MINUTES OF THE
ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT
Sixty-seventh Session
April 27, 1993
The Assembly Committee on Labor and Management was called to order by Chairman Christina R. Giunchigliani, at 5:35 p.m., on Tuesday, April 27, 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. Peter G. Ernaut
Ms. Lynn Hettrick
Ms. Erin Kenny
Mr. John B. Regan Excused
Mr. Michael A. Schneider
STAFF MEMBERS PRESENT:
Don Williams, Legislative Counsel Bureau Research
Frank Krajewski, Senior Research Analyst
OTHERS PRESENT:
Randy Johnson, N.W. News Network
Terri Potts, Director Political Affairs, The McMullen
Strategic Group
Tyrone McSorley, Physical Therapy Association
John Vergiels, NV Association of Physical Therapists
Jack Close, NV Association of Physical Therapists
Jann Dorman, NV Association of Physical Therapists
George McNally, Nevada Trial Lawyers' Association
Carol Jackson, Manager, Dept. of Industrial Relations
Danny Thompson, AFL/CIO
Ron Hubbel, Industrial Clinic
Larry Mathias, NV State Medical Association
David Erickson, Private Citizen, SIIS Recipient
GUEST LEGISLATORS PRESENT
Senator Dina Titus, Clark County Senatorial District 7.
Following roll call, Chairman Giunchigliani opened the hearing on the aspects of Managed Care and Utilization Review contained within SB 316.
SENATE BILL 316- Makes various changes to provisions governing industrial insurance.
The Chairman called on Randy Johnson, an investigative reporter for the Medford, Oregon publication, N.W. News Network, to speak to the committee on Oregon's State Accident Insurance Fund. Mr. Johnson explained for the past three years he had been involved in an investigation surrounding the Oregon reforms of 1990. He said he hoped the information he had to offer would serve to aid Nevada in its attempt to reform the Nevada State Industrial Insurance System.
Mr. Johnson pointed out a state industrial insurance system existed not only for the employee but also for the protection of the employer from an unforeseen injury on the job by the employee. He said nearly all states had started a workers' compensation system to protect an employer from those costs and Oregon was one of the first states to do so. Most started out with a legislative intent to restore the injured worker medically and financially, and ultimately, when possible, to return them to work as soon as possible. Oregon still had such an intent today.
Ideally, Mr. Johnson said, a person might be injured on the job, treated for the injury and time loss would cover the person financially until treatment returned the person to work. However, eventually there would be insurance efforts to reduce workers' compensation costs -- and usually those efforts were supported by the insurance industry itself. There were only two ways to accomplish those reductions, i.e., the benefits could be limited or access to the benefits could be limited.
In 1990, Mr. Johnson reported, Oregon's State Accident Insurance Fund (SAIF), a state quasi-public insurance corporation and a division of the executive branch of state government, along with the Oregon State Legislature had done both. They not only restricted access to benefits for the injured worker, they also limited the benefits an injured worker could receive.
Mr. Johnson went on to outline the progress of the Oregon legislation and explained how it had adversely affected Oregon's program. He quoted from remarks made by one of Oregon's newspaper editors as follows: "They [SAIF] manufactured a crisis, they manipulated the information causing a panic and a special session clouded in confusion, created an unfair workers' compensation system wrapped up and called reform."
The Oregon bill, SB 1197, was developed by a select group selected by the Governor without public or press involvement. The AFL/CIO comprised the majority of the labor side and the state's largest big business lobbying organization comprised the other side. Mr. Johnson explained the Oregon Public Employees' Union decided the bill was against everything they had been working for to take care of their injured workers. That labor union was dismissed by the Governor from the balance of the meetings, although the Governor was not a member of the committee.
Mr. Johnson said people had been told rates would go down in the workers' compensation system after it was revised. In 1988 the Oregon Workers' Compensation System collected $723 million in premiums with 1,872 employers in the high risk pool; employers who paid two to three times as much as those not in the high risk pool. In 1992 it collected $796 million with more than 12,000 employers. Most small businesses paying under $2,500 were placed in the high risk pool and hundreds had told Mr. Johnson they had never filed a claim in the history of their business. Mr. Johnson stated the state insurance carrier had decided they did not receive enough money from each of the small business employers to insure them and still make a profit, if they had one injury.
