LA SALLE UNIVERSITY

THE MORAL AND ETHICAL ISSUES SURROUNDING

MANAGED CARE REIMBURSEMENT POLICIES

SUBMITTED TO THE FACULTY OF THE DEPARTMENT

OF HEALTH SCIENCES MANAGEMENT IN

CANDIDACY FOR THE DEGREE OF

MASTER OF SCIENCE

BY

MARK GAINES

ENFIELD, CONNECTICUT

JUNE 1998

INTRODUCTION

Chapter

I. STATEMENT OF THE PROBLEM 1

Introduction 1

Statement of Need 2

Purpose of the Study 3

Subjects to be Investigated 4

Postulates 5

Rationale and Theoretical Framework 6

Statement of the Problem 8

Hypothesis Statement 9

Importance of the Study 9

Scope and Limitations of the Research 10

II. THE INSURANCE INDUSTRY 11

The Purpose of Insurance 11

The Emergence of HMOs 12

Reduced Payments to Health Care Providers 13

General Cost-Cutting Practices 14

HMO Profits 15

Denial of Health Insurance 24

Field Interview with a Denied Applicant 33

Moral and Ethical Issues 35

Denial of Claims and Care 38

Slow Payments to Providers By HMOs 54

III. UNETHICAL TACTICS USED BY INSURANCE

COMPANY OFFICIALS 56

Insurance Adjustors 56

Insurance Company Lawyers 65

Record Salaries for Insurance CEOs 74

IV. MEDICARE AND MEDICAID ISSUES 77

Basic Coverage 77

Medicare Changes 77

Medicaid Issues 80

V. HEALTH CARE BUSINESS ISSUES 81

VI. THE EFFECTS OF MANAGED CARE ON HEALTH

CARE FACILITIES 85

Reduced Staffing Levels 85

The Decline of Quality Care 86

Poor Labor Relations 89

Hospital Closings 91

Columbia HCA and Hospital Fraud 92

Termination of Patients' Care 96

VII. FIELD INTERVIEWS WITH HMO AND DISABILITY

CLAIMANTS 98

Karen Doe 98

Judy Morris, MD 103

VIII. PRESENTATION OF TWO RESEARCH STUDIES 109

The Impact of Insurance Type and Forced Discontinuity

on the Delivery of Primary Care 109

Outcomes of Stroke Patients in Medicare Fee-for-Service

and Managed Care 112

CIGNA Insurance Study 115

Summary of Studies 117

IX. CONCLUSION 118

BIBLIOGRAPHY 123

CHAPTER I

STATEMENT OF THE PROBLEM

Introduction

Many changes have occurred in the health care environment since the mid-1980s. At that time health care was driven by a Fee For Service (FFS) Model. With the introduction of the Managed Care Model, conditions in hospitals and other health care facilities have progressively worsened.

Professional health care providers have been challenged by fewer hospital admissions with high acuity levels. Admissions have been for shorter stays, with fewer staff members and increased patient workloads. Personal interest in this subject began when one patient, with obvious signs and symptoms of respiratory distress from exacerbation of asthma, was not able to get needed medical treatment because he lacked both health insurance and money.

This paper will examine ethical issues surrounding insurance plans and health care facilities. It includes legal, business, government, and ethical aspects from the point of view of the consumer, the ultimate end user. Insurance plans examined include health maintenance organizations and disability policies. The effect on homeless people is examined as well.

The ethical and moral issues are compelling to professional caregivers to speak out against practices which result in adverse effects on health care availability and quality for millions of Americans today. A better understanding of the problems is necessary for the needed changes to be implemented. The current political crisis surrounding health care requires a thorough understanding to avoid further mistakes in formulating health care policy.

Statement of Need

The quality of the professional practice environment and associated working conditions also appears to have declined under managed care. Short staffing and heavy workloads have caused many nurses to experience burnout after only a few months on the job. Most health care professionals have both seen and experienced this in their practice.

Purpose of the Study

This paper will examine in detail the nature of current managed care and insurance business practices. This will include the current approval and reimbursement practices by health maintenance organizations (HMOs), preferred physician option plans (PPOs), and Medicare under the new HMO model recently adopted by the federal government. These current business practices will be analyzed against ethical and moral principles.

The effects of these business practices on consumers receiving their health care from HMOs, PPOs, and Medicare plans will be examined with an emphasis on the moral and ethical issues. This paper will also study the effects of managed care practices on the professional practice of health care from the perspective of physicians, nurses, and other health care professionals.

Proposals for needed changes in the health care system will be presented. Ethical and moral principles will be an integral part of these proposed solutions.

Subjects to Be Investigated

Postulates

Rationale and Theoretical Framework

The Theory of Beneficence defines the duty to act towards the maximum benefit while minimizing harm. It requires health care professionals to act cooperatively. A nurse, for example, is required to act cooperatively with both the physician and the health care organization. One assumption of this theory is that health care professionals are better qualified than patients to define what constitutes a benefit and what is harmful. In general, this professional judgment is physician directed, rather than nurse directed. The medical criteria used are directed at treating and reversing pathology, and preventing death. However, the theory is limited in disease states such as cancer, where it is difficult to apply. Death is too often the expected outcome of many types of cancer.

Experience of professional practitioners has shown it is very difficult to meet the demands of beneficence while constrained by the limitations imposed by HMOs and PPOs to contain and reduce costs. This has created a moral questions for many practitioners within the scope of their employment. The question of harm resulting from excessive cost containment and reduction bothers a large number of health care professionals.

The Theory of Autonomy is clearly in conflict with HMO-mandated policies for utilization control, a euphemism for denial of needed care under the venue of cost containment.

While the theories of Autonomy and Beneficence appear to conflict, there are elements of both involved at all times in all health care issues. While nurses must choose to practice under one theory or the other, the Theory of Autonomy best meets the needs of both patients and nurses. The patient can exercise personal judgment and expertise unique to his or her individual situation and personal values, and can blend the values of professional and personal perspectives. This reduces the influence of traditional paternalism in favor of consumerism.

This model aligns the nurse with the patient instead of with the physician, health care facility, or family of the patient. This is a major change from the traditional role of the nurse as dependent upon the physician. The nurse is no longer a subordinate, but takes on the role of a mediator, dealing with the conflicts that are inevitable when more than one person is involved in decision making. This model oversteps the traditional boundaries of the nurse-physician relationship.

This model can cause conflict when the reality of scarce resources is contrasted with individual rights and policies for cost containment. All three of these models will be used to examine the objectives of this study.

Statement of the Problem

Hypothesis Statement

Excessive cost containment and cost reduction measures by the managed care industry have directly caused adverse effects on the availability and quality of health care for millions of Americans, with adverse effects on the health state of many Americans.

Importance of the Study

Health care is a vital lifelong need and a basic human right of every person. The quantity and quality of basic health care services directly affects the health of both individuals and entire populations. Issues such as planning health services for the community and the individual are involve in the survival of modern, adequate medical services for the human race. This is a morally higher ethical priority than the business interests of the managed care industry and their investors, which must be balanced fairly with human needs.

Health care is currently a high-priority topic in political agendas at both state and federal levels. It is a significant social and economic issue for many American citizens today. Developments in health care affect all Americans on a daily basis.

Scope and Limitations of the Research

CHAPTER II

THE INSURANCE INDUSTRY

The Purpose of Insurance

The Emergence of HMOs

Indemnity health insurance is fast becoming extinct. Congress laid the foundation for the HMO in 1973 by passing the Health Maintenance Organization Act to encourage the growth of comprehensive prepaid health care programs. Since that time HMOs have grown to dominate the health insurance industry.

The major purpose of HMOs is to reduce employee health insurance premium costs to employers, a major advantage openly marketed. The stated mission for managed care plans is to provide quality care, high levels of patient satisfaction, and reduced costs to employers. Managed care plans contract with physicians to provide care to a fixed number of patients on a capitated basis. The contracting physician agrees not to bill the difference between insurance payments and normal fees. The managed care companies engage in bidding wars to gain large insurance contracts from employers, while paying physicians as little as, for example, $8.00 per patient, per month, in the Austin, Texas, area. Other similar managed care plans, such as preferred provider organizations, operate in a similar fashion.

Reduced Payments to Health Care Providers

One of the primary methods used by HMOs to cut costs has been to systematically reduce payments to health care providers for services rendered to HMO members. HMOs now engage in an annual ritual of cutting payments to providers. In one case, an HMO cut the reimbursement of one northwest United States long-term care chain on the basis of excellent achievement of outcomes, concluding it was paying too much. The rationale was that if a proper balance of payment had been reached, its inefficient facilities would show a decline in outcomes. This HMO made several waves of increasingly deep cuts in fees, including one after the outcome results had fallen.

