1601 N. Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196
Hotline: (800) 419-4777
Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Volume 47, No. 9 September 1991


The pressure of rising medical costs has spurred many state legislatures to consider adopting a Canadian-style system. Last year, Washington and Colorado were actively looking at Canadian ``universal'' health insurance. This year, many more states have joined in, including California, Florida, Indiana, Iowa, Kansas, Massachusetts, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Vermont, and West Virginia.

The main point of contention is whether there should be one payer or more than one. An example of the latter is the ``competing reform plan'' proposed by the California Medical Association, the A.B.C. plan for ``affordable basic care.''

``Reform'' in Washington

At the forefront of the issue since 1989, the Washington State Medical Association called a special session of the House of Delegates in June, 1991. The House overwhelmingly endorsed a resolution on the ``Elements of Health Care System Reform'' (WSMA Reports, July, access for all Washingtonians to a basic health care benefits package with the basic benefit package defined by a public/private mechanism.1991). The resolution calls for:

  • Universal Coverage for individuals whose incomes fall below an objective income level...via state subsidized care (funded from general revenues) through a variety of alternative systems, both public and private.
  • Administrative reforms to include the use of uniform claims forms and coding and standardized electronic processing.
  • Health care cost predictability to include...explicit rationing (basic benefits), the elimination of all cost shifting, [and] technology review,....
  • Liability relief linked to conformance to practice para- meters.
  • The ability of health care organizations to work together without fear of antitrust actions....
  • Not ruling out the possibility of a single payor system....
  • Collective bargaining by physicians with the ``system''....

Resolution #1, S-91, [key undefined terms italicized--Ed.]

[A copy of the resolution is available on request.]

WSMA is part of the Alliance for Health Care Reform, which includes the Health Care Purchasers Association (representing many large firms), the Health Insurance Association of America, and several large health maintenance organizations. The Alliance claims that its plan looks like a ``pretty good deal'' compared with the one authored by State Representative Dennis Braddock, who proposed a state-run universal plan that would offer all the cost containment that $6 billion could buy at the price of a large tax increase. (Rep. Braddock's plan is modeled on the system in British Columbia.) However, representatives of WSMA admit that there is very little difference between their plan and Mr. Braddock's.

Private physicians in Washington feel that the WSMA has ``sold them down the river.'' While there may be disagreements over the details of implementation, WSMA, like most groups in organized medicine, has conceded the principle that the government has the right to dictate conditions of medical practice, including fees.

Canadian Efficiency

In Washington and other states, proponents of universal insurance under a single payer claim that the administrative savings would pay for covering the currently uninsured. They cite a Government Accounting Office (GAO) study, released in June, 1991, which estimates that a single-payer system would result in a $34 billion savings in administrative overhead and a $33 billion savings in hospital and physician administrative overhead. (For a free copy of the report, request GAO/HRD-91-90 Canadian Health Insurance from the U.S. GAO, PO Box 6015, Gaithersburg, MD 20877.)

The report also notes that eliminating copayments and deductibles, as Canada has done, would increase costs by $64 billion, cancelling most of the theoretical savings.

Health care is frequently said to consume a smaller and more stable fraction of the Canadian GNP. However, the difference could reflect a relative slowing of US economic growth rather than better control of health care costs in Canada. From 1970 to 1987, the cost of health care per capita, in constant dollars, grew an average of 4.3% in Canada, and 4.5% in the US (Marc A. Baltzan, University of Saskatchewan, ACP Observer July/Aug 91).

Many factors contribute to the difference in the fraction of GNP devoted to health care: accounting practices, demographics, and spending on medical research. Making appropriate adjustments (as for the greater age of the American population) would narrow the gap considerably (Atlantic Aug 91).

Reform or More of the Same Only Worse?

A debate over the relative merits of complete state control versus a semblance of pluralism is like discussing the size of conversion factor for the RVS. It concedes the basic principle that medical care is a governmental responsibility. This path leads to the last point of the WSMA proposal: the medical association becomes a collective bargaining unit, not a society of professionals. By the measure of true reform-a decrease in the bureaucrat to worker ratio (the parasite burden)-these state proposals are a giant step backward.

Physicians Comment on Relative Value Scale

Cardiology. As a noninvasive cardiologist, my practice consists mainly of chronic elderly patients whose management becomes more complicated and time consuming, progressively, until death. My initial visits and consultation fees were cut 38%, home visits were cut 19%, and hospital visits 12% last February. If all federal employees including the Congress were to suffer income reductions then I could not complain. However, the Congress recently received a significant pay increase. (Saul Appel, MD, El Paso, TX)

Dermatology. A 20 to 40% cut in medical fees does not lead to a 20 to 40% cut in overhead. The physician cannot reduce liability insurance premiums, personnel, utilities, etc. by 20% to 40%. All of the cut has to come out of the physician's pay.

