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of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto
Volume 47, No. 9 September 1991
STATES PROPOSE CANADIAN-STYLE
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-
- The ability of health care organizations to work together
without fear of antitrust actions....
- Not ruling out the possibility of a single payor
- 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
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.
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,
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
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
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
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-
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
``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
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
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
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
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
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
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).
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,
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.