1601 N. Tucson Blvd. Suite 9
Tucson, AZ 85716-3450
Phone: (800) 635-1196

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

Volume 63, No. 7 July 2007


A luscious prize it certainly is. Control of even a small portion of $2 trillion is extremely lucrative.

Imaging alone cost $100 billion in 2006. "Even saving a fraction is real money," said Robert Beauchamp, M.D., medical director for UnitedHealthcare's Western region. A mere 1.7% would be enough to pay for CEO Bill Maguire's stock options.

Three Democratic presidential hopefuls have unveiled plans for nationalizing American medicine under the rubric of "universal health coverage." It's been debated for decades, and "the time has finally come to act," said Sen. Barack Obama.

John Edwards and Hillary Clinton have also presented plans, which are supposed to stop short of being "an overhaul as ambitious as the 1993-94 Clinton plan."

The confluence of forces may be more favorable now. Most importantly, the insurance industry is thought to be in the mood to try to "shape" the proposal, rather than simply opposing it with "Harry and Louise" ads (Wall St J 5/7/07).

"Lenin was right when he said that `the Capitalists will sell us the rope with which we will hang them,'" writes Linda Gorman of the Independence Institute. Business interests accept the current political climate and plan to roll over, hoping to get the best deal they can under existing constraints.

Individual Mandates

Lenin was also right, Gorman states, when he said that to exercise control one must adopt five basic measures. These include "compulsory syndication (i.e. compulsory amalgamation into associations) of industrialists, merchants, and employers" and "compulsory organization of the population into consumers' societies"; "nationalisation of the syndicates"; and abolition of commercial secrecy. Individual mandates, Gorman thinks, achieve all of these in medicine and would advance the single-payer agenda faster than any other policy recommendation. For the first time, government would force people to pay for a package of services they have no control over. And mandates permit government to control the definition of insurance.

Clinton says we may need an individual mandate; Edwards would mandate coverage as soon as it becomes "affordable"; and Obama will revisit the issue if his new rules don't make coverage so attractive that everybody chooses to buy it.

Where Will the Money Come From?

No one is actually demanding that we spend a greater percentage of the GDP on medical care, only that we shuffle the money around so as to "cover" everyone. There are theoretical, unproved probably imaginary savings from information technology, preventive efforts, better management of chronic disease, and "negotiation" (price controls).

There will be losers. "It's going to mean taking money away from people who make out really well right now," Clinton explained at a recent Presidential Forum at the University of Nevada at Las Vegas.

When asked who that might be, she replied, "Well, let's start with the insurance companies." Also, there would be "no more free riders" such as young healthy people who choose to be uninsured. "You're going to have to be in the system."

It may be argued that the failure of low-risk persons to buy insurance increases the cost for "all of us." Actually, states actuary Gerry Smedinghoff, the fact that many young healthy people are uninsured has no effect on the cost of true sickness insurance. Such persons also tend to decline to buy life insurance, and this has no effect on the rates either of 23 or 53-year-olds. If health "plans" were underwritten like insurance practically speaking, illegal today there would be no group insurance and rates for 23-year-olds would be very low.

Fundamentally, there are only four real ways to bring in the money for universal care or other government objectives. In the U.S., these are taxes and fees (including community-rated "insurance premiums"); borrowing; and printing money (inflation). Other types of government also use confiscation, so far restricted here to asset forfeiture and Kelo-type seizures.

Most health insurance companies pay out $1.01 in overhead and claims for every $1.00 taken in. Their profit of 3% comes from investing the money between receipt and payout, explains Edward Dee Hinds.

Representative governments are institutionally incapable of investment, states Linda Gorman. "They are good at one thing collecting money from productive people and spending it on their friends," including those who vote for them.

Some private insurers will gain from universal coverage. The program will limit their freedom, in exchange for forcing people to buy their product, explains David Hogberg.