During the period of reform, Mr. Johnson told the committee SAIF had obtained a new president who changed the mission of the State Accident Insurance Fund. The new president had arbitrarily decided the State Accident Insurance Fund had the right to make a profit just as any other insurance company. This, Mr. Johnson opined, was where things went wrong. Subsequently, SAIF had paid over $32 million in dividends and premiums to state agencies and the largest of the big business employers in Oregon. Mr. Johnson noted SAIF had also requested over 96 percent in rate increases from the Insurance commissioner from 1986 to 1990. They were granted 52.6 percent in rate increases.
Mr. Johnson said although SAIF and the state claimed benefits paid to injured workers and certain permanent partial disabilities had doubled, obtaining the benefits was very difficult. Other statistics offered by Mr. Johnson were:
- The number of denied occupational disease claims in Oregon had risen from 37.5 percent in 1989 to 46.6 percent in 1992.
- Denied total disabling claims went from 14.1 percent to 20.5 percent in 1992; and the big jump had occurred in 1990. The report Mr. Johnson was quoting from stated SAIF was the primary cause of the first 20 percent jump and this had not decreased since.
- Denied disabling aggravation claims went from 33.3 percent in 1989 to 49.6 percent in 1992. The DIF report showed 90,787 Oregonians were denied, of which 43,980 were non-disabling injuries.
Continuing, he said the state and SAIF maintained the number of accepted disabling claims had decreased by over 30 percent. Insurer claim closures went from 28.2 percent in 1988 (pre reform) to 59.7 percent in 1992. Thus, he said, they were closing the claims in Oregon at twice the rate they had previously.
Examining the benefits paid to injured workers as a percent of total earned premiums for all insurers, pre-reform 1989 and post-reform 1992, Mr. Johnson related:
- Permanent partial disability dropped from 9.2 percent to 8.3 percent. This was a percentage of the total earned premium taken in by all insurers in Oregon.
- Permanent total disability dropped from 4.5 percent to 1.7 percent in 1992.
- Time lost dropped from 22.9 percent to 16 percent.
- Insurer paid vocational rehabilitation dropped from 3 percent to 2.9 percent. Although this was only a .1 percent difference, Mr. Johnson said when it was considered there was a $793 million total, it was significant.
- Disputed claim settlements, in which an insurer through an appeals process could offer money, not agree with them, and arbitrarily close the claim, had increased 59 percent from 1987 to 1991, according to the State Insurance Commissioner.
Mr. Johnson asked the committee to remember that when an insurance company denied a claim and tied a person up in the system, the term they used was "starvation therapy." He said he had personally talked to over 1,200 injured workers who could prove their disability, could show the disability and the doctor's reports -- and could show their denials.
SAIF had also claimed attorneys were not needed in the early stages of a claim and attorneys' costs would drop. However, as a percentage of total earned premium for the entire workers' compensation system, claimants' attorney fees had risen from 2.1 percent (pre-reform) to 2.9 percent (post-reform). The rate of appeals had risen from 7.8 percent to 11.4 percent; and insurer claim denials at the hearings level, went from 24.5 percent in 1988 to 43.7 percent in 1992.
SAIF and the state told Oregon citizens as the managed care organizations established a network through the state of Oregon medical costs would go down. So far, medical costs, as a percentage of total earned premium in Oregon, increased from 33.1 percent in 1989 to 37.3 percent in 1992.
The chiropractic percentage in Oregon had dropped from 16.2 percent to 3 percent while costs continued to rise, Mr. Johnson said. Many national and international studies had shown chiropractic medicine was the best way to treat lower back injury, Mr. Johnson explained; and chiropractors were the only medical physicians with almost 1,000 hours of training in treating a back injury.
Mr. Johnson brought attention to Exhibit C, and discussed the content of the article and graphs. Emphasis was placed on the sheet entitled "Review Worksheet." This, Mr. Johnson said, was the method SAIF used to determine whether to accept or deny a claim. He indicated in each instance, the worker, the doctor and the employer were asked the questions. A "no" answer sent the claim to the fraud investigations unit. The likelihood of three different people answering all questions in each incident with a "yes" was very doubtful.
