carrier about the failure of the physician to submit the claims,
or submits his own claims, the physician may be subject to
possible civil fines and other civil penalties for such failure''
(Part B News 9/2/91).
A Real Choice
The answer to rising medical insurance costs is to let
people keep the money they save by prudent buying.
J. Patrick Rooney, President of Golden Rule Insurance
Company, presents the numbers in a videotape entitled Restoring
the Normal Discipline of the Marketplace. He calculates that a
group family policy with a $3,000 deductible can be offered for
$1076.45 per year. Special rate calculations were needed because
such policies are rarely sold today.
Rooney recommends that employers deposit the additional
$2924 that would be spent for a $250-deductible policy into a
special savings account. The employee could use this money to
pay medical bills if needed. But the money would belong to him.
It could be withdrawn for other personal expenses (with the usual
taxes and penalties for early withdrawals from an IRA), or it
could accumulate as a nest-egg for retirement. An employee who
managed to save $2,124 per year would have $91,979 in 20 years,
assuming an interest rate of 7.5%.
AAPS has long advocated the concept of putting the patient
back into the financial equation. There are two difficulties:
(1) Insurance companies don't usually offer the policies. (2)
Medical IRAs are not permissible under current tax laws. The
option of spending wisely is not tax-deductible. Employer-
financed insurance premiums are.
Exploring workable, private alternatives to the current rush
to bankruptcy and serfdom will be the main focus of the AAPS
annual meeting. Jerry Bower of International Paper Company and
tentatively J. Patrick Rooney will join with previously announced
speakers on this subject (Gerald Musgrave, PhD of Economics
America; Hilton Terrell, MD; Michael Purr, FSA; Aldona Robbins,
PhD; Lois Copeland, MD; Francis Davis, MD, publisher of Private
Practice; and Lucy Phelps Patterson of the National Alliance for
The numbers should be clear to all, except possibly the
You won't want to miss this meeting in Lexington, KY,
October 17-19. For last-minute registrations, call 1-800-635-
1196. Hotel reservations must be made by Sept 21. Call the
Griffin Gate Marriott at 606-231-5100. Remember that discount
airfares are available through Delta Airlines, Star File
The Cost of the Middleman
Our cost to see someone without insurance in the inner-city
area of Detroit is $150 an hour. However, the cost to see people
with insurance is $250 an hour because of the additional
personnel, equipment and billing expenses needed to struggle with
all kinds of nonpayment or underpayment...[and] the insurance red
Wanda Velez-Ruiz, MD
excerpted from Medical Tribune 10/18/90
From Capitol Hill
Clinical Laboratory Survey. About 300,000 laboratories
(including those in physicians' offices) that claimed Medicare
payments during 1990 or 1991 have received a survey by certified
mail. The survey requires disclosure of financial relationships
between laboratories and physicians or members of physicians'
families. The completed survey must be received by October 1,
even though the detailed provisions of the law have not yet been
made public. The penalty for late filing is $10,000 per
day. The penalty for billing Medicare or anybody else for a
service prohibited because of a financial arrangement is
$15,000 per service. Physicians' office labs are exempted
from the self-referral prohibition (not from the survey).
95,000 Comments Received on RVS. The RVS may have
stimulated more comments than HCFA has ever before received on a
proposed regulation. HCFA has to read and sort the comments
before issuing final regulations in October. The Agency will
probably change the regulations to eliminate the effects of an
``asymmetric'' transition, but ``remains very firm'' on its
demands to reduce fees to offset assumed increases in volume
(Medicine and Health 8/26/91). Pete Stark has introduced
``emergency'' legislation to prohibit this automatic reduction.
No Congressman has yet responded to a query from AAPS about
his or her position on repealing both the RVS and limits on
Unnecessary Services Waiver. HCFA intends to demand
refunds to beneficiaries for services denied due to lack of
necessity, even if the patient signed a waiver agreeing to pay
for them, unless all its requirements are met. Notices must
state a specific reason why the physician thinks a particular
service may be denied. Routine notices to beneficiaries that do
no more than state that Medicare denial of payment is possible,
or that the physician never knows whether Medicare will deny
payment, will not be adequate. In addition, giving notice for
all claims and services is not acceptable (BNA's Medicare Report
8/23/91). Discovering whether this is done may be one reason for
requiring the waiver form to be submitted with the claim.
These new instructions went into effect July 31.