I already work 12-hour days. I cannot increase the volume of my business and still maintain the same quality of care. (Marsha Hoffman Vaile, MD, Lakeland, FL)

HCFA ``data'' are too grossly erroneous to be used. For example, only 44 responses were used in a study of the costs of a gross and microscopic exam of pigmented nevi; the standard error was 18.4%. (Joseph Scherzer, MD, Scottsdale, AZ)

Family Practice. I am seeing at this time all the patients I can possibly see. The rapidly increasing aggravation index caused by Medicare is prompting me to reevaluate my practice, and I will most likely begin reducing further the number of Medicare patients that I see. (Henry C. Rowe, MD, Hayes, VA)

Under the RVS, the fee I receive for performing a minor surgical procedure would be the same whether I performed it in my office or in the emergency room. But in my office, I would have to bear the costs of the supplies and medications. This is a blatant attempt to undermine the practice of medicine in this community by attaching a penalty to performing services in the office, which is a more convenient and less costly environment. (Samuel Suttle, MD, Louisville, MS)

General Surgery: My current fees from Medicare and Medicaid are comparable to those that were charged in the 1960s. My fees for other patients have risen as Medicare and Medicaid fees have decreased. This works a hardship on the private sector, but our expenses must be covered.

Since I am the oldest practicing physician in Cumberland County, I am occasionally asked for advice by other physicians. I encourage them to recognize the fact that they are in a ``no win'' situation and to get out of the field of medicine as soon as possible. (R. Donathan Ivey, MD, Crossville, TN)

Internal medicine. Assuming that physicians will increase their patient visits to compensate for loss of income is a totally false assumption. Surgeons do not operate on patients solely to earn their income; they operate only when a need is present....

Since I gave a talk at the premedical club at my children's high school about the effects of government interference in medicine, the club has had no more meetings....

The medical profession, unlike the American Indian, has the power in its hands to remove its services. Thus, treating physicians in the manner in which the Government has historically treated the Indian (broken treaties, broken promises, taking of property) cannot succeed without a far greater cost. (Lois Copeland, MD, Hillsdale, NJ)

Neurology: I cannot purchase drugs at the wholesale price charged to pharmacies (much less at a 16% discount from that price). I must pay about 70% more. In addition, there is no allowance for spoilage, breakage, and other reasons that might make a drug unusable.

The cost of the materials for changing a dressing on a large head wound exceed the $40 charge that is allowed for the visit. Patients will have to be cared for in the hospital or out-patient department, requiring long and difficult travel in some cases.

Does HCFA not have access to Commerce Department figures for commercial rents? How much rent does HCFA pay in Philadelphia, San Francisco, and Baltimore, for a start? That isn't even professional office space, that is just office space which probably doesn't require ``parking for four automobiles per 250 square feet of space.'' (Andrew L. Bender, MD, Westwood, NJ)

HCFA will no longer pay independent physiological laboratories (doctor's offices) for doing EEGs. (They have paid us $74 for the study for a number of years.) Now we must refer all patients to the hospital, which Medicare pays $274. (Jacob Green, MD, PhD, Jacksonville, FL)

Ophthalmology. The concept of the behavioral offset is comparable to the farmer increasing production because he is losing a nickel on every bushel of grain that he produces. The more Medicare services I provide, the more money I lose. This lesson was learned in 1987, when I participated in the Medicare program. My practice volume increased by 15% to 20%, I worked harder than ever before in my life, I had a larger staff, higher office overhead, and turned over more gross revenue. However, my net revenue showed zero increase, although I was exposed to greater administrative stress and increased exposure to malpractice liability as well as to the inherent liabilities of doing business with Medicare. Consequently, I have stopped accepting assignment and reduced my practice volume by 25%. I reduced my staff by 40% and delayed upgrading my equipment, with less headache and no decrease in net income. (Robert Johnston, MD, Leesburg, VA)

Rehabilitation Medicine. [Re: basing physician income figures on 1980 census data for other professionals, including some who work only 9 months of the year] The period of 1980 through 1990 accounts for the most explosive growth in cost as a function of the liability insurance crisis. In 1981, the prime interest rate was 21% and we experienced nearly vertical increases across the board in the cost of doing business. (John M. Wyatt, MD, Winter Haven, FL)

Urology: The drugs we utilize in our practice (as for treatment of bladder cancer) are very expensive. There is no way I can obtain a bulk wholesale discount, according to the regional manager of the pharmaceutical company. Either I will have to give a prescription to the patient for him to purchase the drug at a pharmacy (where it will not be covered by Medicare) or we will have to be allowed to charge more than the global fee. (F. Larry Holcomb, MD, Sheffield, AL)

The average visit charge proposed by HCFA does not cover the cost of purchasing and sterilizing supplies such as sponges, syringes, catheters, and catheter trays. Procedures that I may have to discontinue: intravenous pyelograms, injections of antibiotics, and injections for impotence. (Jack D. Clayton, MD, Baton Rouge, LA)

Medical Staff Bylaws are Contracts, According to Tennessee's Highest Court

Physicians won a critical victory in the protection of their property interests in a recent decision by the Tennessee Supreme Court.