Mr. Johnson pointed out the information showing pre and post reform medical costs with an additional bar graph indicating the chiropractic share of the workers' compensation system. He insisted chiropractic was not the culprit. Eight Oregon chiropractors had been brought up on RICO, racketeering and fraud charges within weeks of Oregon's 1990 special session. However, the doctors who had not chosen to fight the Oregon attorney general's office had, since that time, won their cases and all fraud, RICO and racketeering charges had been dismissed. Additionally, the Oregon State Court of Appeals had now granted all the chiropractors involved in those cases permission to sue SAIF and the state of Oregon for those actions.
Mr. Johnson described the additional burden placed on welfare, vocational rehabilitation and social security, when an injured worker was abandoned by the workers' compensation system and unable to find a job. He said if Nevada followed Oregon's example, it should be prepared to increase the state social service agency budgets; and suggested the Nevada Legislature should give welfare and the state vocational rehabilitation division the ability to reach back to the insurance companies and reclaim those costs.
Mr. Johnson commended the Nevada Legislature for taking testimony from both in and out of the state. In Oregon the law had been devised by a secret committee in which he was not allowed to participate either as a citizen or as a reporter.
Mr. Anderson questioned whether fraud was a major factor in Oregon when reform was created. In response, Mr. Johnson said NCCI, a National rating organization for Compensation insurance rated fraud at 7 percent, pre-reform; and SAIF memos reflected this at approximately 7 to 10 percent. SAIF, however, then told the press and the New York Times one out of four injured workers in Oregon had some sort of fraud attached to their case. The workers' compensation division had asked SAIF to explain this. SAIF simply replied they had no appetite to explain the opinions expressed to a reporter no matter who in the company said them. However, in 1991 when the Department of Insurance and Finance was asked for SAIF's denial rates compared to others, it indicated 46.6 percent for SAIF and 15.2 percent for other insurance companies.
This had been hotly contested by SAIF, Mr. Johnson said. In subsequent discussions between the Department of Insurance and Finance (DIF) and SAIF, SAIF had indicated 29 percent was a better figure. Only five days ago, Mr. Johnson related, he had confronted the Insurance Commissioner for the figures and those figures indicated this was in the 35 percent range. Mr. Johnson testified fraud figures changed at the whim of SAIF. Also, pre-reform figures released indicating chiropractors with 10 percent of the cases created 40 percent of the costs. These figures were later assessed and found in error by a Ph.D. from Western States Chiropractic College.
In discussing the issue of fraud, Mr. Johnson suggested to Mr. Anderson, if there was an intention to eliminate this kind of fraud from the workers' compensation system, a simple malpractice reform was needed. He said the medical provider needed to put the health, welfare and best interest of the patient first -- regardless of sex, race, ethnic origin. This meant the welfare patients received the same treatment from the HMOs as a Blue Cross/Blue Shield HMO member received.
Mr. Anderson also wondered if Mr. Johnson perceived a major problem with the Attorney General's Office having access to system records in fraud investigations. In response, Mr. Johnson said the only insurance company in Oregon with access to the attorney general's office was SAIF. None of the other insurers had access to any of those records. This allowed SAIF to pull all public records such as DMV record, medical records and doctors' records.
Chairman Giunchigliani noted when dealing with the issue of fraud, both during interim studies and current considerations, no one had offered any percentages or a dollar amount; nor had medical provider fraud, attorney fraud or employer fraud been addressed. Nevada was being asked to create a fraud unit at an expense of $3.2 million for staffing without being able to consider what the savings would be. If there was $10 million in fraud being committed, it would be a good investment. However, if it was $100,000, this would be questionable.
The Chairman asked if, indeed, SAIF was being sued for the abuse of the denial of claims. Mr. Johnson said there were several lawsuits, possibly even class action lawsuits, being brought by injured workers. As for fraud, Mr. Johnson believed this should be left to professionals in the police and law enforcement fraud systems.
Chairman Giunchigliani asked how "risk pool" was defined in Oregon. Mr. Johnson did not know how SAIF determined who would be placed in the risk pool.
