Sutter Health and Blue Cross have settled their differences and have agreed on a two-year contract retroactive to January1. There have been no talks between Blue Cross and John Muir/Mt. Diablo IPA. Patients that have been switched will need to take the action to switch back to their original provider. The switch back will not be automatic.

The San Diego Physicians Medical Group has severed ties with Blue Cross and Secure Horizons at the same time as Mercy Physicians medical group of San Diego also reached an impasse with but are still talking with Secure Horizons. The end date for discussions is the end of March to meet the May 1 termination date. State law mandates a thirty-day member notice. The groups cite low reimbursement associated with rising costs. Many patients are switching plans to stay with their physician rather than travel farther if they keep their old plan.

St. John’s Medical Center in Santa Monica had sued Blue Cross for their routine denial of payment for patient services in order to boost productivity. The suit has been settled with St. John’s now back as a provider hospital after a six months hiatus with a higher reimbursement rate. CHW had also alleged the same against Blue Cross and settled that in mid 2000. CHW is now connected electronically to Blue Cross to get quicker payment with fewer denials. Blue Cross’ parent organization WellPoint reported its profits last year rose 12% to $342.3 million compared to 1999.

In Florida The Oath HMO is dropping 50 primary care physicians to attempt to save money. The Oath states it has too many doctors for the amount of patients and needs to lower its administrative costs. The Oath ran a $2.5 million advertising campaign this fall touting they were not like other HMOs. Guess what? They are.

In an article that should not be needed, WebMD states the obvious; physicians should monitor the fiscal health of their HMOs. The article quotes Weiss Ratings stating that HMOs have more shaky financials than any other industry. If you don’t know the HMOs or IPAs you are contracting with are having financial difficulty, you are getting what you ask for. All physicians should monitor their contractors at least yearly for promptness of payment, amount of payment and how that amount relates to how you believe they should be paying.

CalPERS has rejected all bids for healthcare for 2002, stating the premiums are too high. The range was from 5%- 40% increase.

In Ohio Licking County the only hospital has severed ties with Aetna. The hospital states it is for the usual reason of low, slow pay. Many HMO patients who can no longer use the hospital for lab or other tests have dropped Aetna for other insurers. PPO patients can continue to use the hospital but with higher co-pays. Aetna had no idea this was coming and called it negotiation by termination. It’s always amazing how MCO’s never see this coming when they do brinkmanship negotiation.

Aetna still doesn’t get it. Vanderbilt and their physician groups also have dropped Aetna for the same reason. Vanderbilt will continue to take care of the specialized needs but at full price. Six thousand HMO members will need to find new primary care physicians. Top

The Orange County Register had a story on the uncertainty of managed care in California. In the 2/16/01 story they state that consumers will need to pay more as business hoists co-pays and deductibles. It also stated that as new technology increases costs, there will be more uninsured. They also believe the weaker IPAs will be forced out of business. The story also quotes Paul Ellwood, one of the pioneers in our current managed care system, as blaming some of the problems on he and his cohorts for not going beyond the large insurance blocs to the consumer in their model. He gives the harshest criticism to President Clinton whose administration was "hostile to the managed care industry."

HealthNet profit rose 24% in the fourth quarter due to raised premiums and lesser administrative costs. It is possible that HealthNet will also raise co-payments and deductibles since they are now below their competitors. The article does not state anything about increased payments to providers in the capitated managed care organization.

The AMA reports that more managed care organizations are switching from capitation to discounted fee for service. This is both good and bad. The good is the taking away from the physician the incentive to ration care and putting the risk back on the organization. Also the physician no longer has risk and therefore will make money for what they do, not from what they withhold. The Medical Group Management Assn. States that capitation contracts have gone from 68% in 1998 to 58% in 2000, with a fall to 40% next year. The bad is that primary care physicians will no longer be guaranteed patient volume. They will have to earn the patient’s trust to keep the patients. Another potential downside is if the economy continues to turn south, employers will want to go back to fixed costs for healthcare. The can however, go to the defined contribution to keep costs steady. The most damning reason to dislike the switch from HMO to PPO concept is the odious use of 1-800-MAY I. Top

The AP reports that adult Tetanus vaccine is in short supply due to Wyeth suddenly stopping the manufacture of the vaccine and the optical medication Wydase. Also, Abbott has run out of intravenous Isuprel. Two other drugs that are running low are fentanyl and Narcan. Top

In the first three-quarters of 2000 premiums rose more in Minnesota than in most other states. The average increase was 11.7%. HMO enrollment is down about 5.5%. In an interesting statistic inpatient hospital use for HMO patients declined from 203 days per 1000 in 1998 to 185 days per 1000 in 1999. At the same time emergency room usage went from 107 per 1000 to 124 per 1000 enrollees. HealthPartners a managed care organization has stated that they are laying off 220 of their 9500 people including some physicians. Top

The USA Today reports that Medicare low premiums coupled with onerous laws have closed many practices to new or even existing traditional Medicare patients. In a recent Colorado survey only 15% of physicians were taking new Medicare patients. In one Denver internal medicine practice they are only accepting Medicare HMO patients. They believe the HMO pays better, the practice was losing about $100 per Medicare patient per year. Colorado rates are among the lowest in the nation. Top

