February 23, 2004

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Hospital Study Commission Hears from Health Plans/Employers
On Feb. 17, The Commission to Study Maine's Hospitals heard presentatons from the Maine Association of Health Plans and an employee benefits consultant. Both presentations noted wide variations in hospital costs across the state and in physician practice patterns.
The first presentation was made by Katherine Pelletreau of The Maine Association of Health Plans.  The Association is made up of the four major health insurers doing business in Maine, namely Anthem BC&BS, Cigna HealthCare, Aetna, Inc. and Harvard Pilgrim Health Care.  Collectively, these carriers provide coverage for roughly 700,000 Maine people.  Ms. Pelletreau's presentation focused on contracting, challenges facing insurers in contracting with hospitals, the regulatory and legislative environment, costshifting, hospital consolidation and the voluntary cost constraints established in the Dirigo Health legislation.

Ms. Pelletreau noted that in Maine, cost drivers are numerous and complex.  She noted that Maine is very hospital focused, and that the state relies upon hospitals to be the public health structure in the state and increasingly, the deliverer of primary care, as well.  She stated, "Expensive emergency rooms are used as a primary entry point into the system in Maine in a way they are not in other states with more varied primary care facilities.  Maine has one of the highest uses of utilization of Emergency Rooms of any state in the country.  This is problematic from the standpoints of quality and cost - ER staff triage emergencies, but they are not trained as thorough primary care providers and they are very expensive."

The presentation also noted the challenges facing insurers in contracting with hospitals, including the provisions of Insurance Rule 850, monopolies and consolidation among providers and hospitals and cost-shifting necessitated by inadequate reimbursement from public payors. "Maine is very large geographically and we have a high number of hospitals among which there is virtually no competition.  Most communities are served by a single hospital.  Further, hospitals control what they charge for services and how often and how much it changes.  Hospitals have always controlled what the charge for a given service is and charges are the normal starting point for negotiations", she noted.

Ms. Pelletreau noted that Rule 850 requires that insurers provide access to healthcare services, and they they frequently must pay for services provided at facilities outside their network under the current regulatory framework.  These services are more expensive for members and the plan alike as enrollees must pay the hgiher costs in the form of higher premiums for using an out-of-netwrok provider. 

Ms. Pelletreau also complained that payors had not seen a decrease in rates from hospitals which had been granted federal Critical Access status, despite these facilities receiving 100% reimbursement from federal payors.

In noting the consolidation that has taken place, she stated, "Consolidation is another major factor in contract negotiations - some health systems such as Spectrum, Eastern Maine Health, Maine General, MaineHealth and Neurosurgical Associates are good examples...Since insurers must negotiate with increasingly large systems for a wide variety of services, their ability to secure lower costs is becoming more restricted."

She concluded by stating that with regard to the voluntary 3.5% cap on hospital expenses per case mix adjusted discharge and the volunatry 3% cap on consolidated operating margins, it is too early to guage the impact either positive or negative.  Plans are currently in the process of negotiating contracts and simply do not have enough information yet.  She further noted that the 3.5% cap is not a limit on payment rates.  It does not not take utilization into account.  Even is chrages are capped at 3.5% and this cap affects the rate charged by the hospital to the insurer, if utilization increases, any gain from the cap could be eroded.  

There was disagreement expressed at the meeting as to whether the voluntary cap applied only to inpatient admissions.  Hospital expenses in Maine represent over one-half of health care expenditures in health insurance premiums, Ms. Pelletreau asserted, and she alleged that one-half of that expense is for out-patient care.

She asked that Maine hospitals be benchmarked against other hospitals in areas with similar demographics, and for a careful examination of any outliers.

In her summation, Ms. Pelletreau offered some suggestions to the Commission:

      1.  Deal directly with cost shifting by requiring transparency in exactly how much is cost shifted from where and to whom.  This would require that hospitals be able to determine the true cost of delivering each service.

       2.  Consider options such as increasing the number of facilites with Critical Access designation to mitigate the impact of low federal reimbursement.

