(Re: Medicare Fee Schedules, Rural Health,

Medicare Reform, and Other Matters)

Aron Primack, MD
Executive Director
PPAC Medical Officer
Center for Health Plans and Providers

Robert Berenson, MD
Director
Center for Health Plans and Providers

Kathy Buto
Acting Director
Center for Health Plans and Providers

David C. Clark, RPH
Director
Office of Professional Relations
Center for Health Plans and Providers

Melanie Combs
Acting Chief
Contractor Management Branch
Program Integrity Group
Office of Financial Management

Ronald Farris, MD
Administrator
Dallas Regional Office

Thomas Gustafson
Director
Plans and Provider Purchasing
Center for Health Plans and Providers

Bernice Catherine Harper, LLD
Office of Professional Relations
Center for Health Plans and Providers

Hugh Hill, MD, JD
Medical Advisor
Center for Health Plans and Providers

Terrence Kay
Director
Division of Practitioner and Ambulatory Care
Center for Health Plans and Providers

John P. Lanigan
Office of Professional Relations
Center for Health Plans and Providers

Paul Olenick
Senior Technical Advisor
Plan and Provider Purchasing Policy Group

Paul Rudolph, MD, JD
Medical Advisor
Center for Health Plans and Providers

Sharman Stephens
Director
Planning and Policy Analysis Group
Office of Strategic Planning

Gregory Pappas, MD, PhD (Observer)
Senior Policy Advisor
Office of the Assistant Secretary for Public Health and Science

Ted Cron
Consultant Writer-Editor
Office of Professional Relations
Center for Health Plans and Providers

===========================================================

Edward Hill, MD, member of the Board of Trustees of the American Medical Association
John B. Neeld, Jr., MD, President of the American Society of Anesthesiologists
Michael L. Weinstein, MD, of the American Society for Gastrointestinal Endoscopy

The 30^th meeting of the Practicing Physicians Advisory Council (PPAC) took place on Monday and Tuesday, September 27 and 28, 1999, at the HCFA Administration Building in Baltimore, MD.

Dr. Primack to Go to USUHS

Dr. Kuffner called the meeting to order at 8:30 AM. Kathy Buto, Acting Director of the Center for Health Plans and Providers, announced that Dr. Aaron Primack, PPAC Executive Director and Medical Officer in the Center for Health Plans and Providers, will be moving shortly to the Uniformed Services University for the Health Sciences (USUHS). Paul Rudolph, MD, an endocrinologist and former Associate Carrier Medical Director for TrailBlazers (MD, DC, Del), will be the new PPAC Executive Director.

Following a round of applause, Dr. Kuffner and other members of the Council expressed their appreciation for Dr. Primack, who Aworked hard on our behalf.@ Dr. Primack responded with praise for PPAC, noting that it Ahas come of age@ and provides HCFA and HHS with Abetter answers, more direct advice, [and] more pointed advice, as opposed to generalities.@

The Chair then welcomed Terrence Kay, Director of the Division of Practitioner and Ambulatory Care in the Center for Health Plans and Providers. Mr. Kay described the process for development of Medicare=s proposed physician fees for 2000. The proposed rule was published July 22nd and the comment period ended September 20th; November 2 is the deadline for publishing the final rule. Mr. Kay noted the following areas of concern:

• methodology issues for arriving at the proposed fees for practice expense (e.g., survey sampling, supplemental surveys as alternatives to the SMS data, etc.); a contract has been awarded to Lewin Associates to review HCFA=s methodology and make recommendations;
• The resources required to perform a physician service (i.e., what staff, equipment, supplies, and overhead are required to perform a service; the Relative Value Update Committee (RUC) has established a Practice Advisory Committee (PEAC), to work with HCFA on this matter;
• the setting up of resource-based relative values for malpractice expenses, as required by the Balanced Budget Act (BBA) of 1997, but retaining some differential for geographic locality; and
• whether or not to permit other licensed professionals (e.g., nurse practitioners, clinical nurse specialists, nurse midwives) to perform such tests without physician supervision.

The Council raised the question of the possible narrowness of participation in the AMA=s Socio-Economic Monitoring System (SMS) Survey. Mr. Kay said HCFA was aware of the criticism but was awaiting the results of the Lewin review before proceeding.