General Cost-Cutting Measures

An HMO attempts to reduce costs by utilizing carefully prepared revenue allocation models, along with figures for actual costs provided. Calculations then determine if there is enough money from the allocation to pay for the services provided, based on fixed revenues and the number of patients needing treatment. If there is a revenue shortfall, cost savings or alternative sources of revenues are mandated.

The moral and ethical aspects of these practices merit some discussion. If an HMO applied the Model of Beneficence to its members, the revenue allocation models and allocated funds would be sufficient to provide for the needs of the HMO members without reducing necessary staff, compromising quality, or placing the outcome of treatment in jeopardy.

The Nurse-Advocacy Model would allow the patient to select from reasonable treatment options, such as Continuous Positive Airway Pressure (CPAP), which are proven to reduce the long-term likelihood of developing more serious diseases such as hypertension, heart disease, or stroke. This therapy would also eliminate physician visits due to fatigue, headache, fibromyalgia, and insomnia, and would result in lower long-term costs for the HMO.

HMO Profits

Under the Capitation Model that HMOs currently utilize, a fixed amount of money is made available to provide all the necessary care for the entire group in a specific population. Some money is set in reserve for expensive hospitalizations, which are minimized, and contracted services, such as physical therapy, which might not be available within the facility. The remainder of the money is then used to provide care for the HMO members within the group based on the allocation model. The allocation of the funds in many cases is arbitrary and hurts certain specialty areas.

Financial and operational goals might require a reduction in the overall costs of providing patient health care services. Services that are actually provided would be considered a financial drain on the system. Any treatment that is not provided would therefore improve the bottom line. Financial resources are usually not budgeted to health care providers based on the actual amount of patient care provided, but from models that define where the HMO feels the volume of care should be provided. Arbitrary factors tend to override scientific considerations in the allocation of funds.

Financial gain seems to be a high priority in still yet another for-profit HMO, Travelers-Aetna, of which U.S. Healthcare is a division. Travelers Insurance Company is now attempting to offer one-stop shopping with integrated services such as insurance, business loans, and investor brokerage. A merger between CitiCorp and Travelers has been proposed. The final bill had just passed the House of Representatives when some members of Congress expressed concerns about the lack of consumer protection and regulation by the proper agency, such as the Securities and Exchange Commission and state insurance boards. The proposed bill assures each service will be regulated by the proper agency.

Travelers and Aetna merged in 1996, bringing together two companies with a long history of providing health insurance. Travelers-Aetna realized a net income of $390.5 million from revenues of nearly $8.2 billion in 1996. In the quarter ending March 31, 1998, Aetna U.S. Healthcare had total revenues of $3.3 billion, realizing a net income of $98.8 million.

Critics of UNUM Insurance company present a different side to this success story. In recent years, industry-wide losses from professionals filing claims based on mental-nervous conditions have risen sharply. As a result, most companies have imposed a maximum cap on individual long-term benefits. Even this coverage with reduced benefits is costly. There is also a trend for long-term insurers to set up more thorough claims management units. But agents who sell policies are concerned that clients will institute lawsuits against them when claims are not paid quickly or in full.

The pursuit of business interests is not limited to the HMO or long-term disability insurance industries. Genesis Health Care, owner of a chain of long-term care facilities, nursing homes, rehabilitation facilities, and elderly assisted housing complexes, has acquired VitalLink, an institutional pharmacy company. This acquisition will include Manor Care, a chain of for-profit nursing homes, into the Washington, D.C. area. Genesis expects the acquisition to increase its 1999 earnings and its market share in Virginia and the Midwest. Genesis will provide pharmaceuticals for Manor Care facilities and will close or sell pharmacies that fail to produce a positive cash flow. The company reported revenues of $1.1 billion, an increase from $671.5 million in 1996 and expects sales of over $1 billion from the combined pharmacies.

If the insurance industry followed the Autonomy Model, instead of imposing arbitrary limits on the care rendered, HMO members would have significant input regarding what treatment they would receive, where the care would be provided, and who members would choose as their primary care physician. However, the HMO industry appears to be acting autonomously to the disadvantage of the consumer, violating the rights of self-determination managed care members have. HMOs and other health care interests now dictate what doctor the patient will see, what tests and care will be authorized, where pharmaceuticals and supplies will be purchased, and which hospitals, nursing homes, and home care companies will be used.

Patients do not receive the benefit of a minimum level of nursing and medical care based on established standards. When HMOs cut staffing to meet financial goals, needed nursing care is denied to patients. This directly affects patient care outcomes.

An HMO, like any hospital, is responsible for the patients receiving care under its contract. The HMO, PPO, or Medicare HMO organization is responsible for providing needed care in a timely fashion. The managed care organization can be held accountable because of this responsibility for the patient. And the patient, as an autonomous entity, has a right to demand proper care.

One of the central philosophies of health care is that all members of the health care team are ethically required to function together for the benefit of the patient. When this ceases to be the primary aim of a health care plan, the HMO member is defrauded. The health care plan then becomes just another business venture, operating at the expense of the consumer.

Denial of Health Insurance

A federal law guarantees the right of workers to access health insurance when laid off or changing jobs. Under this law it is illegal to deny coverage to people with pre-existing medical conditions, such as cancer, even though, in some states, the cost of such coverage is 140 to 600 percent more than standard policies and sometimes as much as $15,000 per year. However, insurance companies are skirting the law, and this problem is currently receiving attention in Congress.

Some insurance companies, when contacted, stated this coverage was not available. Some insurance companies informed their agents that no commissions would be paid for selling this type of policy, a finding that was also confirmed in a General Accounting Office report.

Some members of Congress are concerned that the insurance industry is circumventing both the spirit and the letter of the law. U.S. Representative Nancy Johnson, of Connecticut, has proposed the Tax Fairness for Health Consumers Act, which would allow consumers to deduct between 40 and 100 percent of such individual health care insurance premiums from their federal income tax. It is intended to help the most vulnerable workers and their families.

This is not a new practice of the managed care industry. In 1991, I applied to the HMO of New Jersey for an individual policy when changing jobs. After eight months of many delays and no replies, I was finally able to obtain group health insurance from another group before receiving an approval from the HMO. Under the current law, a worker has about 63 days to secure coverage before losing eligibility. My health status includes a chronic sinus problem which has been identified as a pre-existing condition by some HMOs. HMOs increasingly stall applicants long enough that eligibility for coverage is lost. Individual policyholders are specifically targeted as the insurance industry is unable to raise group rates, which are highly competitive, a practice some members of Congress have labeled as price gouging.

The managed care industry has also engaged in the practice of enrolling young, healthy, and employed members, who command high premiums while having low health care costs. This has resulted in huge profits, which are soon to end, due to an aging population, and not enough money for the future.

Another concern is the potential for discrimination based on the results of genetic tests. At the present time, individuals with positive test results for certain diseases, such as HIV, are stigmatized. While managed care is proposing genetic testing as a tool for planning health care, the results of such testing could be used to limit health care. The issues of individual privacy still need to be clarified before genetic testing can become a part of everyday medical practice. Given the record of the managed care industry to carefully select the healthiest and most financially advantageous members, this is an issue that should not be taken lightly.

Today, it is rare to find an elderly individual insured by a plan other than Medicare. Many who elect to retire early also lose their health insurance, because they are unable to obtain individual policies. As a result, no health insurance is available until Medicare becomes available at age sixty-five. In 1988, retirees between fifty-five and sixty-four years of age were offered health insurance by 60 percent of their employers. By 1993, only 46 percent of the forms offered retirees any health insurance, now being on to 40 percent in 1996. Today only about 13 percent, or one out of eight, retirees will be offered any health insurance. It was also stated that it is possible to either reduce costs or improve quality, but not both at the same time. The medical service programs of HMOs are now considered cost centers, rather than profit centers.

The passage of KidCare in 1997, intended to provide children needed coverage, also has the potential to introduce national health care for everyone. While this program attempts to impose some form of a Managed Care Model, some states are prohibiting the limitation of care or choice of physicians. New York State, for example, has already created a program to provide health insurance coverage for children who would otherwise go without treatment. With federal money, seven states, including New York, have expanded their Medicaid plans. The program has reported increasing enrollment, with more white children than minorities signing up, and children who have enrolled now visit a doctor more often for both physical checkups and illnesses. The program has earned praise from many parents. More than 90 percent of the parents who sign up are also working full-time, but are unable to afford health care premiums. Single parents are at risk of having to drop their health insurance due to the prohibitive costs. The state is trying to better publicize the program to reach the families the program is intended to reach.