        3.  Be aware that what the state pays providers for Medicaid has an impact on private payors.

         4.  Create consistent and timely reporting requirements for hospitals and hospital systems.  Part of this approach should be including clearer reporting for affiliates within hospital systems and determining how investment income should be treated.

          5.   A Rule that will allow for competition among providers perhaps by eliminating the geographic restriction of Rule 850.  Allow insurers to send members to facilities outside current parameters of one hour or 60 miles. 

       The second presentation was made by Brent D. Churchill, CHC,  of Employee Benefits Design, Inc. in Fort Fairfield.  One of Mr. Churchill's clients is Frazier Paper Co.

      Mr. Churchill began by stating that, "Whether we want to admit it or not, our health care system is revenue driven rather than health care driven."  He felt that all providers, including hospitals and physicians, were looking for ways to increase revenue.  He noted advertising, increased charges and increased utilization as examples of revenue-enhancement.

     He noted that in his view, there were three ways to control health care costs, 1. Cost savings, 2. Education, and 3. Cost shifting. "To control costs, it will take a combination of all three.  However, we need to do all we can with number 1 and 2 before taking step 3."

     Mr. Churchill provided graphs comparing costs with respect to radiology, ENT claims, orthopedic claims, and colonoscopies (facility charges only for colonoscopies).  He also noted the successes that Frazier Paper had had in controlling health care costs under its plan, which is controlled by a committee made up of both union and mangement representatives.  In recent history, the company had been able to keep its cost increases below 10% by employing a number of different strategies including re-designing benefits.

     Discussion following the two presentations tended to focus on hospital competition, consolidation, and technology.  At least one commission member asked for the views of other members as to the desirability of returning to rate-regulation as a means of controlling hospital costs.  As some commission members had little background on Maine's previous efforts through the Health Care Finance Commission, it was suggested that further information be provided regarding the HCFC  experience.  

     The Commission meets again at 9:00am on Monday, March 1, in Augusta.  Physician representatives on the Commission are D. Johua Cutler, M.D., a Portland cardiologist and RIchard Wexler, M.D. an internist now working with Medical Care Development.  Hospital representatives are Scott Bullock from Maine General and John Welsh from Rumford Community Hospital.

State Supreme Court Decision Creates Havoc in Workers Comp IME System
A decision handed down by the Maine Supreme Judicial Court on Feb. 12, 2004 in the case of Lydon v. Sprinkler Services et al. threatens to bring to an abrupt halt the current system of Independent Medical Examinations performed under the provisions of 39-A M.R.S.A. Section 312.  In the case, the Court was called upon to decide whether a physician may be appointed to serve as an independent medical examiner in a workers' compensation proceeding, pursuant to 39-A M.R.S.A. section 312, if that physician has performed examinations of other employees at the request of an employer, insurer, or employee, pursuant to 39-A M.R.S.A. section 207 within the previous 52 weeks.

Although it is common practice for physicians who have performed section 207 exams to serve regularly as IME's, and although a Workers Compensation Board rule permits it, the Court determined that the legislative language adopted in 2001 prohibits a physician who has performed a section 207 exam from serving as an IME for a year.

The language of the statute provides that "A physician who has examined an employee...in accordance with section 207 during the previous 52 weeks" may not serve as an IME.  While the Board had interpreted the language as only prohiting such examination if the 207 exam had been perfored on the same employee as the independent exam, the court disagreed.

The additional restrictions were placed on the IME's in 2001 as the result of legislation supported by organized labor.  Labor interests were concerned that some of the physicians performing exams as IME's  were in their view "tainted" by virtue of having perfomed many section 207 exams as requested by employers.  The Maine Medical Association opposed this particular provision in the legislation, asserting that physicians are able to exercise independent judgment in each case, regardless of previous exams.  The legislation was enacted and signed into law by then Governor King.

Because there are relatively few physicians approved by the Workers Comp Board to serve as IME's (fewer than 50 currently), the court decision is likely to cause real difficulties in the processing of cases.  Any physicians who might be eligible to serve as an IME and are interested in doing so, should communicate with the Workers Compensation office by calling Betty Inman at 941-4557  or you may e-mail gsmith@mainemed.com and we will forward your name to the Board for consideration.

