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Copyright 1999 Federal News Service, Inc.  
Federal News Service



LENGTH: 4912 words



Mr. Chairman and members of the Committee, my name is Thomas R. Reardon, MD. I am the President-Elect of the American Medical Association (AMA). I am also a general practice physician from Portland, Oregon. On behalf of the three hundred thousand physician and medical student members of the AMA, we appreciate the opportunity to testify on these important patient protection issues - "information disclosure" and "gag practices." The AMA has always been a strong advocate for patient rights, and in the midst of a rapidly evolving managed care marketplace, the vigilance of all of us becomes even more critical.
At the outset, we want to emphasize that virtually all patient protections are interrelated. Ensuring that patients have information about accessible grievance and appeals procedures, for instance, will mean little if the standards that the review entities would apply are arbitrarily defined by the plans. Similarly, guaranteeing that patients have access to specialty care, would be virtually meaningless if plans could arbitrarily determine that the specialty treatment was not medically necessary. And even though we may discuss only one or two patients' fights in a particular forum, we should realize that it would be inappropriate to barter or trade one set of patient rights at the expense of other legitimate patient rights. Patients deserve to have protected all of the rights which fairness and justice require.
While discussing these two patients' fights - information disclosure and anti-gag practices, we must realize that there is currently no issue more pressing than the question of who determines the "medical necessity" of patient care. Nearly all other patient protections that have been discussed in recent years - and these two fights in particular - in some way turn on this single, critical issue. In the AMA's view, properly handling "medical necessity" is the linchpin to ensuring the promise of the full range of needed patient protections, including proper information disclosure and anti-gag clause and practice provisions.
Information Disclosure
When a person purchases a product, he or she wants to know what is being purchased. Similarly, when patients contract with health plans, they should receive all material information about covered benefits and plan procedures. Patients have a right to know what their money is buying them.
The AMA believes that legislation ensuring that plans properly disclosure all pertinent and material information to prospective and current enrollees should be enacted to help restore the nation's trust in the health care system and allay the public's fear. Plans need to disclose information on covered benefits, service areas, physician and provider access (including access to specialists), plan costs, cost- sharing, financial incentives, restrictions that may limit services, and any requirements for enrollees. In selecting plans, individuals need information to understand how the plan operates, the benefits to which they are entitled, what they must do to ensure that services are covered, and where and from whom they can obtain services.
Prospective enrollees also need to know how plans compare on items such as specific coverage exclusions, patient cost information, patient satisfaction, cost control programs, loss or medical expense ratios, number and mix of physicians and other providers, disenrollment rates and grievance and appeals procedures. When patients are given the ability to choose among plans, as they should be, they can make informed decisions only when they have the necessary information. People compare plans based on all of this critical information. Consequently, plans must provide this information to prospective enrollees in an easily understandable, standard format, allowing enough time for the prospective enrollees to review the information and have any questions they may have answered promptly and thoroughly.
When considering information disclosure requirements, we urge Congress to reflect on the concerns of all enrollees, prospective enrollees, and most especially, enrollees as patients. We believe that Congress must act to require plans to actually provide and distribute essential information, rather than simply make it accessible. For prospective and actual enrollees, inconvenience and inability to locate the source of information can frequently make "accessible" information, in effect unobtainable. As a result, patients many times cannot exercise rights to which they are legitimately entitled. Moreover, when plans distribute information to enrollees and prospective enrollees, that information functions as a convenient resource to provide ready answers to patients' pressing questions.
Some proposed patient protection legislation for instance would require that plans provide only "summaries of" or "statements regarding" or general "descriptions of' patient benefits and benefit exclusions. Some legislation would also permit plans to "make available," rather than actually distribute, information that most patients would consider essential in comparing plans and benefits effectively. For prospective enrollees to make fully informed decisions when selecting plans, they must have all the necessary facts - not the plans' summaries of facts. Plans have all of the requisite information easily available; requiring disclosure of this information would not burden them. Patients have a right to receive this information, particularly as a prerequisite to enrollment and once enrolled - at least annually thereafter, so they can provide an informed acceptance of the plans' proposed coverage terms.
Gag Clauses and Practices
Patients not only have a right to receive pertinent and material information regarding health benefits from their plan, they also have a right to be informed about their own health and all treatment options by their physicians. As an essential prerequisite, patients and their physicians must be able to communicate openly with each other, without unreasonable interference from the health plans.