HHS Issues ``Safe Harbor'' Regulations:
Whitney v. Heckler Can Provide Means to Protect Against
On July 29, the US Dept of Health and Human Services (HHS)
issued final ``safe harbor'' regulations, outlining health care
business practices that are protected from prosecution under the
Medicare/Medicaid anti-kickback statute, 42 U.S.C. §1320a-
7b(b). The broadly worded anti-kickback statute basically
prohibits kickbacks, bribes, and rebates made directly or
indirectly, overtly or covertly, in cash or in kind, which are
intended to induce referrals. Additionally, the statute
prohibits direct or indirect remuneration intended to induce the
purchasing, leasing, ordering, or arranging for any good,
facility, service, or item paid for by Medicare or State health
In response to concerns by physicians, hospitals, and other
health care providers that the statute, on its face, outlawed
many legitimate and beneficial arrangements, Congress amended the
statute in 1987. The Office of Inspector General (OIG) was
authorized to promulgate regulations specifying payment practices
and business arrangements that will not be subject to prosecution
under the statute. While the ``safe harbor'' regulations purport
to implement this congressional directive (or abdication), the
complicated regulations will require interpretation and
application to particular circumstances in order for their legal
significance to be fully understood. Essentially, the
regulations further thrust the federal government into the areas
of health care and commercial and corporate law. This will
certainly have a chilling effect upon beneficial and legitimate
The final regulations create eleven ``safe harbors.'' These
address investment interests, space rental, equipment rental,
personal services and management contracts, sale of practice,
referral services, warranties, discounts, employees, group
purchasing organizations, and waiver of beneficiary deductibles
and coinsurance (2 Medicare Report 262, BNA, 7/26/91).
In a briefing held July 25 in Washington, DC, D. McCarty
Thornton, chief counsel to the HHS Inspector General, stated that
the ``safe harbor'' regulations do not make anything illegal and
that the statute itself determines the legality of a particular
practice. However, Thornton also stated that ``it is not
mandatory that health care providers fit into a safe harbor, but
if they don't, they face the risk of investigation and
prosecution.'' Thornton added that the ``safe harbor''
regulations are effective July 29, the date of publication, and
that ``there is no grace period'' for compliance with the new
rules. However, the OIG will take into account proof that a
person or entity covered by the statute and not fitting into a
``safe harbor'' is making ``a good faith effort to try to
restructure a business arrangement as soon as possible'' (Id.)
Despite the fact that the safe harbors are extremely narrow
and leave many legitimate and ethical business arrangements in
gray areas that are not guaranteed protection from government
investigation, OIG has stated that it will not provide case-by-
case advisory opinions on whether a certain business arrangement
under certain facts fits into a safe harbor. The result
undoubtedly will be that those subject to the law will forego
entry into productive business arrangements that are beneficial
to patients for fear of scrutiny by the government leviathan.
During notice and comment on the ``safe harbor''
regulations, the American Hospital Association requested HHS for
advisory opinions in specific cases, but HHS refused to provide
them. As a result of this refusal, the General Counsel of the
AHA stated that ``some hospitals may hesitate to enter into
legitimate business arrangements because they are not clearly
protected by these regulations'' and that ``the trickle-down
effect of that caution could limit the services a hospital offers
its community'' (2 Medicare Report 281, BNA, 8/9/91).
Even more frightening is the impact that the new regulations
may have on small and underserved communities. Physicians may be
forced to divest themselves of interests in other entities that
provide needed services. If no other person or entity is willing
to fill this economic void and provide capital for laboratories
and other facilities, the community may simply have to go
The case of Whitney v. Heckler (780 F.2d 963, 11th Cir.,
1986), a case brought by AAPS physicians challenging the
constitutionality of the 1984 Medicare fee freeze, may provide a
means by which those subject to the new regulations can
indirectly obtain an opinion on the legality of business
arrangements that fall within the gray areas of (or are not
covered by) the new regulations. In a much-cited footnote, the
US Court of Appeals held that an issue is ripe for judicial
review ``when the challenging party is placed in the dilemma of
incurring the disadvantages of complying or risking penalties for
noncompliance'' (780 F.2d, at 968-969, n. 6). This aspect of the
Whitney decision may provide a ``safer harbor''-the federal
courts-for business arrangements than the minimal and mixed
signals coming from inside the Beltway. Those who face legal
uncertainty can, by this authority, proceed to federal court for
a declaration that a business practice is legal under the anti-
kickback statute. In so doing, a party can force the hand of HHS
in litigation before a federal court and in the meantime protect
himself from prosecution.
As government interference with the practice of medicine
continues, the Whitney decision will be of lasting importance to
those who must live and practice under its yoke.
``Strict Liability'' for Codes
In Anesthesiologists Affiliated v. Sullivan, the 8th Circuit
Court upheld the decision of an Administrative Law Judge imposing
civil penalties for coding errors. Physicians were hit with a
$258,000 fine and two to three years exclusion from Medicare for
filing 211 false claims.
The anesthesiologists argued that they had provided
reimbursable services, even though they did not fit the Medicare
descriptions of the CPT-4 codes. The court ruled that the false
claims law is an ``exacting standard,'' so that ``unartful
descriptions'' of a service can be the basis for penalties.