The New York program has had problems determining how much to charge the families enrolled in the program, as there is a significant possibility that private employers will stop offering health insurance to their employees, and workers will not be able to buy private insurance. The need to reach a balance has caused political problems in the state government.

Massachusetts has a plan in place to provide coverage for uninsured children. The plan is contracted through several HMOs, and provides primary and preventative care through the Massachusetts Department of Public Health.

Migrant farm workers often lack health care coverage. A grant of $350,000 has been awarded to provide health care services to migrant farm workers in Connecticut and Massachusetts. Migrant workers will be able to go to any community health center in their state for care. Common health problems include hypertension and diabetes. Two outreach workers have been hired to set up the program, which will include transportation for employees needing health care. Between 2000 and 3000 workers are employed on a seasonal basis on twenty Connecticut farms. Many migrant workers are employed on tobacco farms.

Some legislation is being proposed at the federal level to prohibit discrimination in the delivery of health care based on health status. The issue of genetic information is also addressed in this bill, which is now in a joint House-Senate conference to reconcile the differences in the different versions from the House and the Senate.

There is also pressure in Congress to change parts of the ERISA laws (Employee Retirement Income Security Act). This federal law has shielded HMOs from state insurance regulations. The concept was to stimulate HMO competition, making more affordable health care available to larger numbers of Americans. It is intended to meet the demands placed on workers forced to compete in an increasingly mobile job market, where workers change jobs more often than in the past. This legislation is designed to insure portability, renewability, utilization review, financial solvency, fair claims processing, and fair rating standards. Its goal is to insure that employers keep their promises of health care benefits for their employees.

Field Interview with a Denied Applicant

Jane Doe is a sixty-three-year-old white female, originally from French Canada. About a year ago, she was widowed after her husband suffered a serious illness, which required him to return to Canada for medical care. During hospitalization for his flu symptoms, he developed a pulmonary embolism and died suddenly. Jane Doe was then forced to return to New England to live with her daughter for economic and family needs. Jane had intended to remain a Canadian resident until she reached age sixty-five, to insure she would receive health insurance under the Medicare Canada System, the universal health care system that covers all residents of Canada.

Upon her return to New England, Jane called eleven health care plans in Connecticut. Nine openly refused to write a policy. Among the companies that refused coverage were CIGNA, Aetna U.S. Healthcare, Travelers, and Connecticare. This left Jane with only two possibilities for health care coverage.

Kaiser Permanente stated that, if she were accepted for coverage, the premiums would be $260 monthly. The representative stated she had a 50 percent chance of gaining approval, based on a review of her medical records from Canada. Jane has a diagnosis of stable type II diabetes, with onset of the condition in 1993. She has only needed routine office visits three or four times a year and no hospitalizations. Her condition is stable and well controlled on oral medications.

Jane now has health insurance from the only available source, a program run by the State of Connecticut, at a cost of $8000 per year. There is a one-year, pre-existing-condition exclusion on this plan. The plan is obligated to accepted anyone, regardless of previous or current medical status. Jane will have to use this plan until she reaches age sixty-five, at which time she can apply to a Medicare HMO plan. This unexpected change of events has created a significant financial hardship for her family members, who are taking care of her. They are justifiably angry at the treatment received from the insurance industry.

Moral and Ethical Issues

The current belief that health care is a commodity provided only to those who can afford it raises some disturbing moral and ethical issues.

A business has an obligation toward the community and its constituents, based at least on the obligation of social responsibility. Its activities need to attend to relationships with people more than on making money. These obligations include better customer service, better products, a better qualified staff, and better management relationships, as well as social responsibility. This latter aspect includes attending to the welfare of the community at large, at all economic levels.

Biblical writings, the basis of traditional morals, speak to this issue. Deuteronomy 15:7 says,

We are clearly directed to meet the basic needs of our fellow man. There is something morally wrong when an increasing number of Americans lack such basic necessities as food, a place to sleep, housing, and health care, and often experience racism and prejudice in achieving these essentials. When we ignore the health needs of people, we endanger everyone.

If the social, economic, and political unrest due to issues related to health care continues, Supreme Court intervention might be required to reign in abuses in the managed care industry. Problems with commercial trade issues have existed since the Articles of Federation were passed by the Constitutional Convention in 1787. At that time, certain matters were regulated at the federal level to prevent states from impeding national commerce. The role of the United States Supreme Court is to define which specific areas are handled by the federal government or the respective state, as well as to interpret the laws based on the Constitution.

Denial of Claims and Care

One method HMOs use to cut costs is to provide only a limited network for member services. Thus, a person might have to travel greater distances, even at night with a sick child, to get needed care. A limited network reduces the expense of member services.

By limiting benefits with vague and ambiguous language, including exclusions, expensive care is denied. The consequences of denials might be as serious as death, but the member is simply told no coverage is provided for needed treatment. The HMO will then invent a series of highly complex, inexplicable regulations and policies that are mandatory to navigate the HMO bureaucracy. This makes it easy to deny questionable requests by referring to the payment requirement mechanism.

The use of economic profiles as a part of the HMO contract, to control selection and deselection, places limits on the authority and power of physicians. The HMO uses this power to usurp the legal authority of physicians with contracts that bind in areas such as performance goals, compliance to HMO policies, and gag orders that limit what a patient is told about treatment options. The physician then becomes a tool in the hands of the HMO. If a physician fails to be a good HMO corporate citizen, contracts contain clauses that give the HMO a termination without cause option.

The current ERISA laws contain an exemption that shields the HMO from most liability from the actions of the plan. Even if an HMO member wins a case, the HMO will not be required to pay the legal fees or any punitive damages for its actions, no matter how socially irresponsible the HMO has acted.

HMOs have been hard at work to influence the education of medical students, in order to make future doctors easier to manage as agents of HMO plans. This allows the HMO to avoid paying for treatment and services by labeling specific care as experimental and by slashing research funds. When research is reduced or eliminated, expensive new treatments which add to the bottom line are not available to prolong life.

The managed care industry replies that any cuts in care are only eliminating unnecessary and excessive care. It claims that these cuts in care can be safely made in the absence of independent clinical research to insure the appropriate norms for needed care. The HMOs further state that no need exists to monitor the effects of economically-driven cost-cutting measures. Stories from actual patients impacted by these practices have been ignored, contrary to the significant value placed on such accounts by the science of quality management. The evidence indicates a serious problem, with many patients being denied care.

Dr. Peeno further testified that HMOs have gone far beyond being just a system of health care delivery and payment. By their own admission, HMOs distribute health care based on different financial incentives and management controls from the traditional FFS model. The decision making of doctors and hospitals has been changed by a new system of financial arrangements, with the HMO now deciding what is best for the patient based on economy. The HMO hides behind calling these decisions benefit or payment matters when an adverse outcome results from these decisions, leaving the doctor and hospital to assume the legal liability.

The Centers for Disease Control, a federal agency, is studying the effect on economic trends when managed-care-driven cost containment takes over; some studies have already shown an increase in hospital-acquired infections. The impact appears to be linked with the reduction in the numbers of registered nurses and replacement by less skilled staff. Because of the nature of certain procedures performed by nurses, particularly Intensive Care Unit nurses, any break in technique might place the patient at risk for a needless infection. Intensive Care Unit (ICU) nursing was designed to permit no more than one or two patients per registered nurse (RN). Currently, three and four patients are frequently forced upon each RN. As a result, needed care was effectively denied by reason of deliberate, chronic, short-staffing. In addition, as previously stated, patients are at increased risk of a hospital-acquired infection. A large number of critically ill patients have to battle serious infections that emerge after ICU admission. Certain conditions observed firsthand include lax infection control measures, staffing reductions, and increased use of pool nurses. Critically ill patients are at very high risk for an infection from any source, including their own pathogens; it takes very little to cause potentially fatal sepsis.

The cost of health care has risen beyond the ability of most people to pay for it, largely driven by the widespread availability of insurance. Under the FFS model, there was no incentive to deny care, but, instead, an incentive to deliver more care, thus generating more income for physicians and hospitals. Under the new managed care system, utilization review allows insurers to determine, on either a prospective or retrospective basis, what services are necessary and appropriate.