Recommendations by the AMA: The Chair then welcomed Edward Hill, MD, member of the Board of Trustees of the American Medical Association, to the witness table. Dr. Hill presented the following recommendations:

• That HCFA correct the Aclear and egregious errors in the Clinical Practice Expert Panel (CPEP) data ... used to develop the Practice Expense Values for Physician Services ... for purposes of the final Physician Payment Schedule Rule.@
• That the RUC be the group HCFA uses to Avalidate physician time data for the purpose of determining practice expense values for each service.@
• That HCFA Aclearly establish that collaboration agreements between [nurse-] practitioners and physicians are a condition of Medicare coverage and payment, regardless of state law, and ... that such collaboration requires physician supervision.@
• That HCFA not remove clinical staff time from the CPEP data for services provided to hospital patients, until after HCFA issues its Physician Fee Schedule final rule for 2001, thus giving the Aphysician community ... more time to consider this proposal.@

The Chair invited Mr. Kay to share the witness table with Dr. Hill and engage in dialogue on certain points raised by Dr. Hill. Both witnesses agreed, for example, that while there were errors in the codes, it might take a while to identify those that were Aclear and egregious.@

Priorities should be set: Council suggested, in light of the enormous number of codes to be reviewed, that HCFA set some priorities for the error review. Mr. Kay agreed but also noted that it is difficult for HCFA to get well-audited information from physicians about times, costs, and procedures in order to correct and verify code data. Dr. Hill added, however, that HCFA first requested CPEP data in 1997, but little has been heard of the effort since then. The Council remained skeptical, however, that the RUC by itself could review all the practice codes within any reasonable time frame and suggested, rather, that the different medical specialties review those codes with which they have a special interest.

At a member=s request, Mr. Kay defined and gave examples of HCFA=s three levels of physician supervision: general, direct, and personal. However, he added, because of physician objections and uncertainties, HCFA has not been able to publish a final list of supervision levels for the full range of diagnostic tests administered by all the specialties.

Malpractice insurance: Members noted that malpractice premiums are based on whether a physician does or not do a particular procedure, whereas HCFA reimburses when such a procedure is actually done; hence, a physician who rarely does a high-premium procedure does not get much reimbursement toward his premium.

The Council also asked Mr. Kay and HCFA to bear in mind the possible bad effects upon quality medical care, as a result of some of the serious changes proposed in the forthcoming resource-based physician fee schedule for 2000.

Testimony from the American Society of Anesthesiologists: The Chair next welcomed John B. Neeld, Jr., MD, President of the American Society of Anesthesiologists (ASA), who told PPAC that the ASA=s survey data Asuggest that large numbers of anesthesiologists employ clinical staff in the facility setting, predominantly anesthesia technicians and registered nurses@ and are currently reimbursed for these expenses. However, he added, HCFA=s proposed rule (Ato eliminate allowance for clinical staff expenses in the facility setting@), published on July 22^nd, Awould eliminate approximately one-half of the practice expenses currently allowed to anesthesiologists under the fee schedule.@ Dr. Neeld asserted that HCFA continues to press ahead, although its action is Abased on no hard data.@

Hospitals won=t hire staff: Council Members generally echoed Dr. Neeld=s concerns, adding that hospitals tend to install new equipment but will not hire skilled personnel to operate it, relying on practicing physicians to bring along the appropriate technicians and assistants. Members commented that such was already the case with regard to patient education, formerly done by hospital staff and now done mostly by a physician=s own professional or office personnel. They also predicted that, as a result of HCFA=s rule giving a Asite-of-service differential,@ many other specialties will feel the same effects now described by the anesthesiologists (i.e.,physicians paying skilled staff costs within the hospital setting). Physicians may decide to do more complicated procedures in their offices rather than in a hospital setting, with potentially undesirable quality-of-care outcomes. Members agreed that the proposed HCFA rule posed a Aserious patient safety issue,@ which needed to be addressed.

Testimony from the American Society for Gastrointestinal Endoscopy: The Chair next welcomed Michael L. Weinstein, MD, speaking on behalf of the American Society for Gastrointestinal Endoscopy. Dr. Weinstein asked PPAC to urge HCFA to delay action on its proposed rule giving Aa site-of-service payment differential between office and hospital,@ adding, AIt may sound like we're sort of turf-protecting, ... but ... this is really a patient safety issue, and we're only here trying to protect the public.@

