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

Volume 52, No. 6 June 1996


In 1993-94, when AAPS said that doctors could end up in federal prison for performing a ``medically unnecessary service'' if the Clinton Plan passed, Clinton advocates called us liars. None of them tried to defend these provisions; they were deleted from the files posted on CompuServe. We produced the bill and invited everyone to read it (see AAPS News Dec. 1993 and Mar. 1994).

In 1996, the Clinton plan to federalize medicine and create a cash cow for federal prosecutors is back. Suddenly, without notice, 100 pages of ``anti-fraud and abuse'' provisions materialized in the House version of the Kassebaum-Kennedy Bill, which was supposed to be a simple bill to improve the portability of medical insurance. From there, they metastasized to the Senate bill (S. 1028), which was originally 109 pages long. No amendments were to be allowed on the Senate bill - except for leadership (Dole) amendments.

The amendment to add Medical Savings Accounts to the Senate bill failed, on a 52 to 46 vote, with Senators Bond, Chafee, Gorton, Hatfield, and Kassebaum voting against their Party's Nominee-Apparent for President. But the prosecutor's amendment passed and the entire bill, as amended, passed the Senate 100 to 0.

``No one had any problems'' with the crime provisions, stated a House staffer at a Washington, DC, meeting. Then a member of the audience, AAPS Director Theresa Smith, M.D., handed him a copy of the April 25 AAPS FAX alert.


On Junkyard Dogs: Past Hearings on Fraud

``The AMA does officially support junkyard dogs, but as long as they are FBI agents,'' stated Kirk B. Johnson, General Counsel of the AMA, testifying before the Judiciary Committee of the U.S. Senate, May 25, 1994.

``We believe it should be a Federal crime to defraud either the Federal Government...or a health care plan even if it operates exclusively in the private sector....The FBI has the experience in private sector criminal actions. We think they have the resources,'' Johnson continued.

At the time, the AMA noted that very good doctors sometimes got ``caught,'' especially if they served Medicaid patients in inner cities or in rural areas where they lacked the expertise to understand the rules. The AMA also recognized the severity of the criminal penalties, specifically referring to a 12-year prison term being served by Dr. Carol Sims Robertson for ``inappropriately'' prescribing Tylenol 3.

Overall, the AMA ``commend[ed] the Administration and the Congress for providing a number of constructive approaches to the problems of fraud and abuse.'' However, it strongly urged that the Attorney General, rather than the IG of HHS, be responsible for ``coordinating'' federal efforts and opposed the ``bounty system'' of financing.


Medical Necessity

Lack of medical necessity could be a very lucrative source of income for prosecutors, judging by past experience (when it was just a cause for denying claims). A study by the General Accounting Office, presented in testimony before the House Subcommittee on Regulation, Business Opportunities, and Technology, March 29, 1994, showed the following:

In FY 1993, carriers denied 112 million Part B claims ($17 billion worth), constituting 19% of all claims submitted. About 9% of the dollar amount was for services deemed to be ``medically unnecessary'' by medically untrained clerks who processed a new claim every 72 seconds. Denial rates varied widely from one region to another. The GAO concluded: ``We have no doubt Medicare carriers throughout the country are arbitrarily and improperly denying claims for several hundred thousand Medicare beneficiaries each year.''

Let's calculate: If a $10,000 fine were imposed for each ``medically unnecessary service,'' prosecutors could demand up to (.09)(112,000,000)($10,000) = $100 billion/year.


The Nature of the Beast

[Keynote address by AAPS Executive Director Jane M. Orient, M.D., at the 8th National Managed Health Care Conference in Washinton, D.C., 4/29/96.]

I was hoping that Lt. Gov. McCaughey would tell me why I'm here-perhaps to be on display, as a relic, a fossil, an exhibit labeled ``superfluous woman.'' I am not now, nor have I ever been, contracted with any managed-care organization.

You have probably heard it said that solo practitioners like me are in the first stage of medical evolution-dinosaurs, on our way to extinction. Let us think about the nature of that beast, Tyrannosaurus rex.