Frequently health plans, however, have incorporated clauses in their contracts with participating physicians which prohibit or restrict the physicians from discussing certain noncovered treatment options with patients. Even if the plans do not include these explicit clauses - so-called "gag clauses," many plans maintain policies or practices that function to restrict open communications between physicians and patients - so-called "gag practices." The AMA has historically been on record as vehemently opposing both gag clauses and gag practices, because they create an inherent ethical conflict of interest and strike at the heart of the patient-physician relationship.
The AMA's Code of Medical Ethics, which lays out guiding principles for the entire medical profession, is very specific on this point. In it we find a very important section entitled Fundamental Elements of the Patient-Physician Relationship.

The very first "Fundamental Element" is as follows:
"The patient has the right to receive information from physicians and to discuss the benefits, risks, and costs of appropriate treatment alternatives. Patients should receive guidance from their physicians as to the optimal course of action."
In addition, the AMA's Council on Ethical and Judicial Affairs, the AMA entity responsible for maintaining the Code of Medical Ethics and providing authoritative interpretations of its contents, has stated that:
"The physician's obligation to disclose treatment alternatives to patients is not altered by any limitations in the coverage provided by the patient' s managed care plan .... Patients cannot be subject to making decisions with inadequate information. That would be an absolute violation of the informed consent requirements. If these clauses are carried out and the physicians are subject to sanction, a reduction of patient quality of care will result."The AMA staunchly believes that patients must be able to trust and rely on the information their physicians provide to them regarding appropriate medical treatment and care. In short, physicians have an ethical and legal duty to ensure that their patients are fully informed of their options regardless of cost or potential treatment limitations. Unfortunately for patients, "gag clauses" create a real or perceived potential conflict of interest for physicians by placing a wedge between them and their physician. "Gag clauses" and "gag practices" undermine two fundamental elements of the healing process - trust and confidence.
Continued Use of Gag Clauses and Gag Practices
Gag provisions are typically designed and implemented with the intent to control physician behavior and to limit a patient's access to the full range of information that is needed to make informed decisions and provide informed consent about the proper course of medical treatment. While the AMA acknowledges a legitimate business interest in addressing cost issues and avoiding unjustified disparagement of a plan's operations, we firmly believe that such efforts should not undermine the quality of care received by patients. We also readily acknowledge that not all health plan contracts contain written "gag clauses." Nevertheless, some health plan contracts still do contain these insidious provisions. More typically, though, health plans have subtle, unwritten, plan policies and procedures that effectively impede physicians from discussing treatment options if the plan does not cover those treatments.
The AMA is aware that the U.S. General Accounting Office (GAO) last year reported that based on its own study, it did not find explicit gag clauses in HMO contracts. When conducting its survey, though, the GAO asked 622 HMOs to forward to it copies of contracts they use for primary care physicians and specialists. In response, the HMOs voluntarily and perhaps selectively submitted 1,150 contracts. Of those submitted contracts, the GAO found that none of them contained "clauses that specifically restricted physicians from discussing all appropriate medical options with their patients," according to the report.
Commenting on its own survey results, the GAO admitted, however, that "the contracts sent to us (the GAO) may not be representative; (unsubmitted ones) may contain gag clauses." Consequently, the GAO survey results do not accurately reflect the types of contracts that physicians are currently being asked to sign or may be asked to sign in the future.
Recent lawsuits further suggest that the GAO's findings may not be entirely accurate. Just a few months ago, the State of Texas sued six HMOs, and in the complaints against two of them (Aetna and Humana), alleged that their physician contracts "contain gag clauses that penalize physicians for candidly discussing the coverage provided by these HMOs.1 Humana imposes $1,000 $2,000 penalties on physicians who counsel patients to disenroll from a Humana plan, according to the state.2 In all of the complaints, the state claimed that the HMO contracts include illegal incentives to limit medical care to HMO patients.
Appearing to con firm some of the HMO behavior patterns alleged in the Texas suits, GAO stated in its prior report that 60 percent of the contracts which HMOs did send included "business clauses." Business clauses are contractual provisions that purport to protect the business interests of the contract drafters - the HMOs. They generally come in one of three types: non-disparagement (restricts the physician from speaking negatively about the HMO); non-solicitation (restricts the physician from encouraging patients to consider joining other HMOs); or confidentiality (prohibiting physicians from mentioning or discussing HMOs' financial arrangements with the physicians or HMOs' corporate policies).