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U.S. Senate to Debate Medical Liability Reform TODAY
Last week, Senate Majority Leader Bill Frist, M.D. announced that medical liability reform would be the first bill taken up in the Senate following the President's Day recess.  THe Senate is expected to begin debate today on S. 2061, The Healthy Mothers and Healthy Babies Access to Care Act of 2003, sponsored by Senators Judd Gregg (R-NH) and John Ensign (R-NV).  The bill would place federal limits on lawsuits regarding the provision of obstetrical or gynecological goods or services, including a $250,000 cap on non-economic damages.

It is expected that debate will continue throughout today and tomorrow and that a vote on cloture will take place at 5:00pm Tuesday (tomorrow).  This will be a procedural vote and will require 60 votes to proceed under the Senate's archaic rules.  Last summer, the Senate failed to reach 60 votes (49 votes in favor) on a broad-based liability reform bill but it is hoped that some Democrats will support a narrower bill protecting just obstetrics.  Because the AMA believes that liability reform should apply to all physicians, it is supporting S. 2061 with reservations.

As Senators Snowe and Collins both supported the more broad-based reforms, we anticipate their support of S. 2061.  But it is still important that they hear form Maine physicians, asking for their support.  You may fax a brief note to them at 202-224-2693 (Senator Susan Collins) and 202-224-1946 (Senator Olympia Snowe).  You  may also call the U.S. Capitol switchboard at 202-224-3121 and ask to be connected to their office or go to www.senate.gov and click on Sen. Snowe or Collins to find their contact information.

If S. 2061 doesn't pass the Senate, Majority Leader Frist has stated that he will bring to the floor medical liability reform legislation for emergency departments/trauma services, followed by votes to protect rural and volunteer physicians.  Frist has clearly stated that his goal is to ensure that ALL physicians are protected, and that once a bill passes the Senate, it will be conferenced with the all-inclusive House-passed bill. [return to top]

Governor Baldacci to Announce new DHS Commissioner this Week
Governor John Baldacci announced last week his plans to name his nominee to head the new Department of Human Services this week.  He stated that he would bring to the Legislature a nominee who is well grounded in health care, mental health care and mental redardation.  The nominee will undergo a hearing in front of the Legislature's Health and Human Services Committee and will need confirmation from the state Senate. 

DHS Deputy Commissioner of Finance John Nicholas was named Acting Commissioner last week , replacing former Acting Commissioner Peter Walsh whose term had expired.  Walsh will return to his former position as deputy commissioner of programs.

The new Commissioner will eventually take over what is expected to be a new agency resulting from the merger of DHS and the Department of Behavioral and Developmental Services.  The legislative proposal to merge the departments is expected soon and will be considered by the Legislature this session.

The Governor declined to say whether the proposed nominee is from Maine. [return to top]

FDA Commissioner McClellan Nominated as CMS Director
President Bush on Friday, Feb. 20, named Mark B. McClellan, the commissioner of the Food and Drug Administration,  to direct the Centers for Medicaid and Medicare Services  (CMS).  McClellan would replace Thomas Sculley who left the administration late last year for a job in the private sector.  McClellan is a trusted senior advisor to the President whose brother serves as the President's Press Secretary.

McClellan is well respected on capital hill and Senate confirmation is expected.  The CMS position will be the third senior health policy position he has occupied in the Bush administration. [return to top]

Acupuncture Expansion to be voted on this Week
MMA expects L.D. 263, An Act to Define a Scope of Practice for Acupuncture, a 12-1 "ought to pass as amended" report from the Business Research & Economic Development Committee, to be ready for floor debate soon -- perhaps as early as this week.

