ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, July 8, 1996 TAG: 9607080162
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: The New York Times
NOTE: Below
Facing a torrent of criticism from health maintenance organizations, the Clinton administration has temporarily shelved new rules that would have restricted the common HMO practice of rewarding doctors who cut costs and control the use of services by Medicare and Medicaid patients.
On March 27, the administration issued rules to protect consumers by limiting the use of such financial incentives to reward doctors. But after the protests by HMOs, the Department of Health and Human Services quietly suspended enforcement of the rules, which are mandated by a 1990 law.
The rules were an effort by the administration to insure that elderly and poor people were not denied medically necessary care.
But HMOs, including Kaiser Permanente, Aetna, Humana and the Health Insurance Plan of Greater New York, denounced the rules, saying they would force the companies to rewrite contracts with tens of thousands of doctors. HMOs said the government did not understand the importance of financial incentives in a fast-moving, intensely competitive industry.
The rules do not flatly prohibit such incentives, but limit the amount of money that a doctor can lose on any one patient or patients with very high medical costs.
The rules would require HMOs to disclose details of these incentives to patients and the government.
Health plans say they establish such financial incentives to deter inappropriate and unnecessary care. But critics say the rewards have led to the denial of needed services.
Mark Hiepler of Oxnard, Calif., a lawyer who has successfully sued several HMOs, said the incentives created conflicts of interest and ``put a wedge'' between doctor and patient.
``The more a doctor treats a patient, the less money he gets,'' Hiepler said. ``The less he treats a patient, the more money he gets.''
The incentives take several forms. In many cases, a group of internists or family doctors receives a flat payment - say $70 a month - to manage all the care required by a Medicare patient. If the patient needs tests or specialty care, the physician group must provide it or pay for it. This might encourage the group to minimize the referral of patients to specialists.
In addition, doctors may receive cash bonuses if they meet certain goals for controlling the use and cost of care. Or the health plan may withhold a portion of the doctors' pay and distribute it at the end of the year if spending was less than projected.
In their comments on the new rules, HMOs said it was common for more than 25 percent of potential payments to doctors to be contingent on their success in controlling the use and cost of care, including referrals.
When the Clinton administration issued the rules limiting such incentives March 27, Health and Human Services Secretary Donna Shalala declared: ``No patient should have to wonder if their doctor's decision is based on sound medicine or financial incentives. This regulation should help put Americans' minds at rest.''
The rules were supposed to take effect May 28, but the Clinton administration has pulled them back for further review, without any notice to consumers.
In a brief memorandum mailed May 28 to HMOs, the administration said, ``We realize this compliance date is unrealistic.'' The memo added that the government would not take any enforcement actions before Jan.1.
Bruce Fried, director of the office of managed care at the Federal Health Care Financing Administration, which supervises Medicare and Medicaid, said, ``It would have been overly burdensome and probably impossible'' for HMOs to comply sooner. ``We were overly ambitious.''
But the American Medical Association, medical specialty groups and consumer organizations said the rules were a good first step in protecting patients and the government should impose even more stringent restrictions on the use of financial incentives to limit care.
More than 4 million Medicare beneficiaries and 12 million Medicaid recipients are in HMOs and other managed care plans, and enrollment is rapidly increasing.
LENGTH: Medium: 79 linesby CNB