MID-MORNING BREAK

The Chair then introduced James Randolf Farris, MD, Regional Administrator of the HCFA Region VI office in Dallas, who provided statistical information on rural health service delivery and described the perceived impact of the BBA on rural hospitals, nursing homes, clinics, and home health agencies. Dr. Farris noted that Aone in four Medicare beneficiaries lives in rural America ... [and] rural hospitals very definitely serve a critical role in areas where the next hospital may be many miles and in some cases hours away ...@ However, said Dr. Farris, Atotal operating margins for rural hospitals appear to be steadily decreasing, perhaps as a ... direct result of Balanced Budget Act provisions...@ He explained that these hospitals Ahave expanded their delivery services from being purely in-patient units to include out-patient services, swing bed services, skilled nursing facility beds, rehabilitation services, as well as home health services ... [but] it appears that the Balanced Budget Act is decreasing payments for each of these separate services.@ As a result, Dr. Farris observed, Athe cumulative effect of reducing revenue in all areas could result in the inability of the hospital to cover shortfalls and ... operate at less than cost ... It appears,@ said Dr. Farris, Athat margins for rural hospitals are steadily decreasing, in some cases into negative numbers.@

AAfter providing this background information, Dr Farris discussed data compiled by the Rural Policy Research Institute and the proposed remedies that the National Rural Health Association and state rural health associations have submitted.@

Some of the proposed remedies mentioned:

• Exempt critical access hospitals and other rural hospitals from the out-patient prospective payment system.
• Repeal the Balanced Budget Act provision which imposes financial penalties on rural hospitals that transfer Medicare patients to post-acute settings before the DRG payment period has expired.
• Allow rural hospitals which have down-sized or closed within the last three years to reopen as critical access hospitals or allow critical access hospitals to choose between the payment options of (1) reasonable cost for facility services or (2) an all-inclusive rate which combines facility and professional services.
• Change the 96-hour length-of-stay limit to a 96-hour average or allow a true exception system.
• Exempt critical-access hospital swing beds from the prospective payment system for skilled nursing facilities.
• Expand payment for telemedicine services.
• Replace the current Medicare disproportionate-share payment structure with a new and simpler formula in order to improve the definition of which patients should be counted toward qualifying a hospital for extra payments.

In closing, Dr. Farris reported that he had gone Athe extra step@ and had asked the Carrier Advisory Committees in the 13-State Southern Consortium Ato consider the inclusion of rural health providers into their body to ensure that rural health concerns are put on the table at the Carrier Advisory Committee level.@

The Chair thanked Dr. Farris, adding that the BBA Ahas just been horrendous@ for urban and teaching hospitals, which have the added burden of managed care (not a very lively alternative in most rural areas). The Chair then invited Dr. Hill to add the AMA=s comments with regard to rural health.

A better model is needed: Dr. Hill suggested that the Nation look for Aa much better model@ for rural health care than the current one. From personal experience he concluded that the goal should be quality medical care and that many small rural hospitals do not provide quality care and therefore ought to be closed. Dr. Hill said a good primary care physician for every family would produce better rural health care than most present hospitals. In addition, he proposed Astabilization and transfer centers@ to move critically ill rural patients to facilities where they would get quality medical care. AForget about this old community hospital system,@ said Dr. Hill. AIt doesn=t work. It=s not going to work.@

Council members thanked Dr. Farris and Dr. Hill for their comments. Some suggested that better emergency medical systems need to be established, but most Members tended to agree with Dr. Hill=s assessment of the need for a Anew model.@ Members also emphasized the need Afor an integrated approach@: i.e., to improve other aspects of community rural life, including such infrastructure elements as education, employment, and roads and public transportation, because simply improving the health and medical care system will not be enough.

Importance of J-1 visas: The Council also returned to the issues of physician recruitment and retention in rural areas and the decline in support for graduate medical education for minority doctors. In that context, the Council noted the importance of J-1 visa waivers for foreign medical graduates practicing in rural America. One Members observed, AWe have 60,000 registered patients [living in] a very large rural area, and half of my providers are [FMGs with] J-1s ... If I did not have J-1 waivers, we would not have health care providers in many of our areas.@

The Chair next welcomed Thomas Gustafson, Director of Plans and Provider Purchasing in the Center for Health Plans and Providers. Following his presentation at the June Council meeting, which paid special attention to the chiropractor issue, Mr. Gustafson sent Council Members a clarifying letter. At this meeting Mr. Gustafson attempted to re-state his clarification, which went like this (verbatim from the transcript):