Mr. Schneider asked Mr. Johnson to describe his agency, N.W. News Network. In response, Mr. Johnson said it was an investigative news agency operating out of Medford, Oregon since 1986. He said there was a team of six reporters who ran the agency, and their stories were sold to all the newspapers, television and radio stations in southern Oregon and across the state. In response to Mr. Schneider's question regarding who had sponsored Mr. Johnson's trip to testify before the Nevada Government Affairs Committee, Mr. Johnson said he had initially been requested to speak before the Nevada chiropractors regarding Oregon's experience, and that organization had sponsored his trip. Mr. Schneider then asked if Mr. Johnson had prepared written recommendations regarding state industrial insurance systems. Mr. Johnson said he had written and sent recommendations to the federal government, but his researchers had only studied Nevada's senate bill for two days. His legal researcher, however, had thought Nevada's bill left a great deal to interpretation rather than statute.
Mr. Schneider also asked Mr. Johnson if he would leave a copy of the numbers and percentages he had testified to. Mr. Johnson volunteered to leave a copy of the Department of Insurance and Finance report called, "Monitoring the Key Components of Legislative Reform," the publication from which he had obtained most of the figures testified to. Mr. Schneider also requested names of small business groups in Oregon who could be independently contacted to ascertain Mr. Johnson's testimony. Mr. Johnson suggested the "National Federation of Independent Business" would be a good contact.
Asking to make it clear on the record, Mr. Johnson said ". . . NFIB grant, this is the report we sent to the government, this is a copy of the document we have on file in our office, 'SAIF Corporation's cancellation of over 10,000 employers led NFIB Oregon to launch an investigation that has uncovered the following facts: These businesses were canceled simply because they were small -- in fact, many had never filed a claim. At the same time, SAIF had a $153 million surplus account -- they claimed they were losing a million dollars a week.' This was just one of the statements from a small business. There were numerous others. You want to reach the National Federation of Independent Business and some of the smaller employers in Oregon." Mr. Johnson said he would send the committee a list of additional people to contact in Oregon while reform was being considered.
Terri Potts, representing the Nevada Physicians' Caucus, testified regarding physicians self-referral, which, she said, had been addressed by Senator Dina Titus and former Senator John Vergiels. Briefly explaining, Ms. Potts said self-referral was the physician referral of patients for tests or services into a facility in which the doctor had a financial interest. This was first a debated issue when Congress passed Medicare legislation prohibiting a physician from referring a patient into a clinical laboratory in which the doctor had an ownership interest. The claim was that physicians could not be trusted to act in the best interest of their patients, only in the best interest of their wallets. As a physicians' organization, Ms. Potts said they found it insulting for physicians to be lowered to that level.
Ms. Potts testified physician owned facilities in Nevada had increased access to high quality medical care, and, indeed, some of the facilities had been built because the physicians had been asked to bring greater technology into the state. Ms. Potts attested to the higher level of expertise, and cost savings were available from physician facilities.
Ms. Potts continued with a review of the progress of self-referral. She said the AMA had initially taken a negative position on self-referrals, saying they were unethical; however, the AMA had since softened their position.
Ms. Potts discussed California's House Resolution 345, popularly known as the Stark Amendment, proposed by Congressman Pete Stark. This proposal was authored under the "Comprehensive Physician Ownership and Referral Act of 1993." She offered some of the text from Congressman Stark's bill which essentially extended the Medicare provisions (as applied to clinical laboratories) to encompass all self-referral relationships with certain exceptions.
Referring to Senator Titus' claims made the previous day, Ms. Potts noted the physical therapy representatives were offering a great many statistics. She noted, however, statistics could represent anything a person wanted them to, and she cautioned the committee to take that into consideration. She opined doctors did act in the best interests of their patients. There would be exceptions and abusers, she acknowledged, but this could be dealt with through a utilization review. She continued with a discussion of the many advantages presented with physician self-referral.
Mr. Anderson noted the most frequent complaint dealing with physician self-referral had to do with people who were unaware of the physician's involvement with the service he was referring the patient to. Ms. Potts said there was a disclosure provision in the statute, and also, many facilities provided disclosure forms immediately.
Ms. Potts also spoke on the issue of managed care. The Physicians' Caucus thought any group of physicians should be able to form a managed care organization, provided they met the statutory criteria. Managed care organizations should have the flexibility to organize the panels the best way they saw fit in order to assure the best group self-management. It was imperative to provide statutory criteria which would establish outcome evaluations and cost-per-claim audits. Ms. Potts urged the committee members to contact members of the Physicians' Caucus who had put together what Ms. Potts saw as good, effective tools to provide efficient managed care.