There Is Another Way

Americans do not have to choose between the status quo and the proposed recycled "managed competition" or Clinton redux on the way to total socialization or nationalization.

As Regina Herzlinger writes in her new book Who Killed Health Care?, transformation can occur with astonishing rapidity, if we unleash consumers and entrepreneurs. She notes that managed care went from zero to 100% penetration in only 4 years. The sense of urgency to seize government control may come from the realization that the opportunity could quickly pass if patient power gains momentum.

There are four basic scenarios for providing medical care, writes Michael Glueck, M.D., defined by whose money and whose benefit (NewsMax.com 5/21/07). Most politicians advocate using someone else's money. But Americans might learn, soon enough, that using their own money is the only way they can make their own decisions for those they love.

The UnitedHealthcare Way

After the United/PacifiCare merger, physicians in Tucson confronted increasing problems. Dr. Robert Beauchamp and Dennis O'Brien, VP for Network Management, agreed to meet with them and answer some pre-written questions.

Physicians complained that "premium designation" to steer patients to certain physicians had been arbitrarily imposed, and they could not even find out their designation.

Prior authorization was replaced with prior notification, with the result, after all the hassles and wasted time, that 3.5% of requests for imaging studies are altered. Neurosurgeon Thomas Scully, M.D., said he could not possibly do his work without studies. "I have used the peer-to-peer discussions and found they do not read the notes I send. They refuse to speak to my physician assistant because they aren't peers. Well, they [physician reviewers with United] aren't neurosurgeons." Beauchamp said, "No promises, but we may need to look into exempting certain specialties."

An office using state-of-the art information technology complained that United's technology doesn't work. Also, "online adjudications are all denied, always."

Physicians objected to threats of $25/occurrence fines if patients use an out-of-network lab. "This is a national program," O'Brien said.

It was an "embarrassment," Beauchamp said, that letters to 700 Arizona doctors had gone out complaining of their patients overusing the emergency room say for an acute traumatic injury 6 months after their last office visit.

The underlying theme is that local executives may promise to "look at this," but the answer will probably be "it is a national initiative, and we have to do what it says until we convince Minneapolis different."

One of the most influential persons on the Clinton Task Force on Health Care Reform was Lois E. Quam, on leave from UnitedHealth, where she is now President of the Public and Senior Markets Group. Quam is on the Fortune 2006 list of the 50 most powerful women in America.


The Way Out

Northwest Neuro Specialists of Tucson has been performing something like Mohs surgery on managed-care contracts. The group reviews its contracts annually, explained practice administrator Lynda Smith at an Arizona chapter meeting in Tucson. Also speaking there was chapter president Michael J.A. Robb, M.D., a Phoenix otoneurologist who has never signed such a contract.

Some practices prefer the staged radical administrativec- tomy, pioneered by urologist Mike Harris of Traverse City, MI. At the June 8 Milwaukee AAPS meeting, Harris gave a 10-year follow- up. He reported that the side effects of eliminating third parties are all favorable: a higher procedure/visit ratio, fewer unnecessary visits, motivated patients, and less cost for charity work or vacations. His accounts receivable decreased from $220,000 in Jan 1998 to about $20,000 now. "There is no better time to opt out than now," he said. "Medicare is bankrupt, and business cannot afford today's program." (AAPS News, Feb 2001, Nov 2003, and www.northernurology.com.)

Also speaking in Milwaukee, family physician and AAPS Director Todd B. West, M.D., provided facts and figures from the third cash clinic he founded, Doctor's Walk-in Care of Thomasville, GA. Happy customers are the key, he noted.


Surgeons Opt Out

Since being out of all managed-care contracts in 2004, his practice's profit per Relative Value Unit increased 360% compared with 2002, reported the late Robert DeGroote, M.D., of Hacksen- sack, NJ, in the April 2007 issue of the Bulletin of the American College of Surgeons (www.facs.org/fellows_info/bulletin/bullet.html). The still more radical idea of opting out of Medicare is explored in the May issue. In recent years, several large orthopedic practices have opted out, as have vascular surgeons, urologists, neurosurgeons, and ophthalmologists, writes Barbara Peck, J.D., of the ACS Division of Advocacy and Health Policy.


