MINUTES OF THE
ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT
Sixty-seventh Session
April 26, 1993
The Assembly Committee on Labor and Management was called to order by Chairman Christina R. Giunchigliani, at 5:30 p.m., on April 26, 1993, in Room 119 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Ms. Christina R. Giunchigliani, Chairman
Mr. Bernie Anderson, Vice Chairman
Mr. Douglas A. Bache
Mr. John C. Bonaventura
Mr. John C. Carpenter
Mr. Tom Collins, Jr.
Mr. Lynn Hettrick
Ms. Erin Kenny
Mr. Michael A. Schneider
COMMITTEE MEMBERS ABSENT:
Mr. John B. Regan
Mr. Peter G. Ernaut
GUEST LEGISLATORS PRESENT:
Honorable Dina Titus, State Senator, District 7
STAFF MEMBERS PRESENT:
None
OTHERS PRESENT:
Mr. John Vergiels, Physical Therapy Association
Mr. Jack Close, M.A., P.T., Nevada Physical Therapy
Association
Mr. Tyrone McSorley, Physical Therapist, Nevada Physical
Therapy Association
Ms. Pam Hogan, Physical Therapist
Ms. Jann Dorman, Physical Therapist
Mr. Larry Matheis, Nevada State Medical Association
Mr. Bill Champion, Employer Unified Coalition of Southern
Nevada
Ms. Marilyn Gubler, representing Nevada Hotel and Motel
Association
Dr. John A. Nanson, M.D., M.B.A., Vice President, Medical and
Consumer Affairs, Sierra Health Services, Inc.
Mr. Allan E. Hanssen, President, Coordinated Care Options of
Nevada
Mr. Mark Smith, President, Chamber of Commerce, Las Vegas
Chairman Giunchigliani opened the hearing on SB-316, Managed Care, Sections 74-76, 6, 24, 78, 130, 140, 288 and 290, Utilization Review, Sections 77 and 10, and Physician Self-Referral, Sections 206.5, 246.5, 250.5, 260.5 and 282.5.
SENATE BILL 316 - Makes various changes to provisions governing industrial insurance. (BDR 53-1764)
Honorable Dina Titus, State Senator, District 7, Clark County, testified. Senator Titus noted her support in maintaining the provisions in SB-316 which prohibited self-referrals, with some exceptions. She stated, "I added this section which is 206.5 to the bill through amendment on the Senate side. It passed the Senate Commerce Committee six to one with Senator Lowden as the only dissenter. It then passed on the floor by an overwhelming voice vote. Chairman of the Commerce Committee Randolph Townsend and I both spoke in favor of the amendment on the floor and again Senator Lowden was the only person to speak against it."
Senator Titus explained Section 206.5 amended NRS 616.690, removed the disclosure provision from the existing law and outrightly prohibited self-referral by physicians or chiropractors to a health facility or service in which they or any member of their family had a financial interest. There were two safe harbor exemptions included in this provision. One was the protection of the rural areas which said if the service was not available within a 30 mile radius it did not apply. The second was a protection for HMO's which were licensed under NRS 695.C. The effective date of the provision was set for January, 1995 which gave doctors plenty of time to divest if they had some interests such as these. Senator Titus stated a physician's ability to refer a patient to his own service or equipment constituted a conflict of interest and permitted an opportunity for abuse which an overburdened health care system could not afford. She mentioned studies which indicated such abuse was indeed occurring. In the December 6, 1990 issue of the New England Journal of Medicine, Dr. Bruce Hillman and colleagues presented the results of a nationwide study. They analyzed some 66,000 episodes of outpatient care performed by 6,400 physicians for four clinical problems. The findings revealed self-referring physicians obtained images 4-1/2 times more frequently than non-self-referring physicians and the average imaging charges per episode of care were 4.4 to 7.5 times higher. A similar study by Dr. Arnold Ralman for the U.S. Department of Health and Human Services found, among doctors with interest in clinics, there were 45 percent more tests ordered with bills being 75 percent higher. Similar studies in various states across the country revealed the same findings. For example, a 1992 study in Florida looked at self-referrals in three categories; imaging, clinical lab tests and physical therapy. They found the cost impact was $5.8 million. In California, the findings showed physician MRI joint ventures resulted in a 56 percent increase in volume of testing at a cost of $370 million. Senator Titus stated she could not find one single study which opposed this evidence or argument against self-referrals. The proponents of self-referral would contend joint ventures benefitted consumers through increased access to new technological procedures and better quality control. She noted this was a smoke screen put up by doctors out of financial self-interest. There was no hard evidence to support their position. The Florida Legislature had reacted to this problem by unanimously passing the Patient Referral Act of 1992. This required all physicians to divest themselves of joint ventures or cease referring patients to their own businesses by October of 1995. Similar legislation was pending in at least a dozen states and was also being considered at the national level as part of the Clinton medical reform program. In addition there were existing rules which limited self-referrals from Medicare and Medicaid patients. The AMA had acknowledged self-referral as unethical and was urging its members to voluntarily divest themselves of such interest. Senator Titus stated she was not proposing an across-the-board prohibition such as the one existing in Florida. She concluded, "I am proposing it only in the case of the State Industrial Insurance System (SIIS). I do believe that if we truly want to bring down medical costs and get SIIS back on its feet, we have to address the problems that are inherent in self-referrals. I know that you will hear some other concerns today about certain safe harbors, certain exemptions and I am willing to work with some of those people, but let me caution you, once you start exempting people out, before too long there is not much point in having the bill at all."