• A...manual manipulation of the spine to correct a subluxation is specifically referenced in the Social Security Act in connection with the definition of a physician, in particular the chiropractor as a physician for this purpose...
• ASince ... .Medicare+Choice plans and other managed care organizations are required to make available all Medicare Part A and Part B benefits, they, by extension, must make this particular service available ... [S]ince it is identified as a physician service, they must make available physicians in order to deliver it ...
• A...[T]hese physicians ... may include any providers that are defined as physicians under the Social Security [Act] ... included but not limited to chiropractors, and this is the subject of a lawsuit ... with the American Chiropractic Association ...
• A...a Medicare+Choice plan must make available physicians capable of performing manual manipulation of the spine to correct a subluxation ...
• AA corollary implication ... is that plans cannot rely exclusively on non-physician practitioners, such as physical therapists, in order to fulfill this responsibility.
• However, A...plans may continue to use physical therapists. [P]hysical therapy is also a benefit under Medicare ... [P]hysical therapists employed by or under contract with plans may continue to perform and be paid for manipulative treatments, including manipulation of the spine. I'm saying that very carefully.
• AThe anti-discrimination provision ... indicates that a plan should not discriminate ... on the basis of licensure. The section goes on ... to say that >this paragraph shall not be construed to prohibit a plan from including providers only to the extent necessary to meet the needs of the plan's enrollees= or >from establishing any measure designed to maintain quality and control costs consistent with the responsibilities of the plan.=@
• Finally, the Inspector General is carrying out a study to help update HCFA=s understanding of the actual situation at the point of care. The results are expected momentarily.

Mr. Gustafson noted that HCFA published a final rule on that matter on February 17^th, laying out different paths of appeal for providers who were signed onto a plan and providers who were not. That rule permitted plans to withhold administrative detail from complainant providers under the rubric of Aproprietary information.@ However, the plans cannot use the Aproprietary information@ shield to prevent their providers from learning relevant administrative information.

ACost control@ is a blank check: The Council noted that managed care plans were continuing to shave their interpretations of the laws and regulations in order to reduce patient services and cut costs by shifting services from high- to lower-paid providers. Members indicated they thought the language on Acost control@ is a virtual blank check for plans to legally manipulate providers to the detriment of quality patient care. They agreed that the issues raised by chiropractors are only Athe tip of the iceberg.@ Mr. Gustafson admitted that Athe anti-discrimination provision is not as strong a read as you might hope,@ but there was still much to be learned from experience with the provisions of the BBA and HCFA=s subsequent policy letters and regulations. However, he emphasized again that the law does not prohibit Aa plan from establishing any measure designed to maintain quality and control costs.@ Members generally agreed that Athis issue [is] going to be a disaster.@

With that, the Chair adjourned the meeting for lunch.

Following the lunch break, the Chair welcomed Melanie Combs, Acting Chief of the Contractor Management Branch of the Program Integrity Group in the Office of Financial Management. Ms. Combs gave a brief post-1989 history of the Carrier Advisory Committees (CACs). Ms. Combs noted that HCFA has required the addition of certain public representatives (e.g., providers, consumers, disabled beneficiaries, etc.) on the CACs, as the needs arose. To the delight of the Council, she said her group would require CACs to add a person representing rural concerns, as a result of that morning=s eloquent presentation by Dr. Farris.

Ways to improve the CACs: Ms. Combs then shared with the Council the following ideas generated by her staff, in preparation for this afternoon=s meeting, for improving the CACs= advisory process for local medical review policies:

• Open up the process to the general public; in this way, she said, a physician would not have to be a CAC member Ato be able to speak and be heard.@
• Make more use of the Internet: for example, Arequiring each one of our contractors to publish on their Internet Web site the agenda for the upcoming CAC...@
• A[R]equire that [CACs] share ... policy with everybody by putting it up on their Internet Web site and making it available to everyone.@
• A[R]equire each one of our contractors to make very clear on their Web site and in their publications that they will accept from any member of the public, CAC member or not, a suggestion for a local medical review policy ...@
• Finally, permit Amembers of the public [to] give presentations to the CAC members.@

Physician input is Aimperative@: Before opening accepting questions from Council Members, the Chair invited the AMA=s Dr. Hill to return to the witness table to speak to the CAC issue. Dr. Hill said the AMA had Arepeatedly advocated to HCFA@ that the Acoverage process [be] open, ...accountable, ... timely, and ... hopefully uses evidence-based decision-making ... to ensure that the coverage policies reflect the best available clinical and scientific evidence.@ He went on to add, AIt's imperative that coverage and policy processes rely on physician input, including input from local practicing physicians and from the national and state medical societies and specialty societies, to achieve [those] standards...@ However, Dr. Hill cautioned HCFA that Alocal and national coverage policy processes should not be a vehicle to address fraud and abuse...@ Dr. Hill closed remarks his with three suggestions:

• That HCFA put a Adatabase of local carrier policies on the worldwide web or [on a] CD-ROM...@
• That HCFA convene Aa national CAC physicians meeting@ made up of the Achairs of your carrier advisory committees@ and Aperhaps be sponsored by PPAC...@
• That there ought to be a time for Acarrier medical directors to actually interact with ... CAC physicians.@

Ms. Combs indicated that work had already begun on the development of an electronic database for coverage policies.

The cost issue rises again: Council Members were generally pleased with Ms. Combs= responses, but pressed her on two matters: the possible harmonization of locally-driven Medicaid and Medicare policies and some clarification of the difference between national and local policies. On the latter question, Ms. Combs conceded that there was Acontroversial@ language in a proposed regulation that permits carriers to use Acost-effectiveness@as their coverage criteria, also. While acknowledging that contractors do not currently have the authority to use cost-effectiveness as a coverage criteria, she indicated that Aif that particular regulation is ever issued in final, we would make sure that our contractors complied with it.@

Members raised several other tangential points with Ms. Combs, such as a possible requirement that plan enrollees be informed, when their physicians leave the plan; the carriers= uses of the most convenient and cost-saving national or local utilization averages, when writing policies; their sometimes inappropriate use of Ajunk,@ non-peer reviewed medical literature to justify a restrictive coverage policy; and the fact that local policies developed by Medicare=s carriers are often adopted by other carriers covering non-Medicare patients.

Following the presentation by Ms. Combs, the Chair called a brief mid-afternoon recess.

When the Council re-convened, the Chair welcomed Paul Rudolph, MD, JD, Medical Advisor in the Center for Health Plans and Providers, for his Afirst and last appearance before the Council,@ before assuming the role of PPAC Executive Director. Dr. Rudolph brought the Council up to date on the payment aspects of the interim documentation (E&M) guidelines. He indicated that his group hopes to carry out several pilot studies in fiscal year 2000, but that the whole revision process is going to take a great deal of time. Council Members raised the following points with Dr. Rudolph:

• The pilot studies should focus on quality and not Anumerical and quantified elements.@
• The studies should seek to identify the outlier physicians at the margins of the bell curve, rather than focus yet again on the vast majority of physicians who practice in the center of the curve.
• The staff should make the greatest effort possible to simplify the language in the guidelines.
• Staff should also try to come to some resolution on the appropriate use of physician time (admittedly a controversial topic) in E&M paperwork. For example, the guidelines punish the good clinician-diagnostician, who quickly deduces a patient=s problem, while the less skilled clinician, who spends more time working through the problem, will therefore receive more money for achieving the same outcome. Dr. Rudolph responded that time may be an appropriate subject for pilot-testing.
• Dr. Rudolph was also asked to look closely at the E&M guideline revisions affecting teaching physicians and academic health and medical centers.

Dr. Rudolph promised to consider these points before leaving the guidelines operation to become Executive Director of PPAC as of the December meeting.

Ms. Melanie Combs returned to the witness table to review HCFA=s concerns with Acustomer service@ under the rubric of Program Integrity. Ms. Combs outlined a new HCFA initiative to make contractors provide better service to their Acustomers,@ who are physicians and Medicare beneficiaries. Ms. Combs noted that HCFA also has Acustomers@: e.g., carriers, managed care organizations, providers, and beneficiaries. Within the context of the customer service initiative, Ms. Combs= organization is doing the following:

• Meeting with the IRS (a Federal agency with a record of troubled Acustomer@ relations) to learn what they=re doing to improve customer service.
• Preparing a new publication to explain the relationship between customer service and program integrity.
• Mounting a new survey of providers to find out what can be done to improve customer service efforts by Medicare=s contractors.
• Considering a Town Hall meeting, possibly in the spring, to discuss the customer service concept.

More trouble with the carriers: Again, the Council=s response to Ms. Combs was very positive. However, Members noted that there was great friction Aout in the trenches@ between providers and carriers. Their litany of distress included arrogant medical directors and medical review staffs, impossible automated telephone answering devices, the lack of accountability by faceless and nameless telephone personnel (if indeed you ever do get connected), and the HMOs= ping-pong device of bouncing a confused patient between the plan and his/her physician.