Physicians Rate Plans

In a survey conducted by the American Academy of Family Physicians and Family Practice Management, 307 respondents graded health plans from A to F. Plans graded by at least 200 doctors included Medicare (which got a C-), Aetna (C-), CIGNA (C-), and UnitedHealthcare (D+). It is possible that Medicare outscored other payers "because physicians have lower expectations for the program and expect higher levels of performance from large commercial payers that post billions of dollars of profit each year." Payment rates were the biggest concern; many PPOs pay 80% of Medicare (FPM June 2007).


Some Insurance Program...

"In 2000, tens of thousands of people on Medicare (because they had no other choice) probably thought they had normal health insurance. Then they got hit with bills of $15,000 or more," writes Linda Gorman of the Independence Institute. According to CMS figures, nearly 73,000 beneficiaries had total hospital or supplementary medical insurance liabilities greater than $15,000, averaging $21,528.


James L. Pendleton, R.I.P.

AAPS mourns the death of James L. Pendleton, M.D., of Bryn Athyn, PA, on June 7, 2007, at the age of 76. He joined AAPS in 1976 and was active in the cause of private medicine until weeks before his final illness. He was our President in 2005 and continued to serve on the Board of Directors. He founded the Pennsylvania chapter, and tirelessly organized and participated in debates and meetings that informed and inspired many of our colleagues. He contributed valuable original ideas for free- market insurance reform. In his honor, the Board of Directors will give gift memberships to 50 physicians.


AAPS Calendar

Jul 18. Wolf pack meeting, Arizona chapter, Yuma.
Sep 5,6. Arizona chapter, F. Edward Yazbak, M.D.
Oct 10-13. 64th annual meeting, Cherry Hill, NJ.

Some Doctors Continue to Fight NPI

It is possible that the NPI will effectively become the federal "license" to practice medicine. Doctors without an NPI who order expensive tests may find themselves out of business if patients leave because insurers refuse to pay for such tests.

Some physicians, however, are being surprisingly successful in resisting the pressure to obtain an NPI. Hospitals, labs, and even some insurance companies have backed off on receipt of the template that one of our members developed (www.aapsonline.org/npi/npi-letter.doc).

AAPS advised physicians to remain noncovered under HIPAA to avoid some government harassment. What we did not expect was that some state medical boards would use the federal HIPAA as a basis for disciplining physicians. But that is happening now! A physician reports that his medical board criticized him for not having a HIPAA compliance plan in place reflecting regular meetings (with minutes) with employees to provide them with HIPAA education. But physicians who followed our lead are able to say, "I don't comply with HIPAA because I am a noncovered entity." Note that covered entities also have obligations associated with having an NPI, which are only recommendations for noncovered entities with NPIs.


Other Uses for Your NPI (e.g. Identity Theft)

According to a HIPAAdvisory from Phoenix Health Systems (www.hipaadvisory.com), the NPI may be used for any lawful purpose requiring identification of a health care provider. This includes cross- referencing files in fraud-and-abuse or other program integrity function, and debt collection under the Debt Collection Improvement Act of 1996 (Pub. L. 104-134) and the Balanced Budget Act of 1997 (Pub. L. 105-33).

Unlawful purposes include identity theft. This will be facilitated by the publicly accessible NPI database that CMS is making available at the end of June. Physicians who have an NPI must take action before then to delete their DEA number and other "optional" information from this data base. See AAPS News of the Day 6/6/07; if you are not receiving this, send your email address to [email protected].