Dinosaurs were huge in size and mighty in strength. They could trample a small mammal like me underfoot, or eat me for a light snack. There is some controversy about whether dinosaurs were cold-blooded animals, but they were not noted for compassion. They were Kings of the Earth. Whether carnivorous, omnivorous, or herbivorous (terms I have heard applied to HMOs by an HMO executive), they had to eat a lot. No time for sympathy for their prey, even if their reptilian brain permitted it. Or rather, their brains. These neurologically interesting beasts had two brains, and that was one of their problems. The larger one was at the wrong end of the spinal cord, and the orders kept coming from the top.

Tyrannosaurus rex was not the pinnacle of an evolutionary progression, but was more like an experiment that failed. Massive as they were, these beasts had lot of inertia. They couldn't adapt, and after a period of dominance, they vanished, leaving behind only a few bones and teeth.

Now you may argue that managed care organizations are not at all like dinosaurs because they have the ability to change their environment and to wipe out their competitors-the shrews, the moles, the rats, the beavers, and other pesky small mammals. Legions of specialists are slated for the unemployment rolls, the middle-aged and old-fashioned are headed for retirement and oblivion, and the medical schools are reeducating a new generation of ``providers.''

But there is a small problem with the rosy projections of the future of managed care. The problem is called human nature. Many throughout the ages, from the Grand Inquisitor to Robespierre and Josef Stalin, have tried to remold human nature, turning humankind into more admirable forms such as honeybees, ants, or sheep. All of them failed...

Because of human nature, socialism doesn't work. The black- shirted variety-corporate socialism or fascism-doesn't work. Neither does the red-shirted variety, which is poised to replace a few corporate cartels with a single government purchaser. That is called ``single payer'' but means 250-some million payers, who are forced to fund the single purchaser and buy medical care for everybody while they are forbidden to pay directly for care for themselves.

Socialism of any color requires unanimity. It cannot allow fair competition by independent practitioners. It can try to persuade them to join, it can buy many of them out, it can drive them to bankruptcy (the business of insurance being exempt from the antitrust law under the McCarran-Ferguson Act). But some independent physicians will still resist. And dissension will arise even in the ranks of the participants. Some will not be sufficiently cold-blooded, and some will insist on thinking for themselves. Very soon, socialism must resort to governmental force.

The Kassebaum-Kennedy bill, which is supposed to be about insurance portability, empowers the federal government to imprison medical dissenters, even for life, and to confiscate all the fruits of their labor. All that is required is a paid informant and a zealous prosecutor. All physicians will have committed a ``federal health care offense'' as defined in this act, say by providing a ``medically unnecessary service'' or failing to submit electronic records in the required format.

As Mao Zedong taught in his little red book, political power grows out of the barrel of a gun. But even guns cannot make socialism work. The human yearning for freedom is not a random accident of nature, or a matter of taste or breeding. It cannot be removed by eugenics, by education, by rehabilitation, or even by brute force. This managed-care Beast is a throwback, not a new mutation. Call it the Wave of the Future, as previous fascist movements have been called. But this Wave will also break. The only question is, how many human aspirations and ``covered lives'' will it sweep away?

The Law of the Land

``Our government is an agency of delegated and strictly limited powers. Its founders did not look to its preservation by force; but the chain they wove to bind these States together was one of love and mutual good offices....

``[I]n the abundance of caution, [the founders] declared that everything which had not been delegated was reserved to the States, or to the people....

``I need not, then, go on to argue from the history and nature of our Government that no power of coercion exists in it. It is enough for me to demand the clause of the Constitution which confers the power. If it is not there, the Government does not possess it. That is the plain construction of the Constitution-made plainer, if possible, by its amendment.''

The Rise and Fall of the Confederate Government, pp. 63, 67-8

Jefferson Davis


Correspondence from the LLCS

Assigned vs. Unassigned Claims. We recommend that physicians should not accept assignment. The reason is simple self-protection and prophylactic litigation strategy. Whenever the government begins an investigation or attempts to take a position against a physician, the first ``move'' will be to assert back charges or to suspend and withhold payments. Obviously, the government would prefer, for administrative reasons, to operate on an assigned basis only. While the unassigned procedure does not in any way insulate the physician from the Civil Monetary Fines provision of the law, it does insulate him from the obvious financial trauma.

Thomas Spencer, Esq., Miami, FL

[Ed. note: For ethical reasons, AAPS has always recommended that physicians accept payment directly from patients, not from third-party payers.]