She said the Physicians' Caucus recommended:
1) A physician training program which would be required for physicians participating in the managed care system;
2) Discussions with the committee regarding utilization review;
3) Consideration of the requirement for a managed care organization to hire a case manager to provide internal utilization review;
4) The managed care utilization review program should be approved by the agency responsible for accrediting the managed care organization; and this agency should establish a utilization review monitoring system to evaluate the appropriateness and necessity of services provided;
5) The managed care organization should submit a plan for quality assurance to the agency responsible for accrediting the organization; and
6) Appropriate computer software should be established to provide the appropriate information to show case profiles.
Mr. Carpenter asked if the utilization review should be within or without SIIS. Ms. Potts answered the accrediting organization for the managed care organizations receiving contracts, should do the utilization review. It would then be up to the Legislature to determine whether this would be done by SIIS or by the Department of Industrial Relations.
Chairman Giunchigliani said currently almost every practice now had internal utilization review. This was further discussed. Ms. Potts reiterated there had to be an internal utilization review process.
Mr. Carpenter commented in his many years of experiences on the hospital board in Elko, medical costs were still skyrocketing even though they had tried to address the review process. He asked Ms. Potts for statistics which would show how the review processes added to a patient's hospital bill. Mr. Carpenter thought it was possible if the review processes were eliminated and it was left to the trial lawyers to police the mistakes, they would be better off. Ms. Potts said she had no statistics regarding the costs utilization review added to the patient's bill, but they saw doctors' ability to perform their jobs efficiently was being eroded. She thought they had to be careful utilization review was used correctly when SIIS with its huge unfunded liability was trying to be saved.
Mr. Carpenter again asked Ms. Potts' opinion on what the cost of bureaucracy added to the cost of a patient's stay in the hospital or visit to the doctor. On a national basis, Ms. Potts said, the percentage of a health care dollar going to just administration was at least 35 percent, with the doctor receiving approximately 19 percent. The blame was popularly laid on the doctor, but Ms. Potts said this was not the doctor's fault.
Coming forward, John Vergiels, former Nevada state Senator, introduced Pam Hogan, Jann Dorman, and in Las Vegas, Tyrone McSorley and Jack Close, all representing the Nevada Physical Therapists' Association.
Opening their testimony, Jack Close drew attention to prepared testimony, Exhibit D, and gave a brief overview of the gist of his letter addressed to Chairman Giunchigliani.
Mr. McSorley noted the Nevada Unified Coalition had provided excellent information regarding reimbursement. Mr. McSorley brought attention to Exhibit E, and asked the committee to especially note the second page showing "State Reimbursement Physical Therapy."
Also representing the Nevada Physical Therapists' Association, Jann Dorman reviewed her testimony shown on Exhibit F.
Mr. Carpenter asked for clarification of Ms. Dorman's remark regarding cost per visit going down and utilization being up. Ms. Dorman said their point was the per visit cost reimbursement by SIIS for each physical therapy visit had decreased approximately 20 percent, while the number of referrals being made to physical therapy and the number of visits per referral had increased. It was this increase in utilization which was responsible for the increase in dollars going to pay for physical therapy. It was the position of the Nevada Physical Therapy Association that eliminating a profit motive in making referrals would potentially help the over-utilization problem in physical therapy.
Pursuing the subject, Mr. Carpenter asked if Ms. Dorman was saying a physician might refer a patient more frequently to a facility he had a financial interest in than one he did not. Ms. Dorman answered affirmatively.
Pam Hogan, also representing the Nevada Physical Therapy Association, reiterated their wish to see all members of their association able to treat the injured worker; and they would not like to see exclusive contracting for physical therapy services. Fees were set by the DIIR, she said, and exclusive contracting would not control that cost but would cut down on competition and quality of care.