Donna Thiel, the physicians' attorney, stated: ``The
significance of this case...is that it requires providers to file
perfectly correct claims.'' A ``strict liability'' standard
applies, she said (Part B News 9/2/91).
AMA Passes Resolution Favoring Private Medicine
On June 24, 1991, the AMA House of Delegates passed
Resolution I-151, introduced by Frank Rogers, MD, a Past
President of AAPS:
WHEREAS reimbursement for Medicare beneficiaries...continues to
WHEREAS a great majority of Medicare beneficiaries (70 to 75%)
have found it necessary and prudent to purchase supplemental
WHEREAS the enormous increase in the cost of the Medicare program
now approaches forty times predicted costs; and
WHEREAS Part B of Medicare remains voluntary; therefore
BE IT RESOLVED that the AMA will advocate and support the
development of a private alternative to Part B of Medicare
so that both doctors and patients can avoid the abuses of
the HCFA and patients may be spared the confusion, conflict,
and rationing inherent in the present socialized system.
The AMA has referred the Resolution to the Board of
Trustees. Will it be filed, along with past Resolutions written
by Dr. Rogers? Or will the AMA take action? AAPS members might
wish to write to the AMA, 515 N. State St., Chicago, IL 60610, to
ask what is being done to implement Resolution I-151. Please
send us a copy of any replies.
Letter to the Editor
Douglas R. Murphy, MD, of Venice, FL, wrote this reply to
the President of the FMA, who urged him to join the AMA:
I was a member of the AMA from the time I received my MD
degree until I laid down the scalpel after 40 years. The paradox
that amused me all of my AMA life was when a patient derisively
referred to ``that powerful AMA''-when most of us knew that it
was nothing but a paper tiger. It still is. When we send
Delegates to the AMA, we don't expect continuous compromise with
Did you know that during all of the 40 years I practiced, I
never accepted a Medicare payment? All insurance checks went to
the patient. The patient paid me with a personal check, or some
pay-back job....I was 32 years old when I drew my first paycheck
in private practice. I should let a politician steal my brains
and my birthright? No way! I'd take a sack of potatoes in pay-
ment, or I'd do the surgery for free, to keep a politician from
interfering with my rapport with my patient.
I have yet to see an attorney or a politician remove a
gallbladder, but they want to tell me how much it's worth. The
AMA has provided the ammunition to let them do so. They have
sold out and now cry that the government has deceived us. What a
laugh to trust them....
Isn't it incredible that the main topic that the AMA is
concerned with is the size of the conversion factor, when there
is a spate of bills before Congress to completely control the
I am enclosing a letter from AAPS. I have underlined the
principles they believe in, and the ones I cherish. The AMA
should be doing what they are doing. For my money, they are the
only show in town. They don't spend their time ``striking a
deal'' with the politicians.
Pete Stark, the AMA's Friend?
In his career of ``engineering a succession of crusades,''
Congressman Pete Stark (D-CA) looks forward to ``mutually
rewarding-albeit sometimes bumpy-exchanges and negotiations with
the rejuvenated AMA (Medical World News Aug 1991).
In 1986, the AMA spent $250,000 trying to unseat Stark. But
things have changed, under the leadership of Dr. James Todd.
``[The AMA's past position-] `No' is not something I can
negotiate. But if your position is `maybe,' then we can go out
to dinner,'' said Stark. ``But I'm saying, `no dessert'
[malpractice reform] until they eat their spinach. And the
spinach is that they've got to help me take care of the 37
Stark does have a problem with caring for the uninsured, or
anybody else. ``I don't know a proctoscope from a horoscope, and
I have no idea what they're worth.'' His solution: ``Let the
professionals ...argue with their peers.''
If doctors don't want to take Medicare: ``Fine.'' But if
everyone had Medicare, ``the hassle factor would be gone.''
AAPS welcomes Drs. Marc A. Cohen of Madison, NJ; Wesley
Furste of Columbus, OH; Cathy Hastings of Chicago, IL; Peter O.
Holliday, III of Macon, GA; Mary Patton of Macon, GA; and Joseph
White of Franklin Park, IL.
We are also pleased to welcome the following new student
members: Anthony Bernens of Kettering, OH; Dean V. Economous of
Dayton, OH; Richard L. Horak II of Dayton, OH; Vlada Mardovin of
Dayton, OH; Darian V. Minkunas of Dayton, OH; Jody Ross of
Dayton, OH; John Sherman of Riverside, OH; and Christine Smith of
Oct. 16, 1991. Board of Directors Meeting, Lexington, KY.
Oct. 17-19, 1991. Annual Meeting, Lexington, KY, Griffin Gate
Marriott. Call 1-800-635-1196 to register now.
Oct. 15-17, 1992. Annual Meeting, Seattle, WA.