The will would permit licensed acupuncturists to "diagnose and treat illness, injury, pain and other conditions by regulating the flow and balance of energy to restore and maintain health."  It would expand the scope of practice of acupuncturists to include a variety of techniques known as oriental medicine, such as:

        * oriental diagnostic procedures

        *  electrical and magnetic stimulation

         *  moxibustion and other forms of heat therapy

          *  sound, light and vibrational therapy

           *  cupping techniques and gua sha

            *  recommendation and dispensing of Chinese patent remedies or Chinese pre-made herbal remedies and lifestyle and dietary counseling

             *  formulation and dispensing of custom-made Chinese herbal combinations

              *  sotai, shiatsu, gi gong, zero-balancing, tui na and acupressure

The MMA is concerned that patient safety may be compromised if patients are encouraged to pursue these techniques - which have little or no scientific basis and no proof of efficacy - instead of a medical diagnosis.  Also, the Business, Research & Economic Development Committee endorsed passage of the bill against the recommendations of the Commissioner of Professional & Financial Regulation, Robert Murray, in the Department's sunrise review report.  The "sunrise" statute requires any new licensing to be reviewed by the Department and a number of questions considered.  The statute also applies to the expansion of any scope of practice of an existing licensed health profession or trade.

In our lobbying efforts against enactment of the bill, we are concentrating on the Senate, as opposed to the House.  To find your Senator:  http://www.state.me.us/legis/senate/.

Senators can also be reached at 1-800-423-6900 or through the Senate Office at 287-1540.



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State's Structural Budget Gap Approaches One Billion Dollars
At a work session of Feb. 19, the Office of Fiscal & Program Review staff briefed the Appropriations Committee on the anticipated budget gap for the State Fiscal Year 2006-2007 biennium.  The so-called "structural gap", or the difference between anticipated revenue and the cost of current services trended forward, is estimated to be $934.1 million.  The state's annual budget is now about $5.5 billion.

The appropriations or projections for the MaineCare program for this biennium and the next are:

                         *  FY 05:  $499,675,578

                          *  FY 06:  $688,187,506

                           *  FY 07:  $735,210,991

The average annual percentage change from 1994 to 2003 was 9.44%.

The average annual percentage change from 2003 to 2007 is expected to be 10.79%. 

On Thursday, the Appropriations Committee did not receive a briefing on the FY-05 budget status, but it is expected that the state will face a budget deficit of $125-150 million for FY 05 and may face a new gap for FY 04.  The MMA expects the Governor to deliver a new supplemental budget within the next several weeks. [return to top]

Dirigo Health Update
The major Dirigo Health activity this week is the Friday, Feb. 27 meeting of the Advisory Council on Health Systems Development.  The meeting will be held from noon to 4:00pm at the Senator Inn in Augusta.   The meeting will focus on the state Certificate of Need law with various interested parties making brief presentations to the Council, including MMA.  These presentations are expected to focus on the CON process, what works and doesn't work, as well as presenting an overview of what projects, if any, may be in the "pipeline" for CON review in the future.

The following meeting of the Council, tentatively scheduled for March 2nd, will deal with the issue of global budgeting.  An outside presenter, Dr. Kenneth Thorpe, has been identified as an expert in this subject matter who will speak at the meeting.  The following meeting will focus on synthesis of data related to the needs of the population.  These data are expected to be presented on a regional basis, to offer the opportunity to observe differences between various parts of the state. 

The role of the Council, as established in the Dirigo Health legislation is:

                       *  To advise the Governor's Office of Health Policy and Finance on the development of the biennial State Health Plan, with the first plan required to be issued by May, 2004;

                        *  To advise the Office on an annual report to the public assessing the progress toward meeting goals of the plan and any needed updates to the plan;

                          *  To advise the Office in development of an annual statewide health expenditure budget report that must serve as the basis for establishing priorities within the plan; and

                             *  To advise the Office in the establishment of a limit for the capital investment fund.

MMA President Maroulla Gleaton, M.D., is a member of the Council, as is Lani Graham,M.D., former Director of the Bureau of Health.

A tentative workplan has been established for the Council.  MMA members wishing to receive a copy of the workplan may e-mail Gordon Smith at gsmith@mainemed.com to receive a copy.

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For more information or to contact us directly, please visit www.mainemed.com l ©2003, Maine Medical Association