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State agrees to sell troubled
Medicaid HMOs
MSMS gives physician voice to proceedings
By PAUL NATINSKY
Managing Editor
Faced with a rebidding process for Medicaid managed care
contracts, state regulators have agreed to sell two troubled
Medicaid HMOs that provide services to 165,000 Detroit-area Medicaid
beneficiaries.
Neither the 103,000-member Wellness Plan, nor the 63,000-member OmniCare
health plan meet the new federal and state standards intended to ensure
sound operations and adequate financial reserves.
AmeriGroup agreed to buy the assets of the Wellness plan for up to $38
million (the figure is based on a price per member that could fluctuate
before the sale is final). An Ingham County Circuit Court approved the
sale May 1.
Coventry Health Care agreed to buy Omnicare health plan for up to $12.6
million (again, the amount is based on a fluctuating per-member rate).
AmeriGroup is the third-largest publicly traded Medicaid HMO in the country
with more than 857,000 members in six states, reported the Detroit Free
Press. Coventry is the eighth largest, with 324,000 members, according
to the newspaper.
The MSMS Board instructed Legal Counsel Patrick Haddad of Kerr, Russell
and Weber to attend an April 29 hearing on the sale to press for physician
interests and give doctors a voice as the terms of the Wellness Plan
sale are finalized.
Assets of the OmniCare and the Wellness Plan have have been frozen
since the health plans were placed into state-controlled rehabilitation
in July of 2002 and July of 2003 respectively. Creditors, including physicians
and hospitals, will be paid from the proceeds of the HMOs’ sale. “It
sounds like the pot is big enough to pay off creditors,” said Haddad.
In response to the concerns and objections raised at the hearing by MSMS
legal counsel, AmeriGroup agreed, and the judge ordered, that the period
of time physicians are required to participate with the Wellness Plan
be shortened. There had been an injunction entered by the court that
prevented physicians from terminating their provider agreements with
the Wellness Plan.
Physicians who desire to do so, now will be able to give notice of termination
of their provider agreement as early as January 1, 2005. The termination
would take effect April 1, 2005. This is a a six-month reduction in the
mandated provider network created by the court’s previous injunction.
As a result of the questions raised by MSMS Legal Counsel and others
at the hearings held in late April, it is known that the Michigan Department
of Community Health plans to increase the Medicaid contract rate applicable
to the Wellness Plan enrollees by 1.9 percent beginning Oct. 1, 2004;
not by 7.5 percent as previously thought. AmeriGroup stated in the hearings
that its margins are too thin to pass this 1.9 percent increase to its
physician and hospital providers. The Wellness Plan, unlike OmniCare,
which reduced its physician reimbursement rates as a part of the order
placing it in rehabilitation, never reduced the reimbursement rates contained
in its provider agreements.
According to Haddad, the likely next step is the liquidation of the Wellness
Plan assets remaining after the sale to AmeriGroup. This liquidation
will be followed by a distribution of the liquidation proceeds to creditors
in accordance with the rehabilitation procedures contained in Michigan’s
Insurance Code.
Haddad said the Wellness Plan is in better shape than OmniCare. Welllness
owned several clinics that figure into the asset mix.
At press time, a meeting was scheduled to move forward on the OmniCare
sale.
Haddad said the tone of the process was much different than the negotiations
that took place when the plans were put into rehabilitation.
“Commissioner (Linda) Watters has demonstrated a keen interest in the concerns
of the provider community,” said Haddad. He said the commissioner has done
a good job of getting information to all parties and engaging all in dialog.
The biggest change from the previous administration, said Haddad, is that members
of the provider community have been invited to key meetings.
President's Report: Pharmaceutical Industry,
A Carrot-On-A-Stick Approach
By EDWARD JANKOWSKI, MD
WCMS President
President George W. Bush made a campaign promise that recently came
to fruition: The establishment of the Medicare drug payment plan. The
formula is complicated, but at least it is a start that will be modified
as the years go beyond the initiation year of 2006. Critics rightly point
out that the drug companies will still get their money. Discounts are
miniscule. Granted, the pharmaceutical industry spends billions of dollars
per year on research, development and marketing. But why does America
have to foot the bill while other countries refuse to do so? “Whatever
the market will bear” is the motto of the drug companies. Politics as
usual. The drug industry lobby groups are very powerful. But the
people are more powerful. We still hold the purse strings.
Another approach. A new FDA-approved drug comes on the market. Let the
drug prove its effectiveness in the first, say, two years or whatever
the market will bear. A good drug that is popular with patients and their
doctors would easily achieve this goal. Now, this drug gets special recognition.
Either consumers, (i.e. patients, third-party payers), doctors, or even
the drug company itself, applies for a bonus stipend from the US government
for research and development costs. Congress approves or disapproves
with FDA input and determines the amount of compensation. If Congress
approves, the drug company now must lower the cost of the medication
for all US consumers by, let’s say, 50 percent or more in exchange for
the bonus stipend. It is a win-win situation. The drug company gets good
PR and a boost for marketing to sell even more of the affordable medication.
The stipend and increased sales will satisfy shareholders. Consumers
win because the drug and likely, eventually its whole class is permanently
lower in cost. How is that for free enterprise? If the pharmaceutical
industry balks, the government can always bang them with the same stick
that is used on physicians. Fair is fair.