The case arose when Dr. David Alfredson, a radiologist, lost his exclusive contract at Lewisburg, Tennessee Community Hospital. Immediately afterward, the hospital also denied him the use of its equipment and support personnel, even though he had been awarded full, active privileges on the medical staff, delineated consistent with his specialty.

The loss of Dr. Alfredson's exclusive contract occurred after the hospital changed hands. The successor corporation sought to enter into a contract for computerized tomography services with another provider, and a dispute arose over whether Dr. Alfredson's agreement had been breached.

In the end, the hospital administrator told Dr. Alfredson to vacate the premises, for he would no longer have access to the hospital. The hospital proceeded to enter into a new contract with a different physician.

Dr. Alfredson filed suit, asserting that the hospital medical staff bylaws were a contract. He asserted that the contract was violated when the hospital refused to allow him to utilize hospital facilities without providing him with the due process to which he was entitled as a fully credentialed staff member.

The trial court dismissed the case on the grounds that medical staff bylaws are not a contract.

Dr. Alfredson appealed to the Tennessee Court of Appeals, Middle Section, at Nashville.

On November 8, 1989, the Court of appeals reversed the lower court in Alfredson v. Lewisburg Community Hospital. The Court found that clinical privileges are critical to a physician's ability to practice medicine and that significant property is at stake with the loss of such privileges. As a consequence, the State of Tennessee (like most states) has required hospitals to adopt medical staff bylaws containing provisions that govern the granting, revocation, or diminution of medical staff privileges, together with a fair hearing procedure (9A Tenn. Admin. Comp. ch. 1200-8-3-.01(1) and 9A Tenn. Admin. Comp. ch. 1200-8-3- .02(a)(3).)

The Court went on to say:

The regulatory obligation to adopt medical staff bylaws that include a fair hearing procedure necessarily imposes a legal duty upon the hospital to follow its own bylaws. To suggest otherwise would be to ``reduce the bylaws to meaningless mouthing of words'' (citation omitted).

While there is a conflict of authority concerning whether the bylaws themselves are a contract, we align ourselves with the courts holding that a hospital's bylaws are an integral part of its contractual relationship with the members of its medical staff. As the Supreme Court of Connecticut recently noted: ``it is crucial to understand that the medical staff bylaws, per se, do not create a contractual relationship between the hospital and the plaintiff, but because of the undertakings of the plaintiff and the hospital and because the hospital has a duty to obey its own bylaws, the bylaws have now become `an enforceable part of the contract' between the hospital and the physicians to whom it has given privileges at the hospital.''

The decision of the Court of Appeals was affirmed by the Tennessee Supreme Court.

The Legal Service will monitor such legal developments as they have a profound effect upon the property rights of every practicing physician.


``Anti-Dumping'' Fine Affirmed

On July 9, the Fifth Circuit Court ruled in favor of the Department of Health and Human Services, requiring Dr. Michael Burditt to pay a $20,000 fine (Burditt v. Sullivan CA 5, No. 90- 4611, 7/9/91). The Court held that Dr. Burditt failed to weigh medical risks and benefits before ordering the transfer of a severely hypertensive woman in active labor to a hospital 170 miles away, thus violating the Emergency Medical Treatment and Active Labor (``Anti-Dumping'' Act).

In its opinion, the court relied mainly on the testimony of expert witnesses used by the Inspector General and not on that of the experts called on behalf of Dr. Burditt. As the AMA noted in its brief amicus curiae, the act itself provides federal agencies and courts no standards or guidance to apply in determining when treatment is ``appropriate'' or ``reasonable'' in a medical sense.

The Court found no merit in Dr. Burditt's claim that the Act, by mandating medical care in certain situations, effected a public taking of his services without just compensation in violation of the Fifth Amendment. Citing Whitney v. Heckler (780 F2d 968 (CA11)), the Court noted:

Governmental regulation that affects a group's property interests `does not constitute a taking of property where the regulated group is not required to participate in the regulated industry.

In this case, the Court found ``two levels of voluntariness''-only hospitals that voluntarily participate in Medicare must comply with the act and Burditt ``was free to negotiate with the hospital or another hospital regarding his responsibility to facilitate a hospital's compliance'' with the act.

Attorneys for Dr. Burditt have said they believe the opinion contains errors, but the decision on whether to file a motion for rehearing or to appeal to the US Supreme Court awaits a careful review (BNA's Medicare Report 7/12/91).