The decision to authorize care is based on statistical norms derived in large part from studies on subgroups of white, middle-class, European-American males. When an individual outside these subgroups (identified as ethnic Americans in this report) seeks treatment from an HMO, there often exists a long history of undertreated or untreated illnesses, which increase the severity of the current illness. If this is compounded by inadequate diet, shelter, or clothing, the illness may be even more severe. The HMO needs to consider these facts, as more medical attention and treatment may be required. Since reviewers too often lack the necessary cultural background, many ethnic Americans find MCOs unwilling to contract with them, thus causing this population to be underserved on the basis of race, class, economic status, and cultural differences.

The payment system places the patient in the position of having to challenge an unfavorable decision. The decisions rendered by utilization review boards are often reinforced by the inability of patients to fight back if denied services. By denial of treatment on a prospective basis, it is likely that no treatment will be received. Thus, while an appeal is in progress, the health problem would, at best, not be resolved, and might even be getting worse.

The law sets up three stages of appeal within the HMO before the Connecticut State Insurance Commission steps in. Previous to this, there was no appeal process beyond the HMO. It was very difficult to get emergency room (ER) visits covered unless the patient was admitted from the ER. The public outcry to the Connecticut State Legislature resulted in this bill being introduced and becoming law. It is an issue more frequently heard discussed among patients today.

Even at the federal level there are concerns about consumer protection issues, with the Employee Retirement Security Act of 1974 (ERISA). The intent of this reform bill, which has not yet become law, is to make sure the interests of HMO members are protected. This proposal covers such issues as disclosure of the terms and process of HMO decision making, timely access to needed treatment, appeals, and qualifications of the medical staff.

Yet, while there are serious allegations of denial and obstruction of care in areas such as the ER, and extending hospital stays, some patients have sued, demanding HMOs pay for Viagra, a new medication for the treatment of impotence. The lawsuit might be expanded to include other HMOs, as well as to seek class action status. Other insurance companies currently refuse to pay for Viagra, including Aetna U.S. Healthcare and Prudential Insurance Company.

In my own experience, Humana HMO of Chicago refused to cover a bee sting kit prescribed for me, even though a bee sting can cause me a life-threatening anaphylactic reaction, with potential to be fatal. Likewise, Chicago HMO refused to prescribe the proper antibiotics needed to halt my chronic sinus infections that almost required surgery.

Today, even if a person is treated with outpatient therapy, therapy sessions are much fewer. Yet this reduction in therapy leads to a greater dependency on medication for the relief of symptoms, while failing to address the root cause. MCOs also restrict access to the newer, more expensive medications, even though these newer medications are more effective than the older, cheaper ones.

The National Alliance for the Mentally Ill gave a failing grade to MCOs in an assessment study. This study was based on nine criteria, including the use the newest medications and rehabilitation.

The backlash against MCOs is certainly significant, covering a variety of therapies and treatments. Even Christopher Reeve, the actor who suffered a spinal injury after a fall from a horse, is speaking out against the insurance industry. He was paralyzed as a result of his injury, and needs a mechanical ventilator to sustain his breathing and, therefore, to remain alive. Yet he had to fight his insurance company for a necessary backup ventilator to cover any failure with his primary ventilator. As a registered respiratory therapist prior to becoming a registered nurse, my experience has involved thousands of ventilator-dependent patients; without a properly functioning ventilator, death will occur within four to six minutes, from cerebral anoxia.

Slow Payments to Providers by HMOs

As a result, the hospital sued Ms. Lee. She then sought help from the Maryland Insurance Commission. Optimum Choice agreed to pay emergency room and air ambulance charges, but was then ordered to pay the entire bill, plus a $1000 fine by the Maryland Insurance Commission.

This is far from being an isolated case, as the practice of slow payments or no payments by HMOs has become all too common. Insurance executives claim they are increasingly skillful at spotting inappropriate bills.

Mid Atlantic Medical Services, the corporate parent of Optimum Choice, has been quoted as boasting to Wall Street executives of its ability to invalidate claims already paid, extracting $12 million plus from health care providers last year. The corporation has threatened to dock future payments if health care providers fail to comply. The stated basis for these refunds is improved claims auditing systems, without any factual need or statutory requirement proven.

The problem is serious enough that hospitals in Maryland have banded together to coordinate their appeal to the State of Maryland, citing Blue Cross-Blue Shield, Mid Atlantic Medical Services Inc, and others. Health care providers charge that denials and payment delays have worsened, as health care plans profits increase.

It is illegal in Maryland to require pre-authorization in emergencies. Yet a diabetic man was denied care for emergent hypoglycemia due to the lack of authorization.

One Austin physician got so frustrated with this problem that he turned his HMO bills over to a collection agency. To his surprise the HMO promptly paid the bills since it needed a good credit rating to stay in business. The idea is spreading to South Texas physicians via the Internet.

My own experience with Chicago HMO is similar. Some time after having been hospitalized in Chicago, I began to receive bills from a radiology group. Upon calling their office, I found out that the HMO had not paid the bill. When I called the primary HMO site in Schiller Park, I was told it would be paid that week. This cycle went on for several months before the bill was finally paid. During a visit, I overheard the doctor at the primary HMO site make some negative comments about me. I then changed HMOs with much better results. It was a close call and I was nearly sued for the bills the HMO was supposed to have paid.

On another occasion in Chicago, I suffered a severe sprained ankle. I went to the nearest emergency room, which accepted Chicago HMO, my insurer. My primary HMO site refused to allow the closer hospital to treat me, as it would have meant paying an additional site within the plan. This caused further injury and delay as a friend had to drive me to my car. I then had to drive myself and get the needed x-rays. The injury required almost six months to heal.

On one occasion, when I had asked my lawyer to call Chicago HMO to fix an obvious contractual default, the HMO even gave him a hard time. It is clear that the practice of delaying and refusing payments appears to be widespread.

CHAPTER III

UNETHICAL TACTICS USED BY INSURANCE COMPANY OFFICIALS

Insurance Adjustors

The problem of unethical tactics being used by insurance adjustors is so widespread that entire books are now available to attorneys outlining industry practices in great detail. Such books are used nationally by attorneys to prepare for litigation with the insurance industry.

There is no requirement for a plaintiff to show any intentional misconduct or evil motive on the part of the insurer, in order for an insurance company to be charged with bargaining in bad faith. It is enough to show that the insurer lacked proper cause and unreasonably withheld policy benefits. Bad faith has also been defined as dishonesty or fraud in a transaction, with the intent to deceive. Bad faith actions by insurance companies have been increasing, as noted by a judge in one case, United Insurance Company of America v. Cope.

An insurance adjustor is expected to offer fast, fair, and friendly settlement of an insurance claim. The adjustor is a key power player in handling claims by reason of carrying a checkbook on behalf of the insurer. In the case of health insurance, the HMO doctor functions in this fashion by authorizing or denying requests for health care for HMO members.

One common technique utilized by many health, life, homeowner, and auto insurance companies involves a deliberate delay in settling a claim, which often causes the claimant to accept a smaller payment in return for a quick settlement. The longer the claim is delayed, the more the insurer benefits. The passage of time most often reduces the amount of anger the claimant has. The claimant loses the initial momentum and impact, along with the will to fight. Thus, an insurer not acting in good faith saves large amounts of money by denying care.

Lowballing is a technique that involves paying less than the fair value of a claim to the claimant. There are many forms this process can take, including ignoring the claimant, not returning telephone calls, or otherwise not acknowledging that the claimant has sustained loss, damage, injury, or illness. Another method would be failing to list all of the damages, injury, or illness. Still, even if all the damages, illness, or injury are recognized, the HMO may fail to fully compensate the claimant for the full value of the claim.

A member requesting service from an HMO is equivalent to filing a claim with an insurance company for an auto accident or burglary. As discussed earlier in this thesis, the HMO operates both as an insurer and delivery agent of health care services. If an HMO physician fails to diagnose the true level of severity of an illness, this would be equivalent to failing to recognize damage or illness. This was the case when a Chicago HMO physician failed to properly diagnose my sinus condition at its true level of acuity. The HMO physician failed to include the spread of the infection to my mastoids. The HMO further refused to provide all the necessary treatment, which corresponds to a common insurance practice of failing to fully compensate a claim.

In the case of Moukalled v. Fire Insurance Exchange, an insurer refused to advance funds for necessary medical treatment, while it had full knowledge the claimant was in a severe financial situation. As a result, the court ruled this was intentional bad faith.

A forced structured settlement might be imposed by a long-term insurance company in a disability case, thus avoiding a cash payment of the full value of the claim. The insurer can then invest the savings for its long-term for the financial advantage, such as is a common practice of UNUM. This avoids many years of monthly payments to disabled individuals.

