MINUTES OF THE
SENATE COMMITTEE ON COMMERCE AND LABOR
Sixty-seventh Session
January 26, 1993
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Tuesday, January 26, 1993, in Room 227 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Sue Lowden, Vice Chairman
Senator Ann O'Connell
Senator Mike McGinness
Senator Raymond C. Shaffer
Senator Leonard V. Nevin
Senator Lori L. Brown
STAFF MEMBERS PRESENT:
Brian Davie, Senior Research Analyst
Sandy Arraiz, Committee Secretary
OTHERS PRESENT:
Allan Hanssen, President, Hospital Health Plan/Coordinated Care Options
Rabbi Mel Hecht, Chairman, State Industrial Insurance
System (SIIS)
Scott, Young, Legal Counsel, SIIS
Allan Hanssen, President, Hospital Health Plan/Coordinated Care Options, presented testimony on managed care. In response to Senator Townsend's inquiry, Mr. Hanssen stated at the present time his company is not managing any care for workers' compensation in Nevada. The interests of his company are exclusively in the State of Nevada. The company is, however, developing programs to accommodate the workers' compensation program. Mr. Hanssen stated his company, Hospital Health Plan is a federally qualified health maintenance organization (HMO) with approximately 27,000 commercial members throughout Northern Nevada. Additionally, he is the chief operating officer of the diversified company of the hospital health plan management corporation known as Coordinating Care Options of Nevada, which is a third party administrator, claims payer and managed care provider network. He said he appreciated the opportunity to discuss with the committee the very significant issues related to managed care and workers' care compensation. He said it was very appropriate the issue of managed care be brought to the forefront and concerned citizens have the opportunity to interchange about what the elements are, related to managed care. For the committee's reference, Mr. Hanssen had provided each committee member with a packet containing an outline of some topical discussion items. Also included were some pertinent industry journal articles related to managed care and workers' compensation. He told the committee he would provide an overview of some of the findings of the very recent articles, particularly pertinent to today's discussion. Mr. Hanssen said he believed managed care, in principle, regardless whether it's in an HMO environment or a preferred provider environment, or an exclusive provider organization, had certain attributes which might be good to review for the committee. These attributes are applied in piecemeal fashion, or in comprehensive programs in order to attain the goals of quality care, coordination of care, cost effectiveness and efficiency