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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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