All of these "business clauses," though not explicitly gag clauses, would likely have a dramatically chilling effect on patient-physician communications, particularly as they relate to physicians discussing legitimate non-covered treatment options for their patients. The non- disparagement provisions would especially act to silence physicians. In fact, in response to the GAO survey, 64 percent of attorneys who represent physicians, 46 percent of those who represent both managed care organizations and physicians, and 25 percent of those who represent HMOs responded that nondisparagement "stipulations 'could have a moderate to great effect on a physician's discussion of patient treatment options."3
In the past, the AMA has found various other examples of"gag practices" that also do not rely on explicit contract provisions. Some of our physician members, for instance, have told us that certain health plans were informing their participating physicians that "effective immediately, all referrals from Primary Care Physicians to Specialists may be for only one visit," and then threatening to terminate "the contracts of physicians and affiliates who fail to meet the performance patterns for their specialty." As another example, a health plan bulletin regarding preadmission review guidelines stated that "effective immediately, all (health plan) participating providers must telephone the Preadmission Review Department...before an admission occurs and before conveying the possibility of admission to the plan member." Although a follow-up memorandum blamed "poor wording" in the original announcement for any "misinterpretation" of the bulletin as a restriction of communication between physicians and patients, the AMA maintains that the original effect of the announcement was clearly chilling.
The GAO report also indicated that the vast majority - 72 percent- of the contracts they reviewed incorporated a "without cause" or "at- will" termination clause. The GAO concluded from this that "(i)t is the contractual relationship itself- its short duration and provision for termination without cause - that may make physicians feel constrained from speaking openly with their patients." The AMA has opposed "without cause" termination clauses, for the very reason that plans can use them to unduly pressure physicians to comply with unethical managed care policies or practices.
In general, the AMA believes that the term "gag clause" should not be viewed in an overly narrow, legalistic or restrictive manner. The AMA maintains that a more common sense approach to this issue should prevail because of the fact that "gag clauses" often go beyond the mere elements of contract law and include a pattern of practice that restricts physician-patient communications. We encourage the Congress therefore to resist the urge to adopt a narrow provision protecting solely against explicit "gag clauses." The AMA believes that narrowing the important anti-gag provisions of any patient protection bill would allow plans to neglect those concerns reported by patients, physicians and others who treat and care for patients.
The AMA further believes that if patients are to be truly flee to make informed medical decisions, any patient protection legislation should be drafted to include at a minimum the following concerns:
Legislation should ensure that health plans would no longer be allowed to "gag" physicians through policies and other unwritten conduct, which intimidate physicians and interfere with a patient's right to receive essential medical information. Patients need to be protected from plans retaliating against its participating physicians for advocating on their behalf and following ethical medical practices.
Legislation should ensure that physicians are free to openly communicate with their patients. Any clauses that expressly or impliedly prohibit or restrict physician-patient communications should be deemed as contrary to public policy and unenforceable. Moreover, legislation should prohibit plans from in any manner censuring physicians for medical communications or for functioning as patient advocates.

To properly treat patients, physicians must be able to discuss the patients' health status, medical care and all treatment options, as well as any factors, such as financial incentives or utilization review procedures, that may affect the patient's treatment options. Patients have a right to receive this information from their physicians without undue interference from their health plans.In response to the GAO report, some legislators have suggested that the federal government should not move "forward pre-empting state law or regulatory authority on any issue - and most especially on issues as crucial as health care - without full consideration of sound science, thorough research and data." In general, the AMA would agree with this statement, although we believe that the science and data more than adequately show the urgent need to pass federal legislation that would prohibit gag clauses and practices. We especially agree that federal patient protection legislation should NOT function to pre-empt state laws or regulatory authority which are more protective of patient rights. This protection, like all other federal patient protections, should act as a floor and not a ceiling.