The DEA registration number is not specifically listed as an element that may be disclosed under the Freedom of Information Act (FOIA), but is probably subsumed under "other provider identifier." The only items not disclosable are the Social Security Number, the IRS Individual Taxpayer Identification Number (ITIN), and date of birth (Federal Register, vol. 72, no. 103, May 30, 2007, pp 30011-30014).

Request a paper NPI Application/Update form by calling the Enumerator at (800) 465-3203, or submit online at https://nppes.cms.hhs.gov/NPPES/StaticForward.do?forward=static.npistart.


Old Identifiers Acceptable for a Time

The government will allow physicians who are not able to use their NPI to use their UPIN on Medicare claims for part of the next 12 months. CMS will make monthly assessments of provider readiness, and could pull the plug on the extension at any time. Medicare will allow claims filers to submit "legacy" numbers to identify referring physicians for the full 12 months. Private insurers may terminate extensions at any time after May 23 after notifying providers. Some plans want the NPI, some the UPIN, some both. "It's a real nightmare for doctors," said Roger Belson, M.D., of Henniker, NJ (AMNews 5/14/07).


Additions to NPI Frequently Asked Questions

From FAQs at www.cms.hhs.gov/NationalProvIdentStand:

An indelible mark? An NPI can be deactivated. Its record will still be in the downloadable file, along with the deactivation date and NPI Deactivation Reason Code (ID 8444). Quoting a commenter, HIPAAdvisory noted: "Removal of a health care provider's [HCP's] records at some point after the [HCP's] death is reasonable, as long a there are guarantees that the [HCP's] NPI will never be used by another [HCP] or re-issued to another [HCP]."

NPI not needed for disability exams. The Social Security Administration or State Disability Determination Service are not covered entities (ID 8432).

Will the NPI Become Universal?

In a June 15, 2004, Report to Chairs of WEDI National Provider Identifier Policy Advisory Group, the issue of nonavailability of an NPI, because a provider is a noncovered entity, was addressed by Mary Kay McDaniel, consultant to the Arizona Health Care Cost Containment System (AHCCCS). One option is to hold the provider who actually renders services accountable for the financial transaction. The other is to refuse care to those who present orders or prescriptions from a provider without an NPI. She suggests that health plans and institutions make the NPI a contractual requirement or a condition for obtaining privileges. "With these requirements, use of the NPI may become nearly universal."

It was also suggested that state law require all health care providers to obtain an NPI.

White Papers prepared by WEDI and NCPCP for the Pharmacy Services Sector recommend that the NPI be placed on prescription pads. It does not replace the DEA number, which is still required for controlled substances prescriptions. Several states prohibit or restrict use of the DEA number on pharmacy claims transactions. It is recognized that noncovered entities are not required by law to obtain an NPI. Pharmacies will need to validate the NPI by calculating the check digit by an algorithm to be posted on the CMS web site and also to perform a lookup against a database indexed by NPI. Electronic prescribing standards that are not HIPAA-covered transactions are not required to use an NPI.

Disruptions in service are anticipated because of the complex requirements.


Boosting the Compliance Budget

Compliance personnel are advised to persuade administrators that more money is needed to keep up with ever-changing compliance laws and to do more in-house audits. The average budget for compliance staff with 6 10 years of experience is nearly $500,000. To get still more money from the boss, "emphasize the importance of compliance versus the risk of getting caught in noncompliance. The organization could lose a lot of money if there's a big slip-up" (MCA 5/27/07).

One more weapon in the anti-fraud arsenal: the Medicare Fraud Strike Force, which began operation in southern Florida Mar 1, using real time billing data to try to "catch criminals in the act." Some caught in the first sting will be taking plea bargains to give information leading to more busts (ibid.)