YOUNG PHYSICIANS
The WCMS Young Physicians
Committee is open to new physicians interested in getting
involved and sharing new ideas. The next meeting:
6:30 p.m., Thursday, May 20,
2004
RSVP: Alice Waite (313) 874-1360
Editorial: Making A-CHOICE
By JOSEPH WEISS, MD
Editor
The title of this editorial does not contain a typographical
error. A-CHOICE stands for Affordable Consumer Health Options & Insurance
Coverage Expansion Act. The Michigan Association of Health Plans,
the professional organization for the state's HMOs, is sponsoring
this legislation to ease the insurance code that regulates the
HMO industry.
Through A-CHOICE, the Michigan Association of Health Plans hopes to change
health care law: to lift present HMO mandates on mental health services,
diagnostic laboratory services, radiology services, and home health services.
The Michigan Association of Health Plans also wants the state legislature
to remove requirements on emergency, ambulatory, inpatient, and physician
services in the areas of consultation and referral.
In return, the HMO industry states that these changes will allow them
to provide more affordable health care coverage. Their argument is that
business is leaving the state in part because of high health insurance
costs. Furthermore, thousands of state residents are going without any
health insurance, because employers cannot take on the expense.
Lifting mandates will decrease the cost for HMOs of providing care,
and allow the state's HMOs to offer policies whose lower premiums will
make providing health care possible and attractive to those employers
who are backing off such expense now.
Supporting the requests and accepting the arguments of the HMOs is not
only a decision for state lawmakers. The role of the Michigan State Medical
Society will be pivotal in giving the initiative the momentum needed
to make its way through both chambers of the legislature and past the
governor's desk.
If you are in community practice, like I am, you well may see HMOs as
your competitor. Their closed panels exclude us, and their systems of
referral create further cuts in our patient base. Why support any action
that strengthens the HMO movement?
Physicians in private practice, like myself, can take another view. We
can acknowledge that health care costs at present mean more people are
finding themselves squeezed out of coverage. Lower premium costs means
more people can be covered. A less-than-best policy likely is better
than none at all.
Finally, I have my own skeptical view. It says that today's HMO executives
will come before their boards of trustees, present the financials that
show a decrease in costs, and claim a reward for leading the corporation
to a brighter balance sheet. What will happen is not lower premiums for
patients, but bonuses and new offices for the HMO administrators. That
is, efforts by the state legislators and good-faith support by the medical
society, will not further health care, only health care administrator
income.
In my own case, after weighing the arguments above, I will line up with
those favoring support of the HMO initiative. I would be interested in
what the WCMS membership thinks. More importantly, before taking its
position, MSMS wants to know your stand and choice.
Costs, Charges and Compensation
By FEDERICO MARIONA, MD
Most conversations amongst clinicians in practice appear
focused on the business side of medicine. I would call Costs,
Charges and Compensation the high C's of current medical practice.
In that regard, it is interesting to note that only in recent years has
the American College of Obstetricians and Gynecologists provided Category
1 CME credit to courses that contain issues related to learning the business
practices of the government, health insurance companies and health plans
-- much needed educational training for physicians in clinical practice.
Physicians in general have taken little time to accurately determine
their cost of providing medical care in order to understand the generation
of adequate charges to sustain their practices. Nor have we examined
how to compare that information with the compensation we receive, which
would allow us to appropriately negotiate for adequate and timely payment.
Indeed, we realize that periodic and repeated cuts in payments for physician
services, in tandem with bureaucratic mandates and increases in medical
liability insurance, seriously impact patient care.
National health care consulting companies periodically publish guidelines
for physician clinical productivity to establish physicians' earnings
or salary lines. This results in a business gap, non-existent in any
almost any other "industry." No other industry is under the "resource
based, relative value scale," government technology used to determine
product cost, price and margin. There is no federal agency that sets
the price to the public for a Hummer, a cappuccino or a Steinway grand.
But physicians are subject to such technology, which is arguably inaccurate.
Physicians contract with either public or private companies to provide
our services (not a tangible product) at discounts as decided by public
payers, health plans, commercial payers or self-insured major employers.
And, to boot, we receive the compensation when and if those institutions
decide to make good on the practitioner’s claim.
To add insult to injury, the much-touted "tort reform" recently
received another blow from the hands of the Congressional delegations
who voted “no" for its implementation. Nor is there a clear path
to a true "medical justice" system to do away with the current
unreliable and unpredictable system.
The time is long past. Our tolerance for these unwise arrangements indicates
a degree of schizophrenic masochism. Granted, the cure lies within us
for we are individuals with a strong commitment to serve our communities
and those who trust us with their health care. While maintaining the
well being of our practices, we should take a second look at our approach
to issues that have no parallel in business practices anywhere.
Security Awareness & Crime Prevention Week
May 17-21 at Sinai Grace Hospital, Detroit
Dr. Sophie Womack and the
WCMS Violence Reduction Committee are sponsoring a
Senior Abuse Workshop May
17
General topics presented during
the week include: Personal Safety, Auto Safety, Workplace
Safety, Home Safety, and Who’s Who in Security.
WAYNE COUNTY MEDICAL SOCIETY
154TH ANNUAL BUSINESS MEETING
Wednesday, May 26,
2004
Detroit Athletic Club
6 p.m. Reception
6:30-8:00 Dinner Meeting
Installation of WCMS
President
RICHARD E. SMITH, MD
Recognition of WCMS
Alliance
Mrs. Darlene Henderson, WCMSA President
RSVP Required - Limited
Seating
Reserve Early
RSVP Response:
Fax (313) 874-1366
E-Mail: pmitchell@msms.org
Call Peggy, (313) 874-1360
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