Exclusive Contracts. Exclusive contracts are quickly being implemented all over the country. The pattern is now a familiar one. Physicians who have enjoyed longstanding hospital privileges are suddenly informed of the termination of such privileges due to the hospital's entering into an exclusive contract with another group. Such denial of privileges often deprives physicians of a means for earning their livelihood.

Courts are beginning to promulgate numerous opinions on this issue. Most of these decisions are sympathetic to physicians who suddenly lose their privileges due to an exclusive contract. These precedents provide guidance as to when an injured physician can obtain redress for such termination of privileges.

Two recent opinions on this topic have been issued by the Illinois State Courts. In Garibaldi v. Applebaum, 273 Ill. App. 3d 536 (1st Dist. 4th Div. 1995), the Court held that a hospital must adhere to its bylaws prior to the termination of a physician's privileges. There the hospital bylaws required that a terminated physician receive notice and rights to a hearing and appeal. The Court expressly held that a ``hospital's bylaws are an integral part of its contractual relationship with the members of its medical staff.'' Id. at 540. Note, however, that Illinois has a statutory requirement that hospitals adopt and enforce bylaws for the protection of its staff.

But physicians who possess privileges pursuant to express contracts with hospitals generally do not benefit from a hospital's bylaws. In another Illinois decision, the Court held that if a physician has privileges pursuant to an at-will contractual relationship (subject to termination by the hospital), then ``the hearing and review provisions of the bylaws were not implicated by [the hospital's] termination of that relationship.'' Bryant v. Glen Oaks Med. Ctr., 272 Ill. App. 3d 640, 649 (1st Dist. 5th Div. 1995).

Often hospitals will fabricate a health rationale for an exclusive contract, such as purportedly improved care or reduction of hospital mortality, in order to disguise the real economic motivation. For example, in St. Margaret Mercy Healthcare Ctrs., Inc. v. Ho, Civ. No. 45A03-9510-CV-337, 1996 Ind. App. LEXIS 570 (3d Dist. Apr. 25, 1996), the hospital had issued news releases announcing an exclusive contract for open-heart surgery, which the hospital attempted to justify by claiming that mortality rates were too high. Predictably, the local press then ran stories criticizing the practicing physicians who were excluded from the exclusive contract. There the Court agreed that the excluded physicians have a valid cause of action for damages against the hospital for defamation.

In some states a physician must exhaust all administrative remedies before challenging an exclusive contract in court. The Supreme Court of Ohio has expressly held that ``[a] physician in a private hospital whose employment and/or hospital privileges have been terminated must exhaust all internal administrative remedies prior to seeking judicial review.'' Nemazee v. Mt. Sinai Medical Center, 56 Ohio St. 3d 109, 564 N.E.2d 477 (1990). A licensed anesthesiologist who challenged an exclusive contract in Ohio without first exhausting his administrative remedies failed in litigation as a result. Quamme v. Lancaster-Fairfield Community Hosp., Case No. 94-CA-33, 1995 Ohio App. LEXIS 1370 (5th App. Dist. Fairfield Co. 1995), aff'd, 1995 Ohio LEXIS 1559.

Disputes over exclusive contracts are typically a matter of state law. Access to the federal courts for this issue generally requires allegation of an antitrust violation. One example of such a violation can be found in Oltz v. St. Peter's Community Hosp., 19 F.3d 1312 (9th Cir. 1994). There the Ninth Circuit held that a health care practitioner has a cause of action in antitrust for the termination of his privileges pursuant to an exclusive contract with another group. The Court held that an exclusive contract, standing alone, does not constitute an antitrust violation, but an exclusive contract by a hospital possessing large market share may constitute such a violation. The advantage to challenging such termination under the antitrust laws is that the successful physician can recover treble damages, as well as attorneys' fees.

Andrew Schlafly, Esq., New York, NY


Westmoreland: O that we now had here
But one ten thousand of those men in England,
That do no work today!

King Henry: What's he, that wishes so?...
Rather proclaim it, Westmoreland, through my host,
That he that hath no stomach to this fight,
Let him depart....
We would not die in that man's company....
And gentlemen in England, now a-bed,
Shall think themselves accurs'd, they were not here;
And hold their manhoods cheap, while any speaks
That fought with us upon saint Crispin's day.