Testifying for the Nevada Trial Lawyers' Association, George McNally noted soon Nevada would be referring to pre- and post-reform. He believed Nevada should be able to consider problems encountered in other states, improve upon the good points, and remove the bad points in order to arrive at a good and effective workers' compensation system. He noted the Nevada Trial Lawyers had various concerns regarding managed care, but due to time constraints, he asked the committee to specifically consider:
1) The appeals process regarding managed care. As the bill was written, Mr. McNally said in Section 79 dealing with the appeals process, if the worker had a claim denied by a managed care organization, the worker had to return to the in-house appeals process, the very entity which had originally turned the claim down.
2) Regarding the appeals process, once SIIS made a decision on a claim they had to justify the decision before a hearing or appeals officer.
3) In Section 79 there appeared to be an absence of any time requirements stating how long a managed care organization could take to make a decision regarding the health care of an injured worker. Presently, if a request was made to SIIS or a self-insured third party administrator, they had 30 days to respond. If there was no such response, the person making the request could treat it as a denial and proceed with a hearing on the denial.
4) Another area in Section 79 dealt with time delays. There was an absence of language indicating how long the organization for managed care could take to schedule an in-house hearing of a complaint.
5) Mr. McNally also asked the committee to consider when a contract was let, it should state the physicians would be available to give treatment to injured workers within 24 hours of the injury in a non-emergency situation. However, in an emergency situation, the injured workers could receive treatment from a physician not a member of the organization for managed care.
Chairman Giunchigliani asked Mr. McNally to place in writing and get to the committee a compilation of the other concerns expressed by the Nevada Trial Lawyers' Association.
Danny Thompson, representing the Nevada State AFL/CIO, stated they were concerned with the whole issue of managed care, but in particular, emergency situations. Mr. Thompson described an incident in which a carpenter working for a self-insured casino cut off three fingers at 8:00 p.m., while at work. He was subsequently taken to the clinic, and thereafter from one hospital to another without receiving treatment until 8:00 a.m. the next day.
Chairman Giunchigliani suggested this concerned the issue of "may" language in the bill. She thought there should be an exemption for emergency situations.
The Chairman asked Carol Jackson, the new Director of the Department of Industrial Relations, to explain services to injured workers from a clinic. Ms. Jackson said they were currently investigating and doing an in-depth study of self-insured employers; and she would rather reserve her report until she had gathered all the information regarding all self-insured employers.
Mr. Collins asked if Ms. Jackson's study concerned self-insured employers who were breaking the law. Ms. Jackson said they were investigating self-insured employers who might be referring claimants to physicians and making it mandatory to use a certain PPO (preferred provider organization) rather than advising the worker they could use any physician of their choice.
Chairman Giunchigliani said individuals should notify the DIR by formal complaint if they knew of instances in which workers were not informed they had the right to choose their treating physician.
Referring to Mr. Thompson's story regarding the worker with the injured fingers, Mr. Carpenter asked why this could not be investigated by the DIR. Ms. Jackson said she had not been advised of the situation before that time. Although Mr. Thompson was on their advisory board, she had not been apprised of the situation. She said she would look into it.
Chairman Giunchigliani said she had received a request for a bill draft which would make various changes relative to the regulation of solicitation by telephone under NRS 599. This would include the exemption of non-profit or charitable organizations and would provide other matters properly relating thereto. The Chairman indicated the bill would be referred to Commerce and the Ways and Means Committee.
ASSEMBLYMAN KENNY MOVED TO OBTAIN A BILL DRAFT REQUEST RELATING TO SOLICITATION BY TELEPHONE.
ASSEMBLYMAN BACHE SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
Testifying from Las Vegas, Ron Hubbel indicated he was an industrial relations director for an industrial medical group with coverage in Henderson, North Las Vegas and Las Vegas. He told the committee the Las Vegas Clinic was a 24-hours a day, 7 days a week service, established in 1978 and currently, the only clinic in Nevada exclusively treating industrial injuries. Noting the time constraints, Mr. Hubbel indicated one of the clinic doctors and he would try to accommodate themselves to a future date to offer testimony before the committee.
Commenting on the statement from the Nevada Physical Therapy Association regarding the increased number of treatments per claim, Mr. Hubbel said their internal management statistics had shown the number of physical therapy treatments per claim did increase in his facility and the attributing cause of this was simply due to the length of time needed for approval of referrals and claims. Mr. Hubbel related other situations echoing Mr. Thompson's testimony.