NPI Test Case Needed. The problem with fighting for the rights of noncovered entities is that the HSA market is not yet big enough to attract those who provide big-ticket items. Such entities (hospitals, labs, free-standing radiology facilities) are thoroughly hooked on third-party payment, and anything else is viewed as an unacceptable risk of nonpayment. Changing this mindset will require further decline in Medicare payment and growth of HSAs. There will come a point at which payment by patients is more reliable than payment by government. During this difficult transition period, it is predictable that some big- ticket provider is going to refuse to do a test because the ordering physician is opted out and does not have an NPI. We need to investigate legal approaches. Anyone who confronts such a difficulty should contact AAPS.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY


Fair Prices. Fair payment for medical services can only be achieved by third-party-free practice. Fair costs of doing medical business can be achieved only by free-market competition among medical vendors. America became great because our Founding Fathers allowed free-market competition.

Sadly, there are many who do not wish to compete, but would rather live on a government salary. I suggest that they join Michael Moore during his Cuba visitation and stay there.
Walter Borg, M.D., Lafayette, LA


Ruthless Cost Cutting. On-line lab tests can be obtained at a huge discount and doctors should be thrilled when a patient walks in with a battery of tests. Similarly, a patient of mine found that he could get a 100-day supply of all his medicines paying cash at Costco at a price cheaper than his copay for a 30-day supply. But such competition is threatening to statists, who would lose control over people's lives.
Del Meyer, M.D., Carmichael, CA


Limitless Demand. Physicians are only a small part of those who have many recommendations on how to get more out of your health insurance motorized wheelchair salesmen come to mind. The existence of insurance spurs many to develop drugs and devices of marginal benefit that people would never purchase for cash but are happy to get "through insurance."

Alieta Eck, M.D., Somerset, NJ


P4P, etc. With such fads as pay for performance and managed care, buyers tell providers how to practice medicine. Does no one notice how strange this is? In normal markets, buyers do not tell sellers how to produce their products more efficiently.
John Goodman, National Center for Policy Analysis


The Root of the Problem. Single-payer systems (Medicare/ Medicaid) cannot peacefully coexist in the same economy as a free-market system.
Frank Timmins, Dallas, TX


Explaining HSAs. I think we emphasize the deductible too much; it's insurance lingo and confusing to a lot of people. "Deductible" also refers to tax treatment, and that is probably a more common usage for most people.

Lumenos explained their product as an account, then a bridge, then full coverage. The $1,500 account covers everything. If you don't spend the money in the account, you keep it and it builds up with interest. If you spend all of it, you have a bridge of $1,000 you have to pay directly. Once you cross that bridge, the insurance pays 100%.
Greg Scandlen, Consumers for Health Care Choices


Health Police. In a program said to be copied from one in Reno, NV, members of the Boise Police Department went door to door in an apartment neighborhood, identifying families who might benefit from free immunizations and service referrals. The BPD is teaming up with health agencies in the Kids Korner program, funded by a grant from Idaho's Generation of the Child. One Idaho legislator told me that "this is not a proper role for the police."
Violet Harris, Caldwell, ID


Zero Tax-Filers. In 2004, a record 42.5 million tax returns one-third of all returns filed had no income tax liability because of the available credits and deductions. This is a 42% increase in the number of zero-tax filers in 4 years. These filers probably represent 120 million people. There are also 15 million individuals or households who do not earn enough to file a tax return. Is tax reform possible when the burden is increasingly borne by a shrinking pool of taxpayers who, at least on paper, appear to be "upper income"?
Joseph Lee Pugh, Diamondhead, MS


Massachusetts Plan. The legislation itself says that people seeking state-subsidized insurance to fulfill the mandate will be on Medicaid up to 300% of federal poverty level (FPL). Since, we are told, most uninsured people are below 300% of FPL, this boils down to Medicaid for all. I love the logic here. Medicaid is busting state budgets. So to save state budgets, we provide more medical care through Medicaid so that the uninsured will no longer have to use their own money to buy medical care because it is somehow unfair to require them to do that. If the state spends more on medical care, it is supposed to cost less. Expand Medicaid; reduce state spending!
Linda Gorman, Independence Institute, Golden, CO