Members wondered how serious HCFA was about its own customer service record, since it disconnected its toll-free A800@ number (the OIG=s hot line) for disaffected beneficiaries. The Council also again pleaded for a simplification and rationalization of the application process for a Medicare number.

Following Ms. Combs= presentation, the Council reviewed the day=s discussion and presented the following recommendations for the record:

• That HCFA delay for one year the regulation concerning physician supervision of staff (per AMA suggestion).
• That, before sending them to the RUC/PEAC for review, HCFA prioritize its codes for the correction of clear and egregious errors so that the RUC will pay more and immediate attention to those errors that waste a large amount of taxpayer money.
• That HCFA establish internal agency mechanisms that respond more quickly to notices of error in codes, regulations, policies, etc., instead of dealing with a burdensome accumulation of errors at a later time.
• That a payment decision regarding the applicability of a site-of-service differential should reflect a prior, peer-developed, clinical consensus (possibly by RUC) about which specific service is more appropriately provided in which setting.
• That interim RVU-based practice expense rules be published, while contractors review HCFA=s methodologies and other matters are ironed out.
• That, during the time the above interim rules are in effect, HCFA prepare an evidence-based Aenvironmental impact study@ that would indicate what changes may occur in patient access and quality of care, as a result of the proposed new rules regarding practice expense and site-of-service differentials.
• That HCFA include all medical/provider specialties in any subsequent SMS-type of survey.
• That HCFA re-visit the malpractice element within the practice expense issue and replace the current system of estimation with one based on geographic average malpractice premium costs, rather than numbers of procedures performed by CPT codes.
• That HCFA move forward with actions (as mentioned by Melanie Combs) to improve carrier CAC performance.
• That HCFA make clear that collaborative agreements, as defined in the BBA, between supervising physicians and nurse-practitioners and other non-physician personnel are a condition of Medicare coverage and payment, regardless of certain state laws which permit non-physicians to perform certain medical services with minimal or no physician supervision.
• That HCFA extend to the Medicaid program the conditions for payment that are in effect in the Medicare program.
• That HCFA scrap its proposed rule (published on July 22^nd ) to eliminate any allowance for clinical staff expenses in the facility setting because it potentially raise a serious issue of patient safety.

The Chair the recessed the meeting at 4:30 pm, to be resumed the next morning.

The Chair reconvened the Council at 8:45 am, noted the Ajam-packed agenda@ ahead, and welcomed to the witness table Hugh Hill, MD, JD, Medical Advisor in the Center for Health Plans and Providers and, since June, the acting head of the Physicians= Regulatory Issues Team, PRIT. Dr. Hill gave a brief history of the year-old program, reporting that the Team had assembled some 137,000 pages of physician-centered regulations. A great many are Asituational,@ said Dr. Hill, and Aunlikely to burden practicing physicians. ... except in unusual circumstances.@ However, PRIT did find, he reported, Athat a significant number of rules and regulations do apply to practitioners and require at least some or occasional attention,@ and, therefore, the Team does conclude that Athe regulatory burden is real and substantial.@ Yet, Dr. Hill believes that Aactually reducing the number of regulations is unlikely any time soon,@ although some things can be done to lighten the burden somewhat.

Need more than technology: Some Members suggested employing an Internet search engine to help physicians find their way through the mountain of rules. The use of Web-like FAQs (Frequently Asked Questions) and hyperlinks might also help. But, with about half the nation=s physicians not yet able to sign on to the Internet, technology was not thought to be the sole answer. Rather, there was general agreement with Dr. Hill=s suggestion for making the rules Asimpler and plainer and clearer.@

Monitor and educate the carriers: Dr. Hill noted that, early in their history, the Medicare carriers were given Asome freedom and some ability to interpret local rules [for] local applications@; today, however, those local carrier rules Aclash with each other and are inconsistent, [and] it causes physicians problems.@ The Council urged HCFA to spend more time and resources on monitoring and educating carriers in order to reduce the amount of Aincorrect, incomplete information@ that carriers give to inquiring physicians. Special mention was made of the role played by carrier medical directors, who Aview HCFA as their customer,@ not physicians; they A[try] to get you to like them, so you'll renew [their] contracts.@

Action is Aunlikely@: The Chair, however, expressed disappointment at Dr. Hill=s notion that doing anything constructive was Aunlikely@; she spoke of Ademoralized@ practicing physicians who Ahave lost faith in@ HCFA. The Chair then proposed the following recommendations, which were accepted by the Council:

• That Dr. Hill take another look at his program and return to PPAC with a presentation on what PRIT could actually doCnot rule-by-rule but in an overall wayCto reduce the regulatory burden. (Dr. Hill hastened to explain that he meant little could be done Ain the short term,@ because much of the burden has been generated by legislation, which is not easily changed.)
• That HCFA should direct Acarrier medical directors ... to develop a database of questions and answers that come from their local [files].@ Physicians and HCFA could then see just what the medical directors are thinking and saying.
• That HCFA make the Medicare Carrier Manual more easily searchable on the Web, including re-coding some items so that they are better understood by a non-HCFA inquirer. (Dr. Primack indicated that the Apieces@ on the Web site are Anot comprehensible to the outsider. [They are] not named by type, by number, or by paragraph number or by title [or] by the topic.@)
• That HCFA put back the A800" hot-line number, as part of the PRIT process.
• That Dr. Hill return to PPAC frequently (AI'd like to see you a semi-permanent fixture here@) with updates on what PRIT is accomplishing in this important area of reducing the physicians= regulatory burden.

The Chair then welcomed Paul Olenick, Senior Technical Advisor in the Plan and Provider Purchasing Policy Group. Mr. Olenick described the problematic situation in areas where Medicare=s reimbursement to fee-for-service physicians is higher than fees paid to physicians signed up with managed care plans; the situation is further complicated by second-payor (Medigap) plans refusing to pay the full 20 percent co-insurance to physicians who have received a Medicare reimbursement higher than the plan=s own fee schedule. Many plan contracts also forbid physicians from collecting their full co-insurance. The situation is further complicated when non-Medicare spouses or children cover their over-65 spouses or parents under employer health plans.

A check for one penny: The Council indicated its deep concern with this issue, particularly since most providers are unaware that they will be short-changed until it happens. In addition, Members reported that in some areas physicians have received one-penny reimbursement checks from their second-payor plans or have actually been billed by such plans because Medicare=s reimbursement was actually above the plan=s fee scheduleCincluding the 20 percent co-payment. In too many cases, said the Members, A[T]hese doctors are stuck accepting 80 percent of the Medicare rate as payment in full...@

A paradigm shift: Referring again to the Acost control@ language discussed on Monday (Acontrol costs consistent with the responsibilities of the plan@; see Update on Provider Protection above), Council Members generally despaired of a solution for the chaos rampant in plan-vs.-Medicare reimbursements and fees: AThe whole paradigm [has] shifted,@ said the Council, Aand everything that was holding the physicians responsible no longer has any teeth to it, because the physician doesn't even know what's going on.@ Members also reminded Mr. Olenick that most physicians deal with a range of payors: Medicare, Medicaid, a number of individual insurance carriers, plus a handful of HMOs or managed care plans. Most physicians try to maintain a single fee schedule but each payor has a different rate and the result is misunderstanding, frustration, loss of income, possible fraud by carriers, and other alleged anti-physician abuses committed under the umbrella of Acost control.@

Sign up or starve: Mr. Olenick was surprised at the comment that a physician would sign a managed care contract without fully understanding what was in it. But the Council explained that Acontract negotiation@ is almost totally unknown. One Member explained, AIf the penetration of Blue Cross/Blue Shield in your area is significant, you have to [sign up] or you starve. You ... have no choice. If you're going to survive, and you're going to feed your children, you're going to sign that contract, and then you have no idea what you signed, and on top of that, they're also coming back six months later decreasing the fees even more. It is horrible out there practicing medicine today.@

Zero leverage: Members also expressed frustration with the antitrust law, which exempts the plans from suit, even though two Acompeting@ plans in a single medical market may have identical contracts and together, as a virtual monopoly, enroll 70, 80, or even 90 percent of the resident patient population. In such situations, individual physicians have zero negotiating leverage; they either sign or close up shop. The situation is equally hard on patients: A[I]f you don=t sign, you've got people you've been taking care of for 10 years that all of a sudden have to find a new doctor, and that's really tough. Some of these older people are going through this all the time, and it's a tough situation.@

Mr. Olenick noted that HCFA unsuccessfully tried to rectify the payment situation in 1997, withdrawing from the battles, since the Industry Guidance Branch of the Office of the Inspector General Ais ultimately the one who has the control over ... 231(h) that requires collection of deductibles and co-payments.@ However, as one Member ruefully noted, no one is Agoing after the physicians who aren=t collecting the co-pay.@ In light of this discussion, it was generally agreed that the OIG (and Mr. Oelnick, plus other interested parties) should be invited to the next PPAC meeting to discuss these issues.