The insurer might fail to disclose what is owed to the claimant, such as automobile rental after an accident. In the HMO industry, the gatekeeper physician may simply not inform the patient of alternative care, as a Chicago HMO doctor failed to do to me. Had the HMO used the proper medication in the first place, many months of problems would have been avoided.

If an individual has a terminal illness, some insurers will attempt to impose a lower settlement, as the claimant is not likely to live long enough to bring the case to trial.

Another technique is to force a claimant into arbitration after a lowball offer, when the insurer is certain the claimant will prevail. At the same time, the insurance company will attempt to negotiate for a lower settlement. The insurer offers an immediate payment of a reduced amount on the value of the claim. In Hightower v. Farmers Insurance Exchange, a California court ruled this practice as acting in bad faith.

Another common practice with insurers is to drag out a claim for years before paying a reasonable settlement on the claim. This practice has been called stone walling and constitutes bad faith. Additionally, in the case of a complex claim, an insurer might refuse to make payment until all parts of the claim are settled, using unfair leverage.

By denying payment for medical services over a long period of time, a claimant might be pressured into an early settlement by being forced into dire economic circumstances from reduced income. The claims maze the average HMO or other insurance company sets up can easily serve to delay a claim. By shifting claims to a home office or non-existent claims committee, long periods of time pass. The insurer might also falsely claim that the insured has failed to cooperate with the investigation. One trick is to nickel-and-dime the claimant for information and documentation. Another favorite game to delay payment is bouncing the claimant from agent to agent. I experienced this practice, sometimes called the rubber ball express, while attempting to get Chicago HMO to pay unpaid hospitalization bills.

Some insurance adjustors fail to notify the claimant of the pending expiration of the statute of limitations, thus setting the claimant up for loss of the claim. The claimant is then unable to take the necessary steps to protect the claim. Once the statute of limitations has run out, the insurer may then deny any further consideration of the claim. Fortunately, lack of such notification by an insurer will void the statute of limitations.

Arbitration is another tool used to intimidate a claimant. The insurer inserts a clause stating they will appeal any unfavorable decision.

Another technique is to offer lowball settlements around Christmas time, when many people financially overextend themselves and fall prey to the need for extra cash. Another good time to implement this trick is around income tax time for the same reason.

The purpose for including these techniques in this research is to illustrate that managed care is health care under the management of the insurance industry. The same techniques that have been used for years in other areas of the insurance industry are being used to manage HMOs.

Insurance Company Lawyers

Corporate attorneys utilize abusive tactics in many cases where a citizen is up against a corporation. The objective in court is nothing less than total victory over the plaintiff, with corporate lawyers encouraged by their clients to use whatever means needed to win the case. The legal codes require that an attorney act zealously to protect the interests and secrets of the client; the same code of ethics requires an attorney to maintain a certain level of ethical responsibility to the courts and the public, to practice law truthfully, and to avoid dishonesty, fraud, and criminal conduct. However, the reality is that corporate crime does indeed pay very big returns, as the majority of defrauded parties never collect anything. Taxpayers bailed out the savings and loan scandal. Corporate lawyers are very much in tune with the business interests of their clients, while perpetuating the image of being out of touch with the man or woman on the street.

The insurance industry proposes another solution: limiting legal protections and redresses against medical malpractice. Pressure from the insurance industry and physicians is aimed at limiting liability, instead of by allowing the free market to exact the consequences of poor quality service on those responsible.

Doctors who make mistakes are too often protected in order to preserve the image of medicine. From my professional practice, I observed one particular physician, a surgeon, who caused the death of one patient and a severe adverse outcome in another. Yet this doctor never lost his hospital privileges. In fact, he was not even reported to the state board of medicine. Finally the Chief of Surgery was forced to restrict his privileges by having another surgeon present during any procedures. Because of this, the original surgeon was not allowed to work a normal duty shift alone. It would have been ethical and less expensive to remove this obviously unsafe doctor from a position where he had already harmed patients and had the potential to harm others.

Secrecy is frequently a method of operation of corporate lawyers, not individuals. Secrecy has the effect of keeping government officials uninformed, and thus unable to properly perform their duties. It is then no longer possible for the government to fairly and effectively guarantee the general welfare of all citizens.

Corporate lawyers use a variety of tactics to withhold information about corporate misconduct. These methods include protective court orders, confidential settlements, and vacature agreements.

Abuse of discovery is common as well, and violates the principle that open knowledge of all the relevant facts to both parties is essential to guarantee proper litigation. Either side should be allowed to gather all the information the other side has, even if the information damages the case of the party that provides it. Discovery is intended to provide a level playing field for all parties in litigation. While discovery has reasonable limits, the process is intended to be broad enough to insure disclosure of information germane to the case, to facilitate a prompt understanding by all parties of the issues in a case. Destruction of evidence, although common, violates the basic duty of all parties to preserve any evidence, either once a lawsuit has been filed or if it is likely legal action will require such evidence.

Another approach is to simply destroy evidence such as files and computer records, much as then-President Richard Nixon did during the celebrated Watergate scandal. The goal appears to be winning the case, no matter what it costs, corrupting the business of civil government, the courts, and private enterprise.

The destruction of evidence frequently begins before legal action ever begins, in an often effective effort to insure the truth will never come to light. During my employment at one hospital, one manager systematically thinned his file cabinet of certain key records, knowing that a U.S. marshal and deputy sheriff would soon arrive with legal papers regarding a particular case. There was never any action against this individual, even though it was patently obvious what was going on. This manager stayed late, came in on weekends, and even borrowed a document shredder, which was returned after heavy use. The case was settled with a confidential, lowball agreement.

Americans today feel an increasingly intense hostility toward both the court system and lawyers because they perceive the deck is stacked in favor of the wealthy and special interest groups with their hidden agendas. Corporate interests have even succeeded in squelching witnesses who had firsthand knowledge of corrupt corporate conduct. Corporate America can only continue to abuse its power and exploit citizens for a limited period of time before the public demands needed change. Citizens need to demand a complete overhaul of the judicial system.

While arbitration or alternative dispute resolution is a possible option (a professional mediator decides a case outside the court system), it too often favors corporate interests over the individual. Many business now utilize their superior economic power by including mandatory arbitration clauses in the fine print of HMO contracts and opening bank accounts. These contracts of adhesions are legal and must be upheld by the courts at the expense of consumers and employees. In an increasing number of cases, it is impossible for an individual to do business with a health care plan or insurance company, or even accept a job without accepting these terms, giving up his or her rights.

Record Salaries for Insurance CEOs

While benefits are being cut for HMO members and other insurance claimants, American CEOs are collecting multimillion dollar compensation. The average CEO pay has risen 500 percent over the past five years, while profits rose 11 percent, with factory wages rising only 3 percent.

Executive salaries have risen so much that if minimum wage rates had kept pace, minimum wage workers would now earn $39K yearly. In 1997 the CEO of HealthSouth received compensation of $107 million. The CEO of CIGNA received over $15 million in the same year, and Aetna paid its CEO nearly $2 million.

Oxford Health, a Connecticut HMO, recently awarded a retirement package of $9 million to its former CEO, even though the company sustained losses during the prior operating year amounting to $291.1 million. While CEOs are supposed to receive top pay for achieving top results, many CEOs today get top pay no matter what results they achieve.

It could be argued that while executives get hefty pay, HMO members receive less of the health care they need and HMO staff have to work with less staff on top of increased workloads. As previously discussed, this raises serious ethical questions about finances in the executive suite.

CHAPTER IV

MEDICARE AND MEDICAID ISSUES

Basic Coverage

Medicare provides basic health care coverage for adults sixty-five years of age and older. Currently, most Medicare recipients receive their services from the traditional FFS providers, but that is changing very quickly as the federal government moves towards utilization of a Managed Care Model. Medicare currently covers 38 million Americans.

Medicare Changes

Under the new proposal, people as young as age fifty-five would be allowed to pay premiums for Medicare coverage. It is estimated that up to three million uninsured Americans are in the fifty-five to sixty-four age bracket, with approximately 400,000 being eligible for this proposed program. The proposal includes new fraud prevention measures designed to generate additional money for the program. President Clinton states this new program would not threaten the integrity of the Medicare Trust Fund.

Judge Lamberth called the conduct of government officials reprehensible, adding the government should be held accountable. This kind of action by government officials will adversely affect the needed changes in Medicare.

