ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, December 26, 1996 TAG: 9612260062
SECTION: NATL/INTL PAGE: A-1 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: The New York Times
The federal government has adopted a policy limiting the types of bonuses that can be paid to doctors as a reward for controlling service costs for Medicare and Medicaid patients.
The policy is described in notices sent this week to health maintenance organizations around the country. Its stated purpose is ``to protect patients against improper clinical decisions made under the influence of strong financial incentives'' offered to doctors by HMOs.
Paul Cotton, a spokesman for the Federal Health Care Financing Administration, which runs Medicare and Medicaid, said rules to carry out the policy would take effect Jan.1.
The rules will apply only to HMOs serving patients under Medicare and Medicaid, the programs for the elderly and the poor. But in practice, they will set a standard for the entire managed-care industry. The rules do not flatly prohibit HMOs from paying bonuses and other financial incentives to doctors, but establish a framework for regulating such payments.
Several states plan to apply similar standards to commercial HMO contracts. And consumers may cite the rules in lawsuits asserting that HMO financial incentive payments were unreasonable and led to the denial of necessary care.
The rules are part of an effort by the government to address the concerns of patients who fear that, as they are drawn into HMOs and other managed-care plans, financial factors will increasingly influence doctors' clinical decisions. Consumer advocates worry that doctors will deny patients needed services so the doctors can keep their costs in line with an annual budget.
The New England Journal of Medicine summarized these concerns in an editorial in September. ``The quality of health care is now seriously threatened by our rapid shift to managed care as the way to contain costs,'' it said. ``Managed-care plans involve an inherent conflict of interest. On the one hand, they pledge to take care of their enrollees, but on the other their financial success depends on doing as little for them as possible.''
HMOs say such fears are baseless because they control costs by eliminating unnecessary services. They say they reward doctors not only for controlling costs, but also for providing high-quality care.
The new rules come three weeks after the government declared that HMOs may not limit what doctors tell patients about treatment options. Doctors say such ``gag clauses'' discourage them from discussing expensive treatment options not covered by the HMO.
Many HMOs pay doctors a flat monthly fee to provide all the care a patient needs. These payments often cover the cost of services provided by specialists and even hospitals.
In addition, some HMOs pay bonuses to doctors who help keep costs under control, by techniques like limiting tests and procedures, reducing hospital admissions and curbing referrals to specialists. Alternatively, some HMOs withhold a portion of the doctors' pay and then distribute it at the end of the year if they have met certain goals for spending, productivity and performance.
For example, in April, Harvard Pilgrim Health Care, based in Brookline, Mass., told 650 staff doctors that they were receiving bonuses for 1995 because the company had achieved ``a favorable bottom-line performance'' that year. But the HMO also said that the financial picture this year was ``extremely worrisome,'' that hospital use was exceeding projections and that doctors would not get their full salaries unless the company ``hits its budget'' for 1996.
HMOs criticized an earlier version of the rules as unrealistic, saying they would force health plans to renegotiate contracts with tens of thousands of doctors. The government postponed enforcement of those rules, which were to have taken effect in May. Bruce Vladeck, administrator of the Health Care Financing Administration, said in an interview in July that there would be no changes in the regulations.
But the new rules contain many changes of the type sought by HMOs.
``We believe these changes improve the regulation and, over all, will reduce the burden of compliance,'' the government said in the notice sent to HMOs and state Medicaid agencies.
Vicki Gottlich, a lawyer at the National Senior Citizens Law Center, said on Tuesday: ``I'm glad that the government is finally doing something about incentive payments to physicians. But these rules address only a portion of the problem. The government should require HMOs to collect data showing the referral of Medicare patients to orthopedists, neurologists and other specialists, so we would know whether patients are getting the care they need.''
Charles Sabatino, a lawyer at the American Bar Association's Commission on Legal Problems of the Elderly, said the changes made by the government in the past seven months tended to ``expand the range of health care providers who will be exempt from some of the new rules.'' At a recent meeting with federal officials, he said, consumer advocates expressed ``concern that widening the exemptions will hurt consumers.''
Medicare finances health care for 38 million people who are elderly or disabled. Nearly 5 million of them are in HMOs. More than 12 million of the 37 million low-income people covered by Medicaid are also in HMOs.
The new rules prohibit an HMO from making a ``specific payment'' to a doctor or a physician group as an inducement to reduce or limit medically necessary services to a patient. The effect of this restriction is uncertain, since HMOs usually reward doctors for controlling the cost of care for a group, not for individual patients.
The rules also require HMOs to provide a general summary of their financial incentive arrangements to any Medicare beneficiaries who request it. HMOs must provide much more detailed information on the same subject to the government each year.
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