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Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 47, No. 10 October 1991


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 worse]. Q.E.D.

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 program expand.

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 computers.

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 charge.

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 Senior Citizens).

The numbers should be clear to all, except possibly the mathematically illiterate.

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 #U40094.


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 tape.

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 balance billing.

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 Prosecution

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 care programs.

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 free-market arrangements.

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 without.

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 decline; and

WHEREAS a great majority of Medicare beneficiaries (70 to 75%) have found it necessary and prudent to purchase supplemental insurance....

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 the Government.

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 health-care industry....

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 million uninsured.''

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.''


New Members

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 Miamisburg, OH.


AAPS Calendar

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.