Mr. John Vergiels, Physicial Therapy Association, testified. Mr. Vergiels mentioned a packet of material which explained self-referrals (Exhibit C) and submitted prepared testimony from Mr. Jack Close, Nevada Physical Therapy Association (Exhibit D) who would testify from Las Vegas. Mr. Vergiels introduced Ms. Jann Dorman, Physical Therapist and Ms. Pamela Hogen, P.T..
Mr. Jack Close, M.A., P.T., Nevada Physical Therapy Association, testified from prepared testimony (Exhibit D). Mr. Close noted the Nevada Physical Therapy Association supported the committee for their efforts to deal with the rise in health care costs.
Mr. Tyrone McSorley, Physical Therapist, Nevada Physical Therapy Association, testified. Mr. McSorley noted he was available for questions the committee might have. Chairman Giunchigliani asked what imaging was. Mr. McSorley noted imaging was MRI or CAT scans, possibly into Xray.
Chairman Giunchigliani questioned when physical therapy entered into the treatment of an injured worker.
Ms. Pam Hogan, Physical Therapist, testified. Ms. Hogan responded it depended on the physician who was referring the patient. Ms. Hogan noted she received 99.9 percent of her referrals from a physician. Most insurance would not pay for physical therapy without a physician's referral. Some physicians suggested in the case of a low back injury which was the majority of workers' compensation cases, the patient be prescribed bed rest with medication, and after a few weeks would be referred to physical therapy if he had not improved. Other physicians felt patients were better if they went to physical therapy immediately.
Chairman Giunchigliani asked what impact self-referrals had on the physical therapy business. Ms. Hogan responded patients who had been referred for a knee injury and while at work injured their low back or neck, had gone to a physician who owned a physical therapy facility and said to the doctor, "I would like to go back and see Pam," the doctor would say, "I would like you to go see my therapist because they do a better job." Ms. Hogan noted she did not have any documentation of this.
Ms. Jann Dorman, Physical Therapist, testified. Ms. Dorman referred to (Exhibit C) a chart of analysis of the State Industrial Insurance System (SIIS) physical therapy (PT) providers. Ms. Dorman explained the chart was established by going through the list of providers and calling them to determine which providers were independently owned by physical therapists, which providers were physician owned, which were corporate and which were hospital based. The difference between the therapist owned physical therapy providers (TOPTS) and the physician owned (POPTS) was analyzed.
Mr. Anderson questioned if there were situations when a hospital would hire an outside therapist to come in and become part of the hospital staff, and if this was considered a self-referral. Ms. Dorman replied hospital physical therapy departments were subcontracted in some cases. In other cases they were subcontracted by a physical therapist, and then would be considered a therapist-owned department. Hospital physical therapy departments could also be subcontracted by a physician-owned concern. Mr. Dorman noted this analysis was not inclusive of all the physical therapy provided throughout the state of Nevada for the State Industrial Insurance System (SIIS) injured workers.
Mr. Carpenter questioned how organizations owned by physical therapists fit into managed care situations. Ms. Dorman noted her major concern was with a closed panel of physicians and no provisions for independent physical therapy providers. There would be a significant potential for referral for profit and physical therapy services would tend to stay inside the practices of the paneled physicians, and it would be difficult for therapy services to be provided outside the closed panel.