Chairman Giunchigliani asked how patients came to his clinic in the first place. In response, Mr. Hubbel said they distributed referral slips to employers and posters were placed at work sites with instructions and guidance in case of accident. There were no written contracts or agreements requiring an employer to send them to his clinic.
The Chairman asked if Mr. Hubbel's clinic had any hotels primarily using his clinic. Although Mr. Hubbel said there were such hotels and casinos, he thought it would be more proper to speak to her about that in private. He emphasized his clinic always told workers they had a choice in where to be treated. Chairman Giunchigliani suggested perhaps the DIR needed to focus not just on the issue of exclusive provider/exclusive contract, but to also consider what happened at the clinic site and to make certain people were referred.
Senator Dina Titus, Clark County Senatorial District 7, came forward to answer remarks earlier made by Terri Potts regarding certain statistics. Senator Titus said the figures she had testified to had come from a very reliable source, the New England Journal of Medicine. One of the figures having to do with a provider in Las Vegas had indicated the cost of MRIs, usually costing about $1,000, had been reduced to $600 each. The provider, of course, claimed this was a savings. However, Senator Titus reiterated, when it came to imaging requests from doctors owning their own companies, 45 to 75 percent were unnecessary referrals.
Larry Mathias, representing the Nevada State Medical Association, submitted Exhibit G and testified from the prepared testimony.
Referring to Mr. Mathias' testimony regarding Section 74, Mr. Carpenter questioned the language on page 28, line 36 dealing with criteria for the selection of an organization for managed care. Mr. Mathias did not see the language as being particularly problematic as long as it was made clear what was expected in the RFP was a minimum requirement. Anyone could bid; however, this would not be a guarantee of a contract. If an organization did not meet the criteria of the RFP or the law, it did not have to be granted the contract -- but it could not be precluded from bidding.
Mr. Mathias said presently they were questioned whether the language in Section 74 was specific enough for the Legislature, or others dealing with the bill, to be totally confident a minimal set of criteria would necessarily be included. The best way to assure this was to place it into guidance from the statute.
Recapping, Mr. Mathias said the present language was enabling but not specific enough to state what types of things to expect in the criteria. Mr. Carpenter felt the present language restricted the manager to the point where it was unworkable. Mr. Mathias did not totally agree with Mr. Carpenter. However, Mr. Carpenter insisted the language did not say "anyone" could bid on it after a criteria was established. He believed the language indicated the criteria needed to be written so everyone could bid. Mr. Mathias quickly agreed if this was the popular interpretation, he would disagree.
SB 316, Mr. Mathias said, contemplated a total revision in the way medical services were going to be made available and delivered to injured workers. Before this kind of radical reform could be undertaken, he said it appeared there needed to be a minimal statement in the law of what the Legislature expected that to be.
Access and quality of services were two key pieces, Chairman Giunchigliani said the Legislature would have to consider; and ground rules had to be established to make those determinations.
Mr. Hettrick recalled testimony from the previous evening from two doctors involved with the managed care organizations which stated those doctors did more than just provide a contract to provide services. They also investigated the medical personnel. Mr. Hettrick thought the Legislature needed to be certain they did not receive bids from a group of doctors with huge numbers of malpractice claims, mixed together with bids from responsible medical people. The RFP needed to be well spelled out keeping in mind the need to provide a level playing field.
Chairman Giunchigliani asked Mr. Mathias to develop some language which more clearly reflected the concepts he had in mind.
Once the RFP was developed and the criteria established, Mr. Ernaut asked Mr. Mathias if he was in favor of a finite number of people actually contracted once the bidding process was complete. Mr. Mathias said it was their opinion any of the bidders who met the Request For Proposal criteria and the legal criteria could be contracted; and any number of players who could meet the criteria should be approved. It was then up to the bidder(s) to accept the risk.
What was the point of the bidding, Mr. Ernaut asked, and should the number of managed care organizations be limited? Since one managed care organization would not be enough, Mr. Mathias said he believed anyone who could meet the criteria should be approved. Mr. Ernaut saw the whole process as being more of an agreement; however, Mr. Mathias thought it would remain a modified bid process. This was further discussed.
Mr. Ernaut asked Mr. Mathias what his organization's position was regarding external as opposed to independent utilization process. Mr. Mathias opined there should be both. He said there could not be a managed care organization without providing internal utilization review, and there could be no responsible monitoring of the performance of the system if there was not external utilization review.