Henry V, Act IV, scene 3, William Shakespeare

Members' Page

Jack in the Box. True to the ``jack-in-the-box'' lampoon that I forwarded previously, the State-sponsored Medicaid Managed Care Organization in our area has now ``threatened to not let doctors play their little game'' in order to ``pressure'' them into signing up. Physicians in our hospital met in an ``emergency meeting'' and were told that ``if we didn't sign the Medicaid HMO contracts'' by the end of the day, the HMO program ``would die and they wouldn't be able to offer it again for at least two years.'' I was ready to jump up and cheer loudly: at last, an HMO leaving the territory, defeated with its tail between its legs. Instead, the reaction was one of urgency to sign up so that the ``poor plan'' wouldn't die-even though an attorney had not yet reviewed the contract! The leader of the physicians' organization urged doctors to ``trust'' the HMO people, although they had misled physicians from the beginning, saying that managed care was mandatory for Medicaid recipients.

Excited by this blind trust and disregard for common sense, Mr. Stan Lundine (former Lt. Gov. under Cuomo), is ``facilitating'' the managed-care takeover of Medicare through the Chautauqua County Health Network. Mr. Lundine is skilled at acquiring grant money, one of the main uses of which is to apply for more grant money.

Why can't people see these things? Perhaps the answer is the dumbing down of education (which ``liberals'' like because it keeps people dependent on them). Nearly half of American high- school seniors believe that the following phrase is found in the U.S. Constitution: ``from each according to his ability, to each according to his need'' (Post Journal 4/26/96).
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

[Ed. Note: Huntoon Lampoons on managed care, Sets 1 and 2, now available for $5 each.]


When Insurers Demand a Tax Number. In my 35 years of practice, I have never accepted a third-party payment; I have refused to give out my Social Security number. I personally handle all the innumerable inquiries about this matter, never delegating this to an employee, however trustworthy. I have had little or no difficulty. My reply has been: ``As I don't accept payment from anyone but the patient and have no contractual relationship with anyone else, the law does not require me to give you that number, which is confidential to me and the tax authorities. However, I can understand that your computers read numbers only and because I'd like to help you, I'll be happy to give you my Illinois license number.'' This satisfies them 99% of the time. But if I am told that payment cannot be made to the patient if I do not give them the number, I ask (politely) to speak to the President. I never get to talk to the head honcho, but I do get to re-explain things to a supervisor who usually concedes that my license number will do. If, however, the blackmail continues, I say with obvious regret that I shall be compelled to tell my patient about this and advise him to file a complaint with the State Dept. of Insurance because the insurer is acting in bad faith. The patient is paid very quickly after that. The only exception to this, in my experience, is with self- insured firms, and I don't have an answer to that one.

My attending physician's statements are prominently stamped: ``Physician does not accept assignments: please pay patient and not physician.''
Donald Quinlan, M.D., AAPS Director, Chicago, IL


It's Sickness Insurance. I don't use the term ``health insurance.'' My policy does not guarantee my health or provide monetary compensation for the fact of becoming unhealthy. It provides for paying costs of medical care. Nor do I use the term ``health care'' in describing physicians' services. I take care of my own health, which includes (among many other things) seeking medical care when needed.

In my view, these terms were coined as marketing and political ploys to get the public to buy or agree to (and vote for) something-feeding a fantasy of immortality in an era of heightened health awareness. They have become slogans for those seeking to control, distort, and dilute the medical profession. The terms did not exist until fairly recently. They used to be ``medical insurance'' and ``medical care'' [and still are, in AAPS News -- Ed.]
Norman Cohen, Redlands, CA


The Doctor Is Sick. I am writing a letter to my patients to inform them that the doctors in their town are sick and in need of emergency care. The illness is not physical, but professional, ethical, and moral. The disease is managed care: which means less care, less choice, less quality, and no continuity of care....For speaking out against managed care, I may get dropped from my patient's plan....We must turn to our patients-they may be the only ones who can heal us.
Eric S. Mudafort, M.D., Bradenton, FL


AAPS Calendar

June 1. Board of Directors, Airport Marriott, St. Louis.
Sept. 26-28. IATROS meeting, Troon, Scotland: call Dr. Tim J. Winning, Berato, Barrs Brae, Kilmacolm PA 13 4DE, Renfrewshire, Scotland, phone: 01505 874473.
Oct 10-12. 53rd annual meeting, La Jolla, CA.
Sept 17-20, 1997. 54th annual meeting, Chicago, IL.

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