Federal Legislation is Necessary To Correct "Gag" Problems
In reaction to the loud public outcry caused by local cases where physicians have been "gagged," thereby threatening patients, a number of states have begun enacting "anti-gag clause" legislation. For example, legislatures in forty-six states have already passed laws banning "gag clauses." Some states have also chosen to address this issue through regulation. The National Association of Insurance Commissioners (NAIC) adopted a non-binding model bill more than a year ago that would, in part, ban plans from contracting to limit or prohibit a participating physician from discussing treatment options with patients regardless of the health carrier's position on the treatment options, or from advocating on behalf of patients within a utilization review or grievance process.
Given the number of states that have moved forward with legislation, the NAIC's model bill and various private sector activities to educate the public about these provisions and practices, we expect some people may pose the question, "is federal anti-gag clause legislation necessary?" The AMA believes the answer is clearly "yes!" Even if all the states enacted similar "anti-gag clause" measures, not all health plans can, or will, be reached by state law. Similarly, not all of the state legislation will effectively prevent "gag practices" from continuing. Consequently, federal legislation is absolutely essential to eliminate "gag practices" and "gag clauses" from all health plans, in both private and public sectors, and ensure that every patient is adequately protected.
Information Disclosure and Anti-gag Provisions Affected by Medical Necessity Determinations
Information disclosure requirements can also be adversely influenced by how "medical necessity" is determined and by whom. For instance, many plans in their information disclosure statements indicate that the plan will provide coverage for all "medically necessary" treatment. As a result, patients and prospective enrollees believe that they are covered for all medical treatment which is clinically appropriate and reasonably necessary to treat their illnesses, conditions, or injuries, in accordance with generally accepted standards of medical practice. When the patient suffers an illness, however, plans that have arbitrarily defined the term "medical necessity" can deny coverage for a wide range of accepted treatments that do not fall within their own arbitrary definition of medically necessary treatment.
Or consider the importance of "medical necessity" determinations in light of anti-gag clause and anti-gag practice legislation. If managed care reform legislation were to protect patient physician relationships by prohibiting gag clauses and gag practices, to what avail would open communications be to patients if they could still be arbitrarily denied the medical treatment they reasonably believe to be covered by the plan simply because the plan deems it "not medically necessary?" A ban on health plan gag clauses and practices admittedly would help to ensure that plans could not keep patients in the dark about their medical treatment options. But if the plan could still refuse treatment for any covered treatment option because of the arbitrary application of a plan's "medically necessary" definition, the patient would in fact have little real protection.
As In Gag Practices, Financial Considerations Affect Medical Necessity Decisions Historically, most private insurers and third-party payers have viewed medical necessity as those health care products or services provided in accordance with generally accepted standards of medical practice. Accordingly, medical necessity decisions were typically made using specific review criteria and processes that applied generally accepted standards of medical practice and afforded clinical peer-to-peer review. Today, however, this long-standing process is being challenged on a daily basis by health plans that determine medical necessity primarily in terms of financial considerations.
Health plans have the ability to exercise tremendous leverage over physicians while influencing the care that they can render. When health plans contract with physicians, for instance, the physicians have to agree to the plan's standard contract terms, which typically require that the physicians comply with the plan's medical management program - usually termed a "utilization management" (UM) program. While the AMA does not oppose UM programs that are conducted properly, many plans have not established UM programs which adequately involve physicians or place as their top priority improving health care quality for patients. Within the UM programs, some plans have even instituted guidelines that describe or define"medical necessity" using "lowest cost" criteria. Because of gag practices, physicians are frequently prohibited from discussing with patients these criteria.
Health plan contracts and some information disclosure packets describe the terms "medically necessary" or "medically appropriate" in ways that leave most of the medical decision-making discretion with the health plan, as opposed to the patient's physician. A common plan practice is to overlap the definitions of "covered services" and "services that are medically necessary," as noted above, such that they essentially become one and the same. Then, the plan can include language in the contract granting itself final discretion over the determination of what is medically necessary. In this manner, the plan can always make the final decision of what is "medically necessary" and thereby always limit its own covered services.
In other situations, managed care plans simply incorporate financial or cost considerations into the determination of "medical necessity." Reviews of managed care contracts last year revealed that language imposing "lowest cost" criteria had been included in many contracts' definitions of medical necessity. Health plans' concern about their profits remains the driving force behind these definitions which emphasize cost and resource utilization over quality and clinical effectiveness. To say the least, this is alarming both to patients and to physicians.