Mr. Carpenter asked how long it should take to get a managed care organization up and running. Mr. Mathias said he was hesitant to predict this. Given the level of commitment by all the major parties and what had already been developed, Mr. Mathias thought by the time the discussions were finished, SIIS managers would have an adequate knowledge of what the expectations were for the RFP. However, he did not think it should take more than a year.
In response to Mr. Carpenter's question regarding whether time limits should be placed on getting a managed care organization in operation, Mr. Mathias said this might be a good idea, but whether it would serve to hurry things along would still be the question.
In an effort to clarify, Mr. Hettrick said, ". . . What you have to say . . . anybody who wants to match the RFP can get in -- not anybody who wants to match the bid, because now you're talking about the dollars, you're not talking about the quality of the service. . . . When you should say anybody who wants to match the RFP can provide services, then you're o.k. And I think that satisfies the concern Mr. Ernaut had about who you let into this, because the guy who didn't satisfy the RFP in the first place didn't get the bid in the first place, and the bid comes down to dollars and then you match -- you do bid for the dollars and anybody else could match them, but you have to match the entire bid, not just the dollars."
Everyone agreed with Mr. Hettrick's explanation.
Mr. Mathias then discussed Section 75 defining the minimum requirements for issuing a contract to a managed care organization.
Chairman Giunchigliani predicted she would be asking Mr. Mathias to submit his concepts in writing when they began to work more closely on actual language.
The Chairman noted throughout the bill was mentioned "medical and health services." She said she could not find a definition of "medical and health services." The conclusion was "medical" meant MDs, and DOs and "health services" applied to everyone else. Mr. Mathias said most would agree with this; however, he thought there were no strict definitions because there was no absolutely solid term of art. By mentioning both, everyone was covered.
Referring to Section 75, Mr. Bache was concerned with language on page 29, lines 22-23 and 33-38. Would this language prove unduly restrictive and result in excluding certain organizations from making a bid. Responding, Mr. Mathias said he thought this was one of the very questions the Legislators would have to ask themselves in devising specific language.
Mr. Hettrick explained in his experience as a member of the Board of Directors of an HMO, although they did not have a staff person, they used a network model. This meant an organization had a contract with a neurosurgeon, a person not a part of the group, but rather just having a contract to perform the specialty service. He further described how it could be made workable by contracting. When the rural areas were studied, different mechanisms would have to be used such as fee paid at the same rate or fee paid at some increase in percentage because it could cost more to provide a specialty service in the rural area.
Questioning Mr. Mathias, Chairman Giunchigliani noted throughout the bill the language indicated it was the manager who let the RFPs. Did this create a double standard? An injured worker was an injured worker; and she wanted to make certain the same level of service and access was provided to the self-insured employee. If RFPs were to be let then whatever organizations were accepted would have to provide access to the self-insured.
David Erickson, a private citizen and an injured worker, came forward to testify and submit Exhibit H. Mr. Erickson agreed with testimony earlier given by Mr. Johnson and stated many of the problems were also occurring in Nevada. Regarding fraud, however, Mr. Erickson claimed Nevada had a problem with fraud being committed by SIIS employees and some of the doctors who were only abiding by the wishes of the State Industrial Insurance System. He said he had spent two and a half years on SIIS rehabilitation and had received no retraining of any kind. He felt he had been coerced into some rehab schemes that did not work out.
Mr. Erickson opined many good doctors would be excluded from treating injured workers if those workers were restricted only to managed care organizations. He urged the committee to consider using both managed care and self-referral.
Chairman Giunchigliani noted everyone defined "fraud" differently. For some the denial of a claim could appear to be fraudulent. She thought the committee needed to be careful on how to define "fraud" within the statutory language.
The Chairman agreed with Mr. Collins if Mr. Erickson had a complaint and could offer some actual names, he should put this in writing and submit the letter to Carol Jackson, Director of the Department of Industrial Relations.
There being no further business, the meeting was adjourned at 6:50 p.m.
RESPECTFULLY SUBMITTED:
Iris Bellinger
Committee Secretary
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Assembly Committee on Labor and Management
Date: April 27, 1993
Page: 1