June 14, 2004

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Commission to Study Maine's Hospitals Meets in All-Day Session
The Commission to Study Maine's Hospitals, established in the Dirigo Health legisation, met for an all-day session last Monday and prioritized the issues that it will be working on between now and November. In November, the Commission will make a report to the Governor which will contain its recommendations.

Commission Chair William Haggett, former CEO of Bath Iron Works, set the tone for the day by stating that while hospitals make an important contribution every day to Maine citizens, quality needs to be improved and costs modified.  He stated that, in his view,  the status quo was simply not acceptable and Maine's hospitals would have to change either through advance planning and a process such as that envisioned by the Commission, or through a more ad hoc process.  Mr. Haggett stated that he believed that the administrative costs today to operate a hospital were too high, and noted that in his visits to nearly one-half the hospitals in the state, hospital administrators had acknowledged this.

Facilitator Frank O'Hara introduced the discussion by noting that the Commission had met for 8 months, and had 4 months left to complete its work.  The job today, he said, was to highlight the areas the Commission can look at  over the next four months that will make the most difference.  Some issues, of necessity, will have to be given more priority than others.  The Commission then began the process of prioritizing a list of issues that individual commission members had previously provided to Commission staff.

Although minutes of the meeting are not yet available, the following issues received much of the attention during the course of the day, and are likely to be at least a major portion of the Commission's focus over the coming months. 

1.  REGIONALIZATION.  What mechanisms need to be developed to faciliate a regional strategy for health care systems.  Anti-trust laws, Certificate of Need regulations, MaineCare financing, Medicare financing and technological issues all will have to be examined and potentially modified in order to develop a strategy to lead hospitals to consolidate,  to achieve administrative cost savings and to avoid duplication and unnecessary competition.  What are the current impediments to regionalization?

2.  REGULATION v. FREE-MARKET.  Address the issue of regulation vs. free market with particular emphasis on Certificate of Need and Bureau of Insurance Rule Chapter 850.

3.  STANDARDIZATION.  Standardize the way hospitals report financial date and develop a common methodology for calculating and accounting for inpatient and outpatient costs.  Also develop a methodology to measure hospital quality/outcomes relative to spending for that care.

4.  PATIENT SAFETY.  Increase patient safety through appropriate staffing and better use of technology.

5.  PUBLIC HEALTH.  What is the proper role of Maine's hospitals in public health activities.

6.  TECHNOLOGY/EMR.  Examine the costs and benefits of computerizing medical records.

7.  MENTAL HEALTH.  Examine the stresses and strains in the mental health system and its impact on Maine's hospitals. Lack of access to critical community support systems for the mentally ill increases the burden on hospitals to meet those needs.

8.  CLINICAL PROTOCOLS/DISEASE MANAGEMENT.  Evaluate efforts to increase the use of disease mangement protocols.

9.  RECRUITMENT.  Understand and assist hospitals in responding to workforce challenges, physician recruitment and retention.

10.  STATE HEALTH PLAN.  What is the relationship between the provisions in the current proposal and the work of the Commission? 

The Commission's next meeting is June 21st.  Following that meeting, the Commission will meet almost weekly, with the expectation that a draft report will be ready for public hearings by early October.  Nancy Kane of the Harvard School of Public Health will present on June 21st.   Ms. Kane is a consultant to the Commission and has attended most of the meetings.

While the issue of medical malpratice reform came up during the discussion, the majority of the Commission did not appear to be in favor of the report dealing with this topic. 

WIth the recent resignation of RIchard Wexler, M.D. from the Commission, Lewis Hanson, D.O. has been added.  D. Joshua Cutler, a Portland cardiologist continues on the Commission as well.  MMA staff will continue to monitor the work of the Commission and report to members through the pages of Maine Medicine Weekly Update.

MMA's Delegation Travels to AMA Annual Meeting in Chicago
The MMA's AMA delegates and several specialty society delegates are representing Maine physicians this week at the AMA annual meeting in Chicago.  During a speech that drew a standing ovation at Saturday afternoon's opening of the 2004 AMA House of Delegates, AMA President Donald J. Palmisano, M.D. likened the AMA's determination to that of a certain medical student in England five decades ago.

He described how the student, on a damp and chilly spring day in 1954, after a morning's work, two train rides and a large meal, with no advanced training, no dietary supplements, not even a coach, shocked the world by running a mile in three minutes and 59 seconds.  Years later, said Dr. Palmisano, Roger Bannister explained his feat this way:  "It's the ability to take more out of yourself than you've got.  The man who can drive himself further once the effort gets painful - is the man who will win."