The AMA believes that health plans should not be allowed to unfairly deny medical care based on the application of such unfair and arbitrary medical necessity definitions. If health plans are able to define medical necessity in a review, the appeals process will be seriously undermined, if not rendered meaningless. The AMA does not oppose the ability of health plans and employers to establish health benefits packages, however, health plans must allow prudent physicians, not health plan bureaucrats, to make individual medical care decisions. Plan enrollees must know up-front what services are covered and not covered by their health plans. If publishing lists of"covered" services is too onerous, as some plans claim, then at a minimum, enrollees must know what is not covered. This is also why information disclosure requirements are so critical for patients and physicians.
The AMA believes that "medical necessity" or "medical appropriateness" decisions are ultimately medical decisions and must continue to be treated as such. Permitting health plans to decide "medical necessity" according to financial or cost considerations creates a dangerous precedent. This concern led the AMA in December of 1998 to refine its policy on "medical necessity" at its Interim House of Delegates meeting. The AMA believes that "medically necessity" means: "Health care services or products that a prudent physician would provide to a patient for the purpose of preventing, diagnosing or treating an illness, injury, disease or its symptoms in a manner that is: 1) in accordance with generally accepted standards of medical practice; 2) clinically appropriate in terms of type, frequency, extent, site, and duration; and 3) not primarily for the convenience of the patient, physician, or other health care provider."
As indicated, this policy uses a "prudent physician" standard, which both medically and legally is an objective standard. It also requires that the treatment be "clinically appropriate" and consistent with "generally accepted standards of medical practice," which is how it has traditionally been determined.

To mute allegations that physicians would recommend treatment for their patients' or their own convenience, this definition expressly prohibits such a practice.We realize that some plans and insurers might express concern that allowing anyone other than themselves to make medical necessity decisions will eventually lead to such abuses as health club memberships being deemed "medically necessary." This "slippery slope" argument, however, is nothing more than a red herring. As the AMA has always recommended, the external appeals process must permit physicians - independent of both the plan and the treating physician - to review the treating physician's medical necessity determination. We are not advocating that the treating physician be the ultimate decision maker, rather, we are advocating that independent, properly qualified and licensed prudent physicians make final and binding decisions. We challenge the health plans to adhere to such an equitable solution.
Because "medical necessity" decisions are in fact medical decisions, the AMA firmly believes that only physicians who are properly qualified - that is, of the same specialty, actively practicing medicine in the same state as the patient or the treating physician, and having significant familiarity with the condition in question - must review other physicians' treatment decisions. In other words, the reviewer of medical treatment decisions must be knowledgeable and properly qualified - so that patients are not mistakenly or arbitrarily denied medical treatment to which they are entitled. Additionally, the reviewer must be independent of any health care professional who participated in the initial adverse benefit determination, and should not be affiliated with or employed by the same organization.
Patients are also concerned that plans and insurers frequently deny coverage for medically necessary treatment based on information they have obtained after the tests and treatment were rendered. Determinations of medical necessity, however, must be based solely on information that was available at the time that health care services or products were provided. A physician may have to admit a patient for further observation, diagnosis, and treatment, and may only be able to complete his/her diagnosis upon receiving the patient's test results. Denying coverage of the initial treatment or diagnostic tests because the plan retrospectively alleges that they were not "medically necessary" is patently unfair and not good medicine.
In conclusion, the AMA maintains that virtually all patient protections are integrally related, with each dramatically effecting several others. Legislation prohibiting gag clauses and practices, must also address medical necessity, for instance. Toward this end, we support legislation that would require plans to provide enrollees and prospective enrollees with essential information about the plan and its benefits, and that would prohibit plans from improperly interfering with patient physician communications and medical decision making.
Thank you again for the opportunity to testify today on these important patient rights issues. On behalf of the AMA, I offer you our services in working further with the Congress to effectively address these important and pressing matters. The AMA would be pleased to work with the sponsors of any patient protection legislation to protect these critical patients' rights.
1 "Texas Alleges HMOs Engaged in Illegal Incentives, Deceptive Marketing Practices," Health Law Litigation Reporter, January 1999, Vol. 6, No. 6, p. 3.
2 Id.
3 "How HMOs Still Gag Doctors; Health Maintenance Organizations," Medical Economics, March 9, 1998, Vol. 75, No. 5, p. 42.

LOAD-DATE: March 25, 1999

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