West Virginia physicians are having a malpractice insurance crisis. An OB/GYN in Huntington WV states her malpractice insurance has risen from $32,700 per year to $82,900 in seven years. She has never been sued. On top of the large malpractice increase physicians and all medical providers must pay a 2% tax on all services provided. Minn. has a similar tax. Some of these physicians are threatening to leave the state. This could really hurt a state like West Virginia where there are not enough physicians in some rural counties. A medical center in Greenbrier has been looking for eight physicians and found none. The medical center states that if they could get the eight new physicians, 32 new jobs would be created and personal income in the county would increase by $3.6 million. This would mean an additional $216,000 in income tax and $966,000 in sales tax to the state. The surrounding states have malpractice insurance of about 1/3-1/2 of West Virginias. A Huntington neurosurgeon is now paying $150,000 per year for malpractice insurance. The reason for the high malpractice fees are the high amount of suits, but the physician wins 85% of the suits. The 2% tax is also on all gross receipts and goes to help fund Medicaid. As a spin off of the high malpractice rates the number of applicants to the medical schools have dropped significantly.        

JFK Hospital in Indio is putting up a $13.4 million 20,000 sq. foot expansion that includes a 16 bed ICU on the first floor and additional 24 beds upstairs. This will increase the hospital size from 130 to 162 beds. Currently the area has about 100,000 people and is expected to double in the next 15 years. JFK has had to transfer patients to other hospitals in Palm Desert or Palm Springs due to being at capacity. Top

Modern Healthcare reports that CHW is chopping off 350 executives in their top-heavy organization and reducing its debt by $100 million this year. The restructure reduces the number of regions from 10 to 4 to make the organization more manageable. CHW also has come to an agreement with nursing that allows unionization, but only if the nurses truly want it. CHW has also reached agreement with SEIU, the local union covering many non-nursing medical personnel. The four-year agreement provides for annual wage increases, committees of caregivers and managers to decide staffing levels, and an arbitration process for settling staffing disputes They are also looking at about $500 million to retrofit their hospitals to conform to the seismic standards. To top it off the Department of Justice has just settled one suit against them and is starting a new one which may cost up to $20 million (see legal news). Lloyd Dean, the new CEO, is working hard to streamline, optimize what they have and not look to grow especially in the ill thought out purchase of physician networks. The system has gotten out of the capitated market and renegotiated managed care rates, sometimes up to twice the reimbursement. Top

Southwestern General Hospital in El Paso, Texas owned by a limited partnership that includes 30 physicians has discharged all its patients and closed its doors to emergency patients or regular admissions. The hospital is broke. They missed a payroll and some employees quit after not receiving their checks. The hospital is only doing radiology and respiratory services and is considering bankruptcy. Top

An article in Chest revealed that 20% of the deaths in an ICU were due to a misdiagnosis. The study was performed in autopsied individuals. It stressed that autopsies still have a place in medicine and that physicians may learn from the procedure. Top

KPC, the largest IPA in California, went bankrupt last year causing 250,000 patients to disrupt medical service. The bankruptcy judge is now asking why KPC in its last few weeks of existence paid $2 million to its attorneys, out of which only $50,000 went to the bankruptcy attorney. KPC also continues to pay $480,000 a year to each executive to shut down the business. In a related matter two lawsuits have been filed against Chaudhuri, the CEO, for illegal payments of money to other IPAs of which he is a member and for commingling of funds. It may be some time before the entire situation is settled. Top

The California Department of Managed Care has finally fined a California Health Plan for late payments. PacifiCare must pay all overdue claims plus interest within 60 days. This will cost about $3 million plus have someone in their offices looking over their shoulder.

In a related story, the Orange County Register reported the lack of prompt pay problems from both sides of the story. The lack of prompt payments and what is the meaning of a clean claim. There was no consensus as to what was right, but it was noticed that as premiums have increased with increased profits for the managed care organizations, more claims are clean and paid timely. I’m sure this is only a coincidence. Top

Modern Healthcare has named their top 100 hospitals in various fields. I would like to offer my congratulations to the following hospitals:

California Pacific Medical Center for Orthopedics

Mills Peninsula for Orthopedics

Dominican for Stroke

Salinas Valley Memorial for Stroke

Summit Medical Center for ICU

California Pacific Medical Center for Cardiovascular

St. Mary’s Medical Center for Cardiovascular

Seton Medical Center for Cardiovascular

Mills Peninsula for Cardiovascular

Keweah Delta Hospital for Cardiovascular                     Top

What Happens When You Try to do the Right Thing

Denver Children’s Hospital has been having a higher than expected mortality rate in their septal defect patients. They have been transferring these patients to San Francisco and Boston until they can work out the problem. This commendable saving of lives has cost the Chief of Cardiology his job. The hospital has told him he may stay on staff but not as Cardiology chief. There is a lot of tension between the cardiac surgeons and the cardiologists who determine where the surgery will be performed. Top

The Federation of State Medical Boards has opened its data bank to the public. The cost per physician report is $9.95. This bank only has what is on record at state medical boards and not hospital reports. Its reports are better than the NPDB reports which hospitals report their disciplinary actions. Top

The New England Journal has reported a British study where only 50% of the patients that may be helped by angioplasty or open surgery received this care. The article author stated that it calls the need for the procedures into question. However, those that received either closed or open revascularization had fewer problems down the line than those who were treated with drugs. Top

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DISCLAIMER: Although this article is updated periodically, it reflects the author's point of view at the time of publication. Nothing in this article constitutes legal advice. Readers should consult with their own legal counsel before acting on any of the information presented.