[For further discussion of the Takings Clause, see AAPS News, January, 1991.]


Attorney's Fees Awarded in Case Against HHS

In a July 3 decision in the case of AHA v. Sullivan, the US Court of Appeals for the District of Columbia ruled that ``the federal government will be held to conduct itself like any other litigant,'' according to attorney Gregory M. Luce. The Court affirmed two federal district court orders allowing attorneys' fees on the grounds that HHS acted in bad faith when it published a Medicare secondary payer final rule (BNA's Medicare Report 7/26/91).

Letters to the Editor

Explicit Rationing and Basic Benefits in Oregon. As an otolaryngologist, I was saddened to see that acute tonsillitis does not qualify for treatment [under the Oregon Basic Health Services Program]. I do hope they will see fit to cover acute rheumatic fever and glomerulonephritis as well as peritonsillar and other abscesses that will result from untreated tonsillitis. I also noticed that they will not cover cholesteatoma; hopefully, meningitis and brain abscesses will qualify, as well as proce- dures to reanimate the paralyzed face and rehabilitate the hearing impaired.

The idea of any one person or group of people trying to ``rank'' diseases or their treatment on some sort of scale of worthiness to society is shocking. Pity the poor person with metastatic cancer whose statistical survival rate is only 9%, rather than 11%....
Fred F. Holt, MD, Charleston, WV


Administrative Costs in Canada. According to Drs. Woolhandler and Himmelstein (N Engl J Med 324:1253-1258, 1991), the solution to health care delivery is to adopt the efficiency of the Canadian provinces. [Legislators in Washington and elsewhere think so too.] However, there are several flaws in their methodology. (1) The authors did not assign to the provinces the cost of collecting funds by government ukase at all levels for such things as income tax, sales tax, excise tax, etc. (2) The private sector overhead includes money set aside for reserves, which governments can ignore as their ``reserves'' are uncollected taxes. (3) The private sector overhead includes expenditures for capital improvements....What are Canadian expenditures for capital costs?

If the Canadian government is so efficient, then why are Canadians paying a new 9% federal sales tax designed to rescue the social welfare system from near insolvency?
Calvin Ennis, MD, Pascagoula, MS


Another Solution to Rising Costs?

If voters approve Initiative 119 this fall, Washington State physicians will be able to kill their patients legally if they have a terminal or incurable disease and a six-month's prognosis.

A group called Physicians Against Initiative 119 is especially alarmed by the lack of an effective conscience clause. ``The bill states that doctors will not be forced to participate against their conscience,'' said Robin Bernhoft, MD. ``But they must find another doctor to carry out the directive or be left open for lawsuits....An angry patient or family could bring charges for abandonment, which is a civil action not covered by malpractice insurance.''

The euthanasia initiative was featured on ABC's Prime Time Live. One physician gave his solution to the discomfort that might result from a patient's struggle to breathe after being removed from a ventilator: intravenous morphine.


Truly, A Good Death

There is no positive side to a system where an individual who has no knowledge tells an expert what to do, [as when a utilization review clerk has to ask a surgeon whether ``carotid'' is spelled with a ``c'' or a ``k'' before denying payment.]

A bureaucracy is like an untreatable cancer....Our only hope is that [someone], perhaps a retired vascular surgeon, will find the main vessel of this cancerlike system and clot it off; thus causing gangrene and a bureaucratic death.
J.N. Brouillette, MD, AM News 5/13/91


Government Efficiency

According to a study of Medicare Part B reimbursements by the American Jewish Congress and the Medicare Beneficiaries Defense Fund in New York, two out of three claimants had their reimbursement appeals partially or fully upheld.

During 1990, 7,427,457 reviews were requested. Of these, 6,954,610 were resolved, with 4,249,574 reversed in full or in part. Examples of under-reimbursement included a payment of $74.90 to a patient with a $9,500 bill for reconstructive surgery for radiation burns. Medicare eventually paid $2,763.

Under Medicare law, the government must pay an interest penalty if a claim is not processed within a limited time frame. But there is no such penalty if the government loses the claim or makes an error (BNA's Medicare Report 7/12/91).


New Members

AAPS is pleased to welcome Drs. Manuel Abello of Deland, FL; Joan Barrett of Westwood, NJ; Kenneth Cartaxo of Westwood, NJ; Bert G. Hassler of Arcadia, CA; Phillip Lastello of Westwood, NJ; Albert Levy of Westwood, NJ; Rita Nzeribe of Augusta, GA; Richard W. Pharr of Brandon, MS; Melvin Shrebnick of Westwood, NJ; Michael L. Tjoelker of Everett, WA; and Sami Yasin of Edison, NJ. We also welcome a new student member, Phyllis Neef of Kettering, 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.