Actions by Congress to control Medicare costs are causing concerns as well. Medicare recipients are now being moved into managed care HMO arrangements, which limits their choice of physicians. The restrictions on physicians have become severe enough that as payments to providers such as hospitals, clinics, and doctors are cut further, large number of doctors are leaving the Medicare program completely rather than risk losing money from treating senior citizens. Unless fair reimbursement is guaranteed under Medicare, even more doctors will simply sign off the program, having nothing left to lose. The future of Medicare is being debated as a new Medicare Commission will be required to decide on what future benefits recipients will receive as the solvency of the fund is being questioned.

Medicaid Issues

Medicaid has traditionally provided care for poor, disabled, children, and poor elderly. Due to the loss of jobs in the U.S. economy, Medicaid has become an even more critical safety net as more people lack health insurance coverage.

Among those who suffer the most are children. The General Assembly in Virginia forced Governor Gillmore to allocate federal money for 83,000 currently uninsured children. Families making up to $32,000 yearly will be able to use the plan, with some co-payments based on income. This will assist the working poor who are unable to afford health insurance.

CHAPTER V

HEALTH CARE BUSINESS ISSUES

The insurance industry has largely gained control of American medicine, with a steady decline in the availability and quality in health care for patients. The goal of the insurance industry is to maximize profit by any means possible, which means conditions are only going to worsen for both patients and health care providers.

The large employers who pay the premiums for health insurance are demanding still more cuts in HMO and hospital costs. The HMOs state higher rates are needed to provide needed health care for their members, while big business cites waste and medical inflation such as the annual 10 to 15 percent price increases for drug costs. The view of American business is to push for an overhaul of the business practices of physicians and hospitals. The potential for a shakeout in the HMO industry is very real in the long term. Many large corporations are threatening to freeze the rates they will pay HMOs. As reported previously, a major motive in the move for managed care has been from large corporations to lower health care costs, increasing their profits.

The pressures on managed care are severe enough that the HMO as we know it may undergo significant change. Many consumers are angry with the constraints imposed upon them by cost management systems. Clearly, there is a backlash against the managed care industry based on high levels of customer dissatisfaction.

The government is also cutting its reimbursement to HMOs at the same time higher premiums are being demanded. Customers with higher expectations that are not being met are causing state and federal legislation to mandate the HMOs provide more patient care.

Due to a consumer revolution, HMOs are now starting to attack each other for the first time, stressing in new advertising campaigns that their benefits are based on patient needs, not on boardroom decisions. Yet prevalent management styles today seem to emphasize military tactics, complete with $1000 tours to Civil War battle sites and executive trainers. Military metaphors are stressed in this training.

Doctors are even banding together, taking business courses, and setting up their own practice groups in an effort to regain control of medicine from the insurance industry. Meanwhile, mergers in the insurance industry continue with the current merger between Travelers Insurance and Citibank, which will be known as Citigroup.

During my employment at a Hartford health care facility, the union was negotiating with a Genesis facility in Connecticut. Genesis officials demanded further concessions as the facility was not making enough profit. The result was a surprise information picketing session, with elderly nursing home residents participating. The Genesis negotiators were forced to back down. This situation demonstrates that everyone is out for more, with a limited supply available. Serious trouble is ahead for consumers, labor, and business alike, as someone will have to give way.

From a moral and ethical point of view, as previously discussed, lack of concern for other people and greedy profiteering at the expense of the poor, disabled, ill, and injured is contrary to Biblical standards, the basic cornerstone of our culture. The rich get richer by oppressing those unable to defend themselves, which is contrary to the concepts of beneficence and autonomy and raises serious moral and ethical concerns. All of us will pay the price in the long term.

CHAPTER VI

THE EFFECTS OF MANAGED CARE ON HEALTH CARE FACILITIES

Reduced Staffing Levels

As a direct result of facility downsizing, poor wages, adverse working conditions, and heavy workloads in the name of profit margins, a new nursing shortage is upon us like never before. The national practice of cost containment has created a sudden, critical shortage of highly skilled registered nurses. Since short staffing has been identified as a significant factor in the patient care deficiencies that are gaining attention, hospitals attempting to hire back nurses are finding that they are no longer available. Many nurses have found other employment options, often in diverse fields.

The U.S. Immigration and Naturalization Service recently shut down an illegal smuggling operation that brought more than 500 Filipino nurses into 35 states, taking jobs away from American nurses. They were paid substandard wages, which cost American nurses almost $13 million in lost salaries.

I have had three or four patients forced on me as management sent nurses home, in an intensive care unit where the ratio should be one nurse to a maximum of one or two patients. This was a daily occurrence for me and my coworkers. Recruiting nurses in these facilities has become almost impossible due to the abusive working conditions, since workloads are often too stressful.

The Decline of Quality Care

In a recent Connecticut case, an eleven-year-old boy was suffocated while being restrained by poorly trained mental health aides after a temper tantrum. According to state officials, the type of restraint used should never have been used on a child. This was the hold the hospital had taught the aides, with the aide sitting on top of the child, who was face down. Obvious signs of respiratory distress were ignored, and a nurse was not present during the restraint as policy required. The aides also were not trained in cardiopulmonary resuscitation (CPR). As a result, there was a ten-minute delay in starting CPR, and a delay of several minutes in calling 911.

A similar incident in Greensboro, North Carolina, resulted in the death of a patient at Charter Hospital, during restraint. A state and federal investigation revealed violations of rules that govern restraints and search-and-seizure procedures.

In documents obtained under the Freedom of Information Act from the Connecticut State Department of Health, a report was obtained of a surprise inspection at the Trinity Hill Healthcare Center in Hartford. The State of Connecticut inspectors listed sixteen deficiencies. These citations included:

1. Violations of the requirement to notify residents of their rights and services

2. Failure to inform residents of their grievance rights

3. Failure to maintain a sanitary environment

As result of this inspection, the state held a hearing and advised the nursing home to bring its attorney. Failure to correct these problems will result in a termination of all federal payments on August 27, 1998.

Poor Labor Relations

Arbitrary discipline by facility administrators has Congress concerned enough to propose a federal whistle blower protection bill, as workers who speak up against unsafe or illegal conditions are often fired. When this happened to me, the National Labor Relations Board reversed the facility action against me. Similar cases are becoming more common.

The number of health care facility staff turning to labor unions is rapidly increasing as well. Two facilities in the Hartford, Connecticut, area recently voted in unions. Oddly enough, local papers did was not report these news items.

However, unions are not the only answer. Many nurses leaving hospitals and nursing homes say they will never return to work in such facilities, even with a union.

Hospital Closings

Mt. Sinai Hospital in Hartford, Connecticut, was acquired by St. Francis Hospital and Medical Center, which has since closed all of the acute care services at the Mt. Sinai campus. The surrounding community of Blue Hills has been left without a nearby inpatient acute care hospital. The hospital would have been closed entirely except for community and labor union action against St. Francis. St Francis claims the closing was necessary due to large financial losses. St Francis then centralized many services to increase efficiency and the bottom line, eliminating a large number of positions in the process.

Columbia HCA and Hospital Fraud

Columbia HCA, still under investigation by the FBI, the Internal Revenue Service, and the Health Care Finance Administration, has many practices that cheated local communities. In March of 1997, the FBI raided the El Paso Columbia HCA facility, with warrants based on fraudulent practices. Columbia HCA would buy up facilities in a region, then abruptly close some of them to increase efficiency and profits. Health care professionals lost positions, patients had to travel farther for emergency room access, and regional use of hospitals decreased. As a result, some Florida municipalities now lack hospitals after Columbia HCA closed facilities, but retain the certificates of need that would allow facilities to be reopened by others. Of the 350 hospitals Columbia HCA acquired, it closed twenty-five nationally.

The Medicare fraud investigation found the percentage of respiratory illnesses billed in the severe category had more than doubled after Columbia HCA took over Miami Cedars Medical Center. Federal investigators claimed Columbia utilized upcoding, which is exaggerating the seriousness of an illness to submit higher bills to Medicare. When Columbia bought non-profit hospitals, it demanded that charitable trusts be set up to pay for care of uninsured patients in Columbia HCA facilities.

Some former Columbia HCA officers and directors have been charged with violating the Securities Exchange Act of 1934 for manipulation of stock values to artificially high levels. They allegedly sold four million shares of Columbia HCA stock before the facts of the fraud investigation emerged, causing the value to fall sharply. Many Columbia HVCA employees had their retirement money in this fund.

Gardner recalls how Columbia gave him step by step instructions on how to avoid legal problems while watching the bottom line. He detailed how he downsized (firing fifteen nurse managers, numerous nurses, and other professional staff), saved by using cheaper, lower-quality supplies, and set referral goals for doctors. Gardner also replaced hospital food service employees with an outside contractor in order to stop union organizing efforts.2

Columbia is now reorganizing under a new CEO, and is dropping the Columbia HCA name from local facilities. Several key former Columbia HCA executives have been charged with Medicare fraud by a grand jury.