Chairman Giunchigliani noted utilization review (UR) and outside UR would handle much of the debate about self-referral. Ms. Dorman noted utilization review would help to handle much of the problem. Self-referral constituted the source of inappropriate referrals. Appropriate referrals were when the physician felt the patient would benefit from the service. The utilization review then determined if the patient was benefiting from the service. Mr. McSorley noted the packet of information (Exhibit C) directly responded to the utilization review question. He clarified utilization review could work even more effectively if there was no conflict of interest in regard to the initial decision or the ongoing decision of whether or not someone needed physical therapy. Utilization review could be even more effective if a safeguard was put into place from the very beginning.
Mr. Larry Matheis, Nevada State Medical Association, testified. Mr. Matheis submitted prepared testimony which outlined managed care (Exhibit E). Mr. Matheis noted managed care techniques could be applied to any organization, not only a managed care organization. Many of the managed care principles were simply incorporated into the entire health care system. The principles were routine and standard of the various fields.
Mr. Matheis explained managing medical costs and medical care concurrently and noted this could only be done in a fairly stringent managed care organization such as an HMO. What this attempted to do was join two functions which system had been separated in Nevada's system, the insurance function and the delivery of health care. He suggested putting these functions together under a single administrative unit and operating the insurance, the coverage and the delivery of services concurrently.
Mr. Matheis noted case management was probably the most important principle in managed care. There were several versions of satisfactory managed care principles incorporated by many different entities under this category of case management. One was to require enrollees to visit a designated physician who had the responsibility of making any decision about future referrals.
Mr. Matheis explained managed care organizations were usually put in the same category as health maintenance organizations (HMO's) or preferred provider organizations (PPO's) and managed care was not the same as HMO's and PPO's. One of the problems with managed care organizations was no legal definition existed. The staff model HMO originated with subscribers prepaying a certain amount to a group of physicians, and subscribers in turn for the prepaid amount would only go to those physicians and receive complete care without any additional charges.
Mr. Collins questioned the definition of MRI and CAT and which cost more. Mr. Matheis responded MRI was magnetic resonance imaging and CAT was computer axial tomography and the MRI cost more. He explained they were both diagnostic tools which provided different types of information. The MRI provided more information. Both tests were basically computer reproductions of what was going on inside the human body.
Mr. Carpenter questioned if there were any statistics showing which worked best, internal or external utilization review. Mr. Matheis stated they had slightly different purposes. The internal utilization review was an adjunct to the case management function. It was an inside quality and cost control mechanism. The external utilization review was used by the purchaser or government to look at how the whole system was being utilized and look at specific providers. It provided two types of information, both of which were probably needed in order to be able to evaluate if the services were being over-or under-utilized. Under-utilized meant necessary services which were not available to members.
Mr. Carpenter questioned if external utilization review was necessary when there was internal utilization review. Mr. Matheis stated as a minimum an internal utilization was essential for a managed care organization to function. The question of the external utilization review was to make certain the total decisions made regarding patients were looked at statistically. For example, there was a national network of federally created professional review organizations which were contracted to look at Medicare and Medicaid utilization review. The professional review organizations also monitored HMO's which offerred Medicare services to make sure the overall system was working.
Chairman Giunchigliani summarized internal utilization review was the case management and external utilization review looked more at the care provided.
Mr. Schneider asked which health care group was the most efficient. Mr. Matheis explained there was no specific answer since a certain group would work well in one part of the country and not in another part.
Mr Schneider questioned which organization was sued the most. Mr. Hettrick noted he was on the Board of Directors of an HMO some years ago. He stated usually lawsuits were directed at the doctor involved, not the organization. Most of the lawsuits were malpractice suits.
Mr. Bonaventura questioned Section 78, subsection 1, "A self-insured employer may: 1. Enter into a contract or contracts with one or more organizations. . . ." Would one or more organizations make this a self-insured exemption. Mr. Matheis stated he was not sure if this was a self-insured exemption.
Mr. Bill Champion, Employer Unified Coalition of Southern Nevada introduced Ms. Marilyn Gubler and Mr. Mark Smith and noted he was available for questions.
Ms. Marilyn Gubler, representing Nevada Hotel and Motel Association, testified. Ms. Gubler submitted prepared testimony (Exhibit F) which outlined "How Managed Care Can Help SIIS."
Mr. Mark Smith, President, Chamber of Commerce, Las Vegas, testified. Mr. Smith mentioned he was on the Board of Directors for the State Industrial Insurance System (SIIS). He noted a contract was approved by the Board of Directors which would reduce costs of MRI's and Cat Scans 25-45 percent. This would save approximately $3 million per year.
Ms. Gubler summarized the present system was not providing quality care at a reasonable price. There were numerous examples which confirmed the managed care organization could create a winning situation if it was properly structured. She emphasized the system should ensure the injured worker quality treatment and ensure the people who supported the system received the best possible care for their dollar.
Mr. Anderson questioned what was managed care. He also questioned the preapproved diagnostic test, definition of treatment plan and how this would be managed in a timely manner when many of these accidents or events took place relatively late in the day or sometimes late in the week. Mr. Anderson noted problems had existed early on when trying to delineate the method of how resolutions would be reached. Mr. Champion stated he knew of one clinic which handled nothing but workers' compensation cases; approximately 150 per month. Injured workers had complained about getting appointments after their initial trauma was taken care of. He explained in a proper managed care organization when a worker was injured, the managed care organization had an expansive physician panel with plenty of freedom of choice. The utilization review professional endeavored to obtain the right diagnosis the first time. In many cases, workers' compensation costs were provider driven, and there was no free market at play in the health care system. The user was not the payer so he was at the mercy of the provider. The managed care organization was a representative for the worker, and he made sure the worker received the proper treatment. With managed care there was influential staff to say the injured worker would be seen immediately.
Mr. Anderson queried who was the utilization review professional. Mr. Champion responded usually a nurse was most effective as a utilization review person, but when disputes occurred, the managed care organization had a medical review organization. They had a conference with the treating physician and discussed the protocols and the diagnosis.
Mr. Collins questioned if managed care had fixed prices. Mr. Champion replied managed care was a negotiating representative for the payor and for the patient. Managed care represented a great deal of potential patients so they could go to a list of doctors and negotiate better prices. The physician was told, "If you want to join our organization and provide medical services to injured workers, here is the price we will pay you, and here are the protocols you will have to submit to in terms of utilization review."
Mr. Bache questioned how quality care was tracked within a managed care organization. Mr. Champion explained clinical outcomes now being developed were able to measure the efficiency of a provider in curing a patient at a reasonable price.
Chairman Giunchigliani emphasized the committee's intent was to improve SB-316 to assure the best possible care and not create unmanaged, managed care.
Mr. Carpenter questioned if a managed care organization had an open or closed panel. Mr. Champion stated his definition was the panel had broad choice, but once they signed off on the price structure and the protocol for utilization review, the injured worker must go to the providers on the panel for treatment.
Dr. John A. Nanson, M.D., M.B.A., Vice President, Medical and Consumer Affairs, Sierra Health Services, Inc., testified. Dr. Nanson submitted prepared testimony (Exhibit G). Dr. Nanson concurred with Mr. Matheis as to the nature of managed care and its principles.
Mr. Allan E. Hanssen, President, Coordinated Care Options of Nevada, testified and submitted prepared testimony (Exhibit H). Mr. Hanssen stated his organization, Hospital Health Plan and Coordinated Care Options, represented reality. He noted his organization included companies having many years history in managed care in various models. Mr. Hanssen noted managed care could be simply characterized as unit cost and appropriate care.
Mr. Carpenter inquired if the State Industrial Insurance System (SIIS) was a good candidate for a managed care organization. Dr. Nanson replied SIIS would predominantly consist of industrial medicine physicians and clinics, 24 hour urgent care center, primary care doctors of all types, orthopedists, physical therapists, chiropractors, and the ratio of claimants to providers to each of those types would be modeled on prior experience. Dr. Nanson stated it would be appropriate to put together a network to accommodate the State Industrial Insurance System (SIIS). He further explained there was no doubt the variable intensity of managed care would depend on the financial solution SIIS needed to resolve, and the amount of resistance they were prepared to take in the process.
Mr. Bache questioned what kind of turnover rate existed among primary care physicians and physicians assistants. Dr. Nanson noted they had a medical group of approximately 80-90 providers and the turnover in the professional staff was 10-15 percent per year. He noted in their network which had approximately 250 primary care providers the turnover rate was less than 5 percent.
Mr. Collins questioned if a primary care provider could be associated to more than one group. Dr. Nanson responded they had their own employed physicians who drew a salary, and they also had contracts with several hundred physicians in the community. The contracted physicians were either self-employed or worked for a group practice and they could sign contracts with whomever they wished.
Mr. Anderson inquired if there were other choices in a managed care system besides a closed panel situation. Mr. Hanssen clarified there were alternative pathways in medicine, and it was important a primary care physician recognize those pathways. Dr. Nanson stated when putting a closed system together the primary care network had to be defined correctly. He encouraged the committee to plan a broad, extensive, easily accessed primary care network which consisted of the M.D's, D.O.'s, Chiropractors, etc.. Somewhere in the sequence of seeking care there were trigger points for invoking the utilization review process. This should occur when a certain dollar claim level had been reached for a particular injury, when certain expensive tests were ordered or when the claimant had missed work. Dr. Nanson concluded any referrals to specialists would also be worthy of coming under the utilization review preauthorization programs. Chairman Giunchigliani questioned if more severe injuries should also be included in this category and how would managed care handle such an injury. She noted too often there was no algorithm established early on for the severely injured patient which would then tie into the treatment process. Mr. Hanssen explained case management would be responsible for overseeing traumatic injuries from inception. Case management would monitor the case from the onset until the patient returned to work or treatment was complete. Chairman Giunchigliani noted case management was missing from the present system and this was driving the costs more than anything else.
Chairman Giunchigliani questioned if they had contracts with Carson Hospital. Mr. Hanssen replied affirmatively. Chairman Giunchigliani noted an organization which focused on industrial injuries was needed. She questioned if capitated rates were utilized in both of his organizations. Dr. Nanson replied in the HMO model when a certain critical mass was achieved, a selective provider or group would be found who would accept fixed payments per member, per month for rendering all necessary specialty services for the patient base.
Chairman Giunchigliani queried if seminars were offered for members in the HMO's which instructed them how to deal with primary or secondary care. Dr. Nanson stated in the managed care organization, member education was a key part because the system was complex. Members needed information service and advocacy protection. He noted his organization had a staff of about 40-45 people on the telephone available to solve problems for the fully insureds and printed several publications which were sent to members once a year or available at the site of the provider service.
Chairman Giunchigliani questioned if there was new software out for CPT codes and how were members taught to maximize their billings. Dr. Nanson answered affirmatively. He mentioned they had software programs which examined excessive charges, excessive CPT codes, the same date of service, the unbundling of services into multiple CPT codes. GMIS was the name of the software.
Chairman Giunchigliani questioned what was precertification. Dr. Nanson explained precertification was the same think as prior authorization. It was the revealing of services prior to rendering.
Mr. Hettrick questioned if they had any problem obtaining providers in certain specialties. Dr. Nanson responded not in Las Vegas. Mr. Hanssen interjected and stated in northern Nevada there were certain non-contracted sub-specialties redesigned to contract. Mr. Hettrick noted it was an obvious concern because if the system was going to get to a provider organization's managed care and had one group of providers who did not agree to be managed, it made it much more difficult. Mr. Hettrick questioned how would the group be managed if they would not participate in the contract. Mr. Hanssen noted those cases had to be sent elsewhere. If physicians did not participate, they were not franchised to take care of patients on mutual terms, then the patient should go somewhere else where the group had a relationship. Mr. Hettrick noted his agreement and commented the advantage to this situation was a system this large had clout with numbers. If the State Industrial Insurance System developed this managed care situation, their large size would afford them some clout. This influence had to be used to make sure there were providers in all specialties who were available. Dr. Nanson suggested legislation or regulation which allowed a maximum payment to any non-contracted provider who was a necessity.
The following statements were submitted to be included in the record:
1) Mr. Scott Young, State Industrial Insurance System (SIIS) (Exhibit I).
2) Barbara Wellington (Exhibit J).
3) Sandie Barrie (Exhibit K).
4) Josephine Lynn (Exhibit L).
5) Jim Gallaway, Gallaway Enterprises Incorporated (Exhibit M).
6) Lynn Grandlund (Exhibit N).
There being no further business to come before committee, the meeting was adjourned at 8:00 p.m..
RESPECTFULLY SUBMITTED:
JEANNE PEYTON
Committee Secretary
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Assembly Committee on Labor and Management
April 26, 1993
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