Practice Beat

By Joan R. Rose, Senior Editor

Prompt Payment: Cigna takes a hit in Georgia

Cigna HealthCare of Georgia has agreed to pay a $300,000 fine for violating the state's prompt-payment law, according to company spokesman F. David Feng. "[We] take regulatory compliance very seriously," he added. "We believe [Cigna is now] in full compliance with Georgia's claims-payment laws."

State Insurance Commissioner John W. Oxendine expressed a different view. Cigna has "the worst claims management of any major health insurance company," he said. "And a lot of it seems to be lack of caring. They don't even track how long a bill has been there." Georgia law requires clean claims to be paid within 15 working days.

Oxendine has ordered Cigna to perform an internal audit, implement a corrective-action plan, and develop an automated process to ensure that interest is added to overdue payments and paid to providers in a timely fashion.

Since August 1999, Oxendine has levied record fines of more than $1.5 million against HMOs for paying claims too slowly, failing to respond quickly enough to complaints, and raising rates without approval. "My message is that doctors and patients should not have to spend their time worrying about an insurance company paying its bills on time," the commissioner said.

Medicare Reform: Pete Stark wants to play hardball

Rep. Pete Stark (D-CA) has jumped into the battle to fix Medicare by introducing legislation that he describes as "basically the Clinton administration proposal from June 1999, greatly strengthened to achieve major savings and more programmatic improvements."

But Stark's solution, which is intended to extend the solvency of the trust fund and beef up benefits, would be painful. To save Medicare, he says, the government will have to shift costs to beneficiaries, cut payments to providers, and come up with new tax revenues. "Anyone who says differently isn't being honest," he contends. In his bill, the Part B deductible would be indexed to inflation, but the Part B subsidy (75 percent of the cost) would be added to the beneficiary's income and taxed at his ordinary rate.

The proposal would also impose sustainable growth rates on sectors where there is a sudden (or questionable) explosion of services in doctors' offices—and pay for ambulatory care based on the service, not the setting in which it is provided. For example, Medicare pays $506 for a prostate biopsy performed in an ambulatory surgery center, but only $178 when the procedure is done in a physician's office. In addition, the measure includes a plan to develop long-range cost reforms. Stark envisions a single bundled payment system for more diagnoses, for instance, and a system of profiling physicians' patterns of care. The profiles would be used to identify doctors who bill for abnormally expensive care without justification—and eventually to reduce their payment updates.

Moreover, Stark would fatten Medicare coffers by forgoing some of this year's proposed tax cuts. He'd also add revenues received from the Federal government's legal actions against tobacco companies, funds raised by estate and gift taxes, and excess profits tax on certain pharmaceutical sales. A pharmaceutical manufacturer would be subject to the tax when its administrative and sales budgets exceed twice its R&D budget.

Mergers and Acquisitions: Is the boom in health care services going bust?

It's not unusual for the volume of mergers and acquisitions among hospitals, physician groups, managed care organizations, and other health care entities to slow during the fourth quarter of a year. But the slowdown in the last three months of 2000 was the most pronounced in recent years, according to Irving Levin Associates. For the first time since 1993, the Connecticut-based research and publishing firm reports, the number of transactions fell below 100. That was 30 percent fewer than in the third quarter of 2000—and a 42 percent drop from the same quarter a year earlier. Bankruptcies, a volatile stock market, and new reimbursement methodologies for Medicare contributed to the decline, Levin says.

Student Loans: The nation's unheralded health care safety net

What keeps young doctors working in underserved areas? In many cases, it's a state-sponsored scholarship, direct loan, loan forgiveness, or other support program. To have part of their school debt repaid, or to earn incentive funds, new doctors agree to work in an inner-city, rural, or other designated site for up to five years. These programs now support a primary care workforce comparable in size to better-known federal programs, such as the National Health Service Corps.

According to a recent study by FP Donald E. Pathman and his colleagues at the University of North Carolina, the number of programs providing loan repayments, scholarships, direct loans and incentives, and other support leaped from 39 in 1990 to 82 in 1996. At last count, 41 states had one or more of these programs in place, providing funds for more than 1,300 physicians and 370 nurse practitioners, certified nurse midwives, and physician assistants. Combined, they are roughly equal to the number of health professionals involved in federal programs.

PPOs: Is the tide turning their way?

In 1999, for the first time, the number of PPO-eligible employees surpassed the number enrolled in HMOs, according to the American Association of Preferred Provider Organizations—even though PPOs cost employers about $350 more per year than HMOs. ("PPO-eligible" employees are those to whom an employer has offered a PPO.)

But even with HMO enrollment flat and the less-restrictive PPOs attracting more members, HMO rate hikes in 2000 exceeded those of PPOs for the first time in seven years, according to William M. Mercer Inc., a New York-based consulting firm. HMO premiums jumped an average 9.6 percent, PPO premiums 7.7 percent. Rates at point-of-service plans, which are open-ended HMOs, soared 10.1 percent.

So why are HMOs' rates up so much more than PPOs'? One explanation: HMOs are compensating for years of underpricing, which led to severe losses at some plans. The median loss among HMOs was 1.3 percent in 1999, according to InterStudy, a Minneapolis-based research firm.

Mercer suggests that HMOs are having trouble managing medical costs, a problem exacerbated by public clamor for relaxed utilization controls. PPOs, on the other hand, have improved efficiency in recent years by putting additional resources into utilization management. From 1996 to 1999, the AAPPO says, PPOs cut inpatient hospital days per 1,000 eligible employees by 10 percent—from 261.5 days to 234.9.

 

Joan Rose. Practice Beat. Medical Economics 2001;7:23.