Any non-profit facility near a Columbia hospital suffers from the proximity. Salaries may drop so low as to be an insult. Benefits packages may be cut. Hours may be reduced while workloads increase to the unbearable point. Canceled shifts are common. Non-Columbia facilities have to operate just like Columbia HCA in order to keep their doors open. The effect on staff and patients is devastating.

These practices violate the principles of beneficence and patient autonomy with the self-serving mechanism of self-referral to insure an efficient and profitable business. The principle of beneficence would require keeping enough local facilities to service the customer. The principle of patient autonomy would allow patients to freely select which doctor or hospital to use. The practices of upcoding to increase Medicare billing violate the basic core of honesty and constitute theft.

A fifteen-year-old child was recently refused care at Ravenswood Hospital in Chicago after having been shot in the chest. Friends brought the child to the hospital door, where hospital staff refused to render assistance. Chicago police officers finally put the wounded child into a wheelchair and pushed him through the door, at which point hospital staff were forced to provide emergency assistance. However, it was too late and the boy died.

The Illinois Department of Public Health is investigating this incident for violation of federal anti-dumping laws, which mandate any hospital must provide initial care to anyone who shows up at the hospital. Hospital officials claim the staff refused to come to the aid of the child just outside the emergency room doors because of a policy forbidding hospital staff from going outside the hospital to render aid. The policy has since been revoked. The hospital further claimed the emergency room was full and the child would receive better care at a trauma center equipped to provide this care, thus waiting for a Chicago Fire Department ambulance to transport the patient, rather than providing care itself. Chicago Police claim a number of hospital staff were on breaks and refused requests for help, a fact that is denied by a hospital spokesman.

CHAPTER VII

FIELD INTERVIEWS WITH HMO AND DISABILITY CLAIMANTS

Karen Doe

Karen Doe was born without any complications, and was diagnosed with Type One diabetes at age 8. She was also diagnosed in early childhood with hypothyroidism and seizure disorders. In 1989, she suffered a cerebral infarction, which damaged part of her brain. Since then, Karen has suffered from chronic migraine headaches.

There has been a documented history of suicidal ideation since 1995, which resulted in Karen being referred for psychiatric evaluation and treatment. She received weekly therapy sessions over several years. Her HMO reduced these to every two weeks, then to every three weeks, and finally to an as-needed basis.

On February 26, 1998, Karen left school illegally and was apprehended by law enforcement officials. She was offered the choice of being arrested or going to the ER. She chose the ER and was discharged home the same day.

On April 20, 1998, Karen held her mother and sister hostage with a butcher knife. She finally allowed her sister to go upstairs, at which time the sister called 911. Karen was arrested after giving up the weapon, and was taken under protective custody to the hospital for an emergency admission. Karen now faces several felony charges as a result of this incident.

As an added consideration to this case, there has been legal precedent on this type of issue that has a very significant effect on any physician dealing with a potentially violent patient. In general, a person cannot be detained unless a physician determines he or she is a danger to him- or herself or to others. A 1974 California court ruling involved the release of an individual who then murdered his girlfriend after having threatened violence. The court ruled that mental health professionals have a duty to protect society from dangerous patients upon learning an individual is in possible danger. In the face of this legal precedent, the HMO and mental health case manager might well be playing with serious civil liability.

Judy Morris, MD

Judy Morris, an emergency room physician by specialty, was interviewed in April 1998 as a part of this research. Dr. Morris has kindly given me permission to use her name and any part of her case history for this report.

Dr. Morris is a forty-year-old, caucasian female with over ten years of practice as an ER physician. She graduated from the University of Florida School of Medicine in 1983. Dr. Morris purchased a professional disability policy from Betty Rae Poppo, in Springfield, Massachusetts. The policy was underwritten by UNUM Insurance Company of Portland, Maine, and was occupation specific for emergency medicine. Thus Dr. Morris could work in another medical specialty and still collect benefits if an illness or accident disabled her while working as an ER physician. Ms. Poppo assured Dr. Morris that UNUM was a reputable company.

Dr. Morris suffered an incident of optic neuritis in her right eye while employed as an ER physician at Ludlow Hospital, Ludlow, Massachusetts. Intravenous steroids yielded with good resolution of the right eye neuritis, but Dr. Morris began to experience increased problems with severe exhaustion, headaches, and malaise, which had been a problem for a number of years.

Dr. Morris requested additional assistance in the ER at the hospital to reduce the overwhelming stress she said was causing her condition. Despite multiple requests, Dr. Morris was denied the assistance of another physician in the ER.

During the third or fourth week in 1996, while Dr. Morris was on duty in the ER, the workload dramatically increased when her supervisor, Dr. Mangion, visited to assess the level of stress and working conditions in the ER. Due to several stressful events happening at once, Dr. Morris broke down crying, which required the ER nurses to immediately locate a second physician, calling the ER physician scheduled for the next shift in two hours early. Dr. Mangion offered no assistance. Dr. Morris regained her composure enough to finish the shift, but made several mistakes that almost cost a patient his life. Up to this point she had denied the reality of the problems.

At this point Dr. Morris states she faced the possibility she might never fully recover from chronic fatigue syndrome, or might get progressively worse. She contacted her agent, Ms. Poppo, to file a claim on her UNUM disability policy. Ms. Poppo stated that because chronic fatigue syndrome is a physical disease, not a mental disorder, there would be no problem filing a disability claim. The policy called for benefits to paid on a monthly basis, once UNUM received proof of loss.

Dr. Morris did not receive fast and efficient service on her claim, based on this interview and a review of the medical and legal records. Dr. Morris brought a legal case based on bad faith denial of insurance benefits.

CHAPTER VIII

PRESENTATION OF THREE RESEARCH STUDIES

Studies have been done that address the impact of managed care upon the quality of patient care. Three studies with the best overall applicability to the topic were selected to present.

The Impact of Insurance Type and Forced Discontinuity

on the Delivery of Primary Care

This study examines the impact of annual bidding on managed care contracts and the possible effects of HMO members being forced to change physicians on the quality of the physician-patient relationship. The researcher hypothesized that changing physicians might disrupt the quality of primary physician care. Primary care has been the logical foundation of effective health care, enhancing effective resource ultimation. There are concerns over conflict of interest as patients change physicians from year to year in order to achieve the best contract bargain.

Patient characteristics such as age, sex, number of health problems, health status, and the type of visit were compared by t-test for continuous variables and by chi-square for categorical variables. The differences between Fee-for-Service (FFS) and managed care organizations (MCOs) were assessed by dimensions of primary care utilizing a t-test. Those individuals not reporting a change in their physician were also compared by t-test, as were individuals reporting such a change in physicians.

The standard deviation of 0.2 between means indicates an acceptable level of consistency in the dispersion of data used in this study. The number of subjects for the study (1839) was valid as indicated by a power of .95. An alpha of .05 indicates the probability that a null hypothesis will not be rejected if it were true. A minimum level of .05 is required for nursing research work to insure a valid study.

The study concluded that the quality of primary care was more dependent on the maintenance of a physician-patient relationship than on the payment mechanism. Patients who were forced to change physicians scored significantly lower on each of the indicators of quality primary care. The study showed that patients with MCOs were three times more likely to change physicians. The study concluded that being forced to change physicians is detrimental to quality primary care and is a potential negative effect of MCO contracts.

Outcomes of Stroke Patients in Medicare Fee-for-Service and Managed Care

The federal government is steering increasing numbers of Medicare recipients into HMOs in an effort to contain Medicare costs. This study analyzes survival rates of FFS and HMO patients following strokes with their discharge destination.

Data Collection

Data were collected from medical records based on demographics, clinical characteristics of stroke, comorbid illnesses, and the discharge destinations following hospitalization, such as a nursing home or rehabilitation hospital. Survival data were obtained from Medicare files including twenty-five to thirty-seven months of follow-up. The study included 19 HMOs in twelve states, along with FFS patients in the same areas. Four hundred and two subjects were HMO patients from seventy-one hospitals, and 408 were FFS patients from sixty hospitals. A modified version of an instrument developed by the RAND to assess the quality of care specific to CVA patients was used to obtain data. Data were collected by RNs experienced in quality assurance and utilization review from September 1990 to February 1991. Each case required approximately one hour for data collection. Five percent of the records were photocopied (n = 44) and randomly assigned to be reviewed by an abstractor to determine reliability.