The Chair then called for a brief mid-morning break.

Following the break the Chair permitted discussion and acceptance of the following recommendation:

The Chair then welcomed Sharman Stephens, Director of the Planning and Policy Analysis Group of the Office of Strategic Planning, who brought the Council up to date on the status of Medicare reform. She gave a synopsis of a long paper on the subject prepared by the President=s Domestic Policy Council. Ms. Stephens recounted activities affecting the Medicare Trust Fund, the proposed prescription drug benefit, cost-sharing for lab services, Medicare buy-ins for disabled persons and certain other persons under age 65, Medicare competition, and program efficiency. The Chair then welcomed Robert Berenson, MD, Director of the Center for Health Plans and Providers, who added several comments with regard to Medicare competitiveness.

Plans= profit motives are paramount: The Council responded to this presentation by indicating that the Acreative@ managed care plans A[do] not create and deliver the same benefit package@ that HCFA believes it is buying, thanks to two words in the law and regulation: Acost control.@ Members observed that Aphysicians of all stripes@ believe that Athe managed care industry ... [is] driven not by concerns of quality, not by concerns of patient care, [but] only by concerns of how much their own income can be ... [W]hen they see that the income is threatened, they withdraw ...@

Strong request for oversight of plans: Dr. Berenson noted that HCFA A[has] been reluctant, and I think for reasonably good reasons, to be involved with the contracting relationships between the plans and the physicians. We do have a series of regulatory oversight requirements on the plans, and it may be that in some ... specific areas that can be extended into areas of controversy that we could discuss.@ The Council strongly suggested that HCFA impose on managed care plans Athe same sort of oversight and principles of patient quality and beneficiary benefit that is in the fee-for-service side...because [the plans] are not following those same principles...@ To Dr. Berenson=s repeated request for an instruction as to Awhat to do,@ the Council returned again and again to its central points:

• A[P]reserve what Medicare pays. I can live with that. I can't live with increasing percentages of my population paying me at 60 percent below Medicare.@
• While managed care plans seem to be conspiring in closed medical markets in a manner that would be in violation of anti-trust laws (if, in fact, the plans were subject to those laws), physicians, on the other hand, are unable to collectively negotiate because Athey are so fearful of the Federal Trade Commission and what will happen to them if in any way they suggest any kind of action that could be deemed to be in violation@ of antitrust laws.

Justice, not HHS, has the action: Dr. Berenson said, AI think you're not going to see an awful lot coming out of Health and Human Services@ because the Justice Department would be the agency most interested in the Council=s allegations. The Council again stated its concern with the cost-control loophole in the anti-discrimination regulation. Dr. Berenson said that comment was Avery timely,@ since his office is preparing a final regulation in which Athe anti-discrimination area has been a difficult one. So we'll immediately review those recommendations.@

Dr. Berenson closed his remarks by indicating that he would like to bring PPAC up to date on the work of his office with regard to the modernization of the fee-for-service option. The Chair thanked him for his remarks and adjourned the meeting at 12:45 pm. The next meeting will be in Washington, D.C., at the Humphrey Building, on Monday, December 13, 1999.

Respectfully submitted,
Marie G. Kuffner, MD, Chair
Practicing Physicians Advisory Council

[Heading]

I am pleased to submit to you Report Number Thirty of the Practicing Physicians Advisory Council (PPAC). This Report summarizes the deliberations held on September 27 and 28 in the HCFA headquarters in Baltimore. It was a very productive meeting in which HCFA staff and Council Members raised a number of substantive issues important to practicing physicians, as the enclosed Report will indicate. I especially call your attention to the report of our discussions regarding (1) the conduct of Medicare=s carriers toward practicing physicians and (2) the Acost control@ escape clause in the anti-discrimination section of the Balanced Budget Act of 1997 and HCFA=s subsequent proposed rule. For practicing physicians, these are very disturbing issues indeed for the reasons outlined in our Report.

May I thank you for responding to our request for OS representation at our meetings. At this 30^th meeting we were very pleased to have as our guest and observer Gregory Pappas, MD, PhD, Senior Policy Advisor in the Office of the Assistant Secretary for Public Health and Science. We look forward to further strengthening our relationship with professional staff at the OS and OASPHS levels.

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Last Updated December 8, 1999