That perspective helped Bannister shatter a psychological barrier:  the belief that no human being could run a mile in less than four minutes.  It's that perspective, said Dr. Palmisano, that ultimately will help the AMA change our system of health care - through initiatives such as a tax credit plan to cover the uninsured, patient safety legislation, and a fix to the nation's broken medical liability system.  He cited the U.S. House's recent passage of H.R. 4280, which would cap non-economic damages in medical liability cases at $250,000.  "I believe we're one day away from getting these reforms," said Dr. Palmisano.  "Unfortunately, it will be the day when a school bus overturns, and children are seriously injured - and there are no neurosurgeons or trauma surgeons available nearby - because there was no reform . . . because some senator ignored the facts."

Also at the opening, AMA EVP/CEO Michael D. Maves, M.D., M.B.A., provided a snapshot of the AMA's success as "a story in numbers."  While mobilizing thousands of physicians to lobby lawmakers to pass needed health care reforms, the AMA has amassed 100,000 patient-activists to strengthen our grassroots efforts, he said.

He noted that the AMA has more than 5,200 additional members now than it did a year ago, and now spends $25.8 million less on administrative and general expenses than in 1999.  "The AMA is a living, breathing organization - energized first and foremost by the work you do in your practices, in your communities and in your advocacy," he said. [return to top]

Governor Proposes Rule on Determination of Capital Investment Fund

On Monday, 6/7/04, the Governor's Office of Health Policy & Finance published the following draft rule proposing a methodology for determining the Capital Investment Fund, the annual amount of funding to be made available, in accordance with the Dirigo Health legislation (P.L. 2003, Chapter 469), for projects requiring a certificate-of-need.


The draft rule will have a public hearing on Tuesday, 6/29/04 at 9:00 a.m. at the Bureau of Medical Services office, 442 Civic Center Drive, Augusta, Maine.  You may send comments to Gordon Smith (gsmith@mainemed.com) or Andrew MacLean (amaclean@mainemed.com) for inclusion in the MMA's comments or you may send written comments not later than 7/9/04 to:


Ellen Jane Schneiter, Deputy Director

Office of Health Policy & Finance

State House Station 15

Augusta, Maine 04333-0015


07 -- Executive Department

102 -- Office of the Governor

Chapter 101   Establishment of the Capital Investment Fund



Summary:  This chapter establishes the process to be used in the determination of the amount of the Capital Investment Fund. This rule specifies the manner in which a value for the Fund will be calculated each year, how that amount will be allocated between hospital and non-hospital projects as well as large and small projects subject to review under Maine’s Certificate of Need Act and rules. It also describes the manner in which the input regarding the number will be solicited, obtained and considered.


1.            Definitions. For the purpose of this chapter, the following definitions shall apply.


A.        Advisory Council on Health Systems Development. “Advisory Council on Health Systems Development” means the council established in accordance with 5 MRSA §12004-I and described in 2 MRSA c. 5 §104.


B.        Annual Effective Period. “Annual effective period” means the period covered by the Capital Investment Fund. Such periods will ordinarily run for a 12-month period of time, coinciding with the state fiscal year.


C.        Capital Costs. “Capital costs” means costs that under generally accepted accounting principles are not properly chargeable as an expense of operation and maintenance and includes capitalized interest on borrowed funds and the fair market value of any property or equipment that is acquired under lease or comparable arrangement or by donation.


D.        Capital Investment Fund. “Capital Investment Fund” means the limit on resource expenditures that may be made as part of any hospital or non-hospital project, which is established on an annual basis pursuant to the provisions of this chapter.


E.        Department. “Department” means the Maine Department of Health and Human Services.


F.         Extraordinary Project. “Extraordinary project” means a project subject to review under the Maine Certificate of Need Act and rules that is more than two standard deviations apart from the average award in the year the project was approved, made under the Maine Certificate of Need Act and rules, in terms of third year operating costs.


G.        Hospital Project. “Hospital project” means a project that is being proposed by or on behalf of a hospital, as defined at 22 MRSA section 328(14), and that relates to facilities, services or equipment, that is subject to review and approval under the Maine Certificate of Need Act and rules.


H.        Hospital Component. “Hospital component” means that portion of the Capital Investment Fund specifying the level of capital and operating costs that may be approved by the Department under the Maine Certificate of Need Act and rules for hospital projects.


I.          Large Project. “Large project” means a hospital or non-hospital project with third year operating costs greater than or equal to $500,000. 