The effect of the HMO in determining discharge destination for patients discharged alive was estimated utilizing a multinominal logit model allowing for controls on age, marital status, and condition upon discharge, such as neurological status and the requirement for catheters. Kaplan-Meier survival function estimates were plotted, along with log-rank tests to assess the differences in survival rates among the study groups.

Finally, the differences in the survival of stroke patients in the HMO and FFS models were analyzed utilizing the Cox Proportional Hazards Model, with the COXREG procedure in STAT used to estimate the effect of HMO status and multiple variables on the risk of mortality.

During hospitalization, 109 patients died; 49 were HMO patients (12.2 percent) and 60 were FFS patients (14.7 percent). By the end of the study 410 subjects had died; 191 were HMO patients (47.5 percent) and 219 were FFS patients (53.7 percent). Approximately 25 percent of the subjects in both groups had Do Not Resuscitate orders: HMO patients, being 25.4 percent and FFS patients, 27.9 percent.

The study found that HMO patients were more likely to be sent to nursing homes than FFS patients, with HMOs discharging 41.8 percent and FFSs 27.9 percent of stroke patients to nursing homes. The statistical analysis indicated very strong evidence against the null hypothesis.

The study also found that HMOs are less likely to utilize rehabilitation hospitals or specialized rehabilitation units, with HMOs sending 16.2 and FFSs sending 23.4 percent of stroke patients to rehabilitation. These findings indicate adequate evidence against the null hypothesis.

There was a 95 percent confidence interval indicating a good balance between precision and reliability utilizing the Proportional Hazards Model for relative risk of death. The study found no significant difference between HMO and FFS patients in the relative risk of mortality.

The study could not show if the use of nursing homes by HMOs amounted to withholding of necessary care or warranted use of expensive resources. HMOs commonly utilize nursing homes for post-hospital stays. In another study, elderly patients in HMOs experienced significant declines in their physical health compared to FFSs. Conversely, another study with arthritis patients shows a higher survival rate for HMO patients.

This study was limited by not following up on the health status of surviving patients after hospital discharge, and not measuring the functional ability or quality of life at follow-up. In addition, the study was not able to study the cause of death.

CIGNA Insurance Study

Summary of Studies

While the data do not directly indicate a measurable decline in the quality of health care as a result of managed care practices, they do support adverse effects on the patient-physician relationship caused by shifting patients between HMO plans for the economic advantage gained during the annual contract bidding process. One study underscored consistent physician-patient relationships as the basis of quality primary care. Any adverse effect on this basic relationship has potential effects on patient care.

Since the CIGNA HealthCare document lacked the statistical analysis and data collection mechanisms, this document is, at best, a corporate marketing tool to sell its plan to employers who pay most of the premiums. Since CIGNA has a financial interest in the matter, the objectivity of this document is highly questionable.

Further studies need to be conducted by impartial individuals and organizations to provide valid analyses of the health care industry to direct its growth and evolution.

CHAPTER IX

CONCLUSION

From the evidence presented, it appears that the cost-containment measures initiated by the managed care industry have caused a significant decline in the quality and availability of health care for a large number of Americans. An urgent need exists for a major overhaul in the way health care is managed and delivered in the United States. The federal government needs to step in to safeguard the interests of the consumer.

The level of corruption in the health care system is shocking beyond belief. From the research presented, every level of health care has significant ethical and moral problems that blatantly violate the duty of beneficence and Autonomy owed by business to citizens as a whole. Unethical business practices are common, as indicated by the accounts of patients and providers. Some of this misconduct is clearly illegal, as illustrated by the FBI investigation of Columbia HCA.

A need exists to aggressively enforce the law to stop health care fraud, with stiff individual fines, prison terms, and closing of any health care provider found guilty. This would send a clear message that crime will not be tolerated. We must not allow HMOs to negotiate their way out as Columbia HCA is doing, but must turn the facility over to new interests to protect the communities affected, utilizing the federal racketeering statutes.

The primary profit motive must be eliminated from health care by eliminating the bonuses collected by health care executives. Success for a health care plan needs to be redefined as providing needed services to members, not by multimillion dollar bonuses for CEOs while members are denied necessary health care.

Control of health care interests needs to be removed from the business aspect, with boards of directors being comprised of regular citizens from the community. Special interests, such as business operators, health care providers, and labor unions, should only be a fraction of these boards, with members of the general public serving one-time terms and being the clear majority. Clearly, people must be first, balanced with business interests that are not allowed to pursue private agendas and profiteering. Mergers must not only be stopped, but reversed in many cases.

Criminal and civil penalties need to be put in place for any individual or organization that denies insurance or health care benefits to a claimant. Corporate crime is currently a profitable pursuit encouraged by federal ERISA laws and a court system that favors big business. Equality of treatment is needed to restore trust and confidence in the courts. Attorneys, physicians, and business executives need to face prison sentences, stiff fines, and lifelong loss of their professional licenses for impeding the rights of claimants. Tort reform must not be used to limit the rights of victims to hold business interests responsible for their abuses. Mandatory arbitration needs to be abolished for the same reasons. Unethical lawyers must be criminally punished for hiding and destroying evidence, SLAPP lawsuits, and any abuse of discovery intended to manipulate victims. The law needs to operate impartially, instead of being a tool of in the hands of the insurance industry.

There is an emergent need to restore needed staffing and reverse the decline of quality care in hospitals and long-term care facilities, the direct result of HMO-mandated cuts in reimbursement. The reimbursement rates need to return to fair levels in order to restore appropriate levels of professional skilled staff (registered nurses, licensed practical nurses, respiratory care practitioners, physical therapists, occupational therapists, and others) who have suffered from the drastic downsizing. The wages of these critical staff need to be readjusted to re-attract those who left the health care field due to downsizing, lowball wages, unsafe heavy workloads, canceled shifts, and administrative abuse.

The recently proposed federal Whistle Blower Protection Bill is badly needed to prevent the growing number of health care employers from terminating employees for speaking up on patient safety issues. Heavy fines and prison sentences are needed to send health care executives a message that abuse will not be tolerated. Because of this growing threat of job loss, many nurses are losing their traditional role as a patient advocate. Patients need someone to turn to for assistance.

A universal national health insurance needs to be discussed and implemented in order to insure adequate sources of payment for necessary patient care. Policies need to include limits of coverage that do not consider needed health care services as a political tool to cut taxes and employer premiums.

Any national health insurance plan needs to include a single set of standards and procedures for all citizens, all HMOs, and all areas of the country. This would eliminate the current fragmented system, in which Medicare, Medicaid, HMOs, and PPOs each have separate sets of paperwork and regulations.

Until Congress can enact a national health care plan, a national insurance review board is urgently needed to act on claims of denials of HMO and long-term insurance by insurers. This board might require regional offices with an impartial staff not having any affiliation with the insurance industry. The boards would need to deliver emergency rulings in health care matters, on the same day in some cases. They board would need to be able to make rulings within 30 days on disability claims. The law would also need to be amended to award automatic punitive damages in cases where insurance companies are found to have acted in bad faith to delay or deny a legitimate claim.

Studies need to be initiated to measure the effects of managed care on patients. An impartial body needs to audit every HMO and PPO, and examine a large number of claims and clinical records. A strong emphasis is needed on long-term outcomes, including survival, exacerbation of illnesses, and quality of life. The insurance industry should be required to entirely fund this research. The independent variable would be the services that are actually delivered, with the dependent variable being the actual long-term outcomes. Since results from any study will take years to be available, the need to start immediately is urgent.

The moral and ethical issues need to be examined as well. If we continue to allow all levels of health care to be the domain of mechanized greed at the expense of human suffering, we face the loss of health care in the long run. Society requires that business be based on fundamental principles of integrity and trust. In the privation of honesty, health care executives will continue to take the ethical shortcuts that have left health care in the sad state it is today. This is also a spiritual problem that calls on all of us to act swiftly. We must all demand and practice good citizenship, including integrity in business and government affairs and being active and informed citizens.

The need for change is urgent enough that the average citizen has little left to lose. With slashed wages, reduced health care, fewer hours, reduced benefits, higher and heavier workloads, downsizing, more temporary workers, and an economy that favors big business, current insurance plans might not have any value. Insurance as it currently exists charges too much and gives too little in return. It might be better to put the same money in the bank and have direct control over it.

If we fail to act to guarantee needed health care for everyone, all of society will pay for the greed of the insurance industry. Insurance, as a basic staple of the American economy, might disappear or become of little value to most people. The choice is ours.

BIBLIOGRAPHY