J.         Non-hospital Project. “Non-hospital project” means a project that is being proposed by or on behalf of a health care facility as defined in 22 MRSA section 328(8), other than a hospital, that is subject to review and approval under the Maine Certificate of Need Act and rules.


K.        Non-hospital component. “Non-hospital component” means that portion of the Capital Investment Fund specifying the level of capital and operating costs that may be approved by the Department under the Maine Certificate of Need Act and rules for non-hospital projects.


L.         Office. “Office” means the Governor’s Office of Health Policy and Finance or its successor.


M.        Operating Costs. “Operating costs” means the total non-capital incremental costs attributable to a project approved in accordance with the Maine Certificate of Need Act and rules.


N.        Small Project.  “Small project” means a hospital or non-hospital project with third year operating costs less than $500,000. 


O.        State Health Plan. “State Health Plan” means the plan developed and issued by the Governor pursuant to 2 MRSA c.5, section 101.


P.        Total Costs. “Total costs” means the third year capital and operating costs associated with a hospital or non-hospital project.



2.            Responsibility for Determining Capital Investment Fund Amount.  The Office shall establish a Capital Investment Fund for each annual effective period, pursuant to the process specified in this rule. Each Capital Investment Fund shall include allocations for both hospital and non-hospital projects, shall reflect the goals of health care cost containment, improvement of health care quality and outcomes and improvement of appropriate access to health care services and shall reflect the guidance provided in the State Health Plan.



3.            Process for Determining Capital Investment Fund. The Office shall determine a Capital Investment Fund for each annual effective period as specified below:


A.        The Office shall calculate a starting value for the Capital Investment Fund as follows:


(1)  The Office shall determine the average total third year capital and operating costs of those hospital projects approved in accordance with the Certificate of Need Program in the five year period beginning six years prior to the outset of the annual effective period. This means in the annual effective period for 2004, the average for the years 1999, 2000, 2001, 2002 and 2003 shall be determined. Extraordinary projects shall be excluded from this calculation.           


(2)  The five-year average third year operating and capital costs calculated above shall be adjusted for differences between the average cost per discharge, adjusted for variations in wages and case mix, in Maine and the US, using the most recent data available.


(3)  The product of the calculation performed in subsection (3)(A)(ii) shall be further adjusted to more adequately reflect differences in the median age of Maine’s population relative to the median age in the US, generally, for the most recent year for which data are available.


(4)  If necessary, the product of the calculation performed in subsection (3)(A)(iii) shall be further adjusted to correlate with the number of months the CIF is to apply to, should that number vary from twelve months.


(5)  The amount calculated in subsection (3)(A)(iv) shall be adjusted to reflect differences in median income in Maine and the US, using the most recent year for which data are available. This amount shall be the Capital Investment Fund hospital component.


B.        The statute at 2 MRSA c. 5, section 102(3) requires that, for the first three years of operation, the non-hospital component of the Capital Investment Fund shall be at least 12.5% of the total Capital Investment Fund. The Office shall next determine the Capital Investment Fund amounts for non-hospital projects as follows:


[Value of the hospital component of the Capital Investment Fund, as calculated in subsection 3(B)] x (0.125) / (0.875)


C.        Within both the hospital and non-hospital components of the Capital Investment Fund, there shall be an allocation for large projects and small projects. Within each component, ten percent (10%) of the total Capital Investment Fund component shall be set aside for small projects; the remainder shall be allocated to large projects.


D.        The Office will then examine the results of the calculations performed in accordance with subsections (3)(B) and (3)(C) against, at a minimum, the criteria for the Capital Investment Fund set forth at 2 MRSA chapter 5 section 102(2). The Capital Investment Fund shall be further adjusted if the Office finds it does not adequately reflect the considerations listed below. The criteria include:


(1)   The State Health Plan developed in accordance with 2 MRSA chapter 5 section 103;


(2)   The opportunity for improved operational efficiencies in the state’s health care system;


(3)    The average age of the infrastructure of the state’s health care system; and


(4)   Technological developments and the dissemination of technology in health care.


E.        The Office may consult with one or more experts to gain additional guidance regarding the appropriate value for the Capital Investment Fund or any of its individual components. If, after such consultation, the Office concludes that the value of the Fund arrived at after performing the computations in subsection (C) is inappropriate, the value may be adjusted to reflect the expert guidance.


F.         The Office shall consult with the Advisory Council on Health Systems Development regarding the appropriate value for the Capital Investment Fund or any of its individual components. If, after such consultation, the Office concludes that the value of the Fund arrived at after performing the computations in subsection (C) is inappropriate, the value may be adjusted to reflect the guidance provided by the Advisory Council on Health Systems Development.


G.        After carrying out the calculations and taking into consideration the criteria set forth in subsection (D), any expert advice sought and the recommendations received from the Advisory Committee on Health Systems Development, the Office shall solicit public input on the Capital Investment Fund by holding a public hearing.


(1)  The Office shall provide notice of the public hearing by publication in the Kennebec Journal. The notice will include information regarding the time and place of the public hearing, as well as specify a deadline for receipt of written comments. The public hearing will be held no less than twenty (20) days following publication of the notice.


(2)  Notice shall also be provided to all persons who have requested notification by means of asking that their names be placed on a mailing list maintained by the Office or this purpose. This notice shall be provided to all such persons at least five (5) business days prior to the public hearing and shall include a brief description of the Capital Investment Fund, the manner in which it was derived including discussion of expert advice received pursuant to subsection (E) and recommendations received from the Advisory Council on Health Systems Development pursuant to subsection (F). The notice shall also include a description of the policy rationale underlying the Capital Investment Fund.


(3)  At the public hearing, the Office will accept comments from any interested person wishing to speak. The Office may arrange the schedule for the public hearing to allow specific constituency groups to be heard together in a single block of time. For example, a schedule may be set out that specifies that comment will first be taken from consumers, to be followed by payers, then providers, and so on. The Office may, at its discretion, limit the time any individual may be allowed for presentation of public comment.


(4)  The Office will accept written comments from any interested person for a period of ten (10) days following the date of the public hearing.


(5)  Within thirty (30) days of the close of the public comment period, the Office shall, after consideration of the comments received, issue a written notice of the final Capital Investment Fund. In that notice, the Office shall summarize the comments received and shall provide a response to those comments. If the Capital Investment Fund is inconsistent with any of the comments submitted for consideration, the Office shall provide a detailed statement of the reasons for the inconsistency.


4.         Use and Operation of the Capital Investment Fund.  The Capital Investment Fund amounts, as issued by the Office, shall be used as a limit for annual resource allocation under the Certificate of Need program by the Department of Health and Human Services. 


5.            Maximum allowance for a Single Project in a Single Year. A maximum of $2,000,000 shall be debited against the Capital Investment Fund level for any individual project in a single year. In the case of an extraordinary project, where the project’s total costs exceed this maximum, the total cost of the project shall be allocated in equal amounts over multiple years, with no one allocation exceeding $2,000,000.  


6.         Carry Forward. If, after all Certificate of Need approvals are made for a given annual effective period, the hospital portion of the Capital Investment Fund has fund allowances remaining, those allowances shall be credited to the hospital portion of the Capital Investment Fund in the following annual effective period. Similarly, if the non-hospital portion of the Capital Investment Fund has fund allowances remaining, those allowances shall be credited to the non-hospital portion of the Capital Investment Fund in the following annual effective period.   [return to top]

Anthem Submits Bid to Offer Dirigo Health Plan
Anthem Blue Cross Blue Shield of Maine announced on Friday its decision to submit a bid to offer the Dirigo Health Plan in Maine.  As requested by the State, the benefit design  proposed is a standard PPO with benefits for preventive care services.  The product will be available to small businesses (less than 50 employees) and a limited number of individuals and self-employed persons.  Two deductibles will be offered in the first year - $1250 and $1750 - with individuals and the self-employed limited to the higher deductible.

The Dirigo Health product will be priced competitively in Maine's small group and individual markets.  The subsidies offered are hoped to attract persons who have not traditionally purchased group health insurance.  Fees paid to physicians and other providers will be similar to the fees paid currently by Anthem.  The state hopes to enroll 31,000 persons the first year of the plan.

The bid is now before the Dirigo Health Board.  The Board has the option of entering into contract negotiations with Anthem, to award the contract to another potential bidder or to reject all bids and seek permission from the Legislature to form its own insurance company.  A decision by the Board is expected by July 1. [return to top]

Maine Quality Forum Continues Work
The Maine Quality Forum met this week.  Much of the work of the Forum is being done in subcommittees including the Performance Measures Subcommittee chaired by Jan Wnek, M.D.    The Technology Assessment Committee was given the Forum's legislative charge of reviewing the issue of nurse staffing ratios.  They have begun to review recent studies and are looking forward to the JCAHO study which is in progress now.  They are in the process of considering how to limit their scope and be most effective.  They will be creating indicators to be used for determining minimum staffing ratios. 

Dr. Shubert briefed the Forum on their highest priority which is to look at the interconnectivity of all components of the health care delivery system.  A lofty goal.  They are working with the Maine Health Information Center which will be partnering with a number of other groups. 

Dr. Shubert also noted that the revolving loan fund, created to assist providers in upgrading their technology, is a "work in progress."  The Maine Medical Association has volunteered to administer the fund.  Dr. Shubert also noted that they are working on an anesthesia best practices project and will be attending the Maine Society of Anesthesiologists meeting in September.

The next meeting of the Forum is July 9.  For a list of the Quality Forum members and their contact information, call the MMA office at 622-3374. [return to top]

New Superintendent Hired at Riverview Psychiatric Center
When the new Riverview Psychiatric Center is up and running with patients and staff on June 15, they will do so under the leadership of a new superintendent David S. Proffitt.  Proffitt has an extensive background in therapeutic and rehabilitation services for psychiatric institutions, including three other state hospitals in Wyoming, Montana and Arizona.  Most recently he was the Director of Outpatient Services for Northern Nevada Adult Mental Services, where he served 2200 clients.  Proffitt has his Behavioral Science Degree from the University of Nebraska in Omaha and his Master of Science Degree in Recreation Administration, option in Therapeutic Recreation, from the Arizona State University.

There continued to be controversy this week concerning the issue of whether the new facility is large enough to meet the demand for beds.  A Bed Review Committee continues to meet under an agreement negotiated when the legislature funded the construction of the facility.  Well over 30% of the patients eligible for admission to AMHI are currently denied,  according to an article this week in the Kennebec Journal.  The state has agree to keep one wing of AMHI available for at least one year after the new facility opens, but AMHI officials have repeatedly stated that they believe the new facility is adequately sized. [return to top]

Revisions to MMA's 13th Annual Physician Survival Seminar, June 23
In response to a very successful seminar in Auburn in May, we have made some modest adjustments to the Seminar begin held in Bangor on June 23.

Jan Wnek, M.D., Clinical Advisor to the Pathways to Excellence Program sponsored by the Maine Health Management Coalition has been added as a presenter.  Because the Program is in the middle of launching its third of three components its Primary Care Initiative - Clinical Outcomes, it was felt that such a presentation would be particularly timely.  Dr. Wnek's breakout session at 3:00pm will replace "Your Relationship with Pharmaceutical Representatives" which was to have been presented by MMA EVP Gordon Smith.  Mr. Smith's materials on this topic will still be available to attendees, however, and he will be present throughout the day to answer any questions with respect to the topic.  The topic has also been structured as a free-standing CME program that is available to medical staffs or other audiences.

All other presentations are as previously announced but the times of some of the afternoon breakout sessions have been changed.  John Gleason's presentation on Certificate of Need will now be presented at 1:00pm while the session on Reimbursement will be at 4:00pm, as will Mr. MacLean's Legislative and Regulatory Update.

While nearly 100 practice managers and physicians have registered for the day-long program, there are still some seats available.  Call Chandra Leister at MMA if you would like to attend and have not previously registered (622-3374 or cleister@mainemed.com). [return to top]

Anthem, Inc. - WellPoint Merger Facing Difficulties in California
A key California insurance regulator has indicated that the state's Department of Managed Health Care will decide soon whether or not to hold a public hearing on the proposed merger of WellPoint Health Systems, Inc and Anthem, Inc. after the department recently came under fire by state legislators. Last Wednesday, a special joint Assembly and Senate committee hearing in California was held regarding the merger.  State legislators scheduled the meeting after receiving complaints that the California Department of Managed Health Care, which is the last state regulatory body left to approve the merger, intended to approve the merger without holding public hearings.  However, Insurance Commissioner John Garamendi told legislators during the hearing that he may not give his approval to the merger because it "is not in the best interest of the state."

According to recent documents filed with California state regulators, executives with WellPoint could earn $147 million to $356 million in bonuses or severance payment depending on who stays and who goes once the company is acquired by Anthem.  The filings indicate that if the 293 WellPoint executives are retained, their total retention bonuses will be $147 million.   If those same individuals are forced out within three years, they will receive $356 million in severance.  The filing valued the stock options currently owned by the 293 WellPoint executives at $251 million.  Garamendi said that he is concerned that in order to support these rich compensation packages, the company may engage in "cherry-picking to weed out severely ill customers."

Opponents of the proposed merger, including the California Medical Association,  are additionally concerned about these sizable payments.  CMA's Associate Director of Government Relations Astrid Meghrigian said, "WellPoint claims that generalized efficiencies will result from this merger.  It appears, however, that the company's primary motivation to merge with Anthem is to feather the financial nests of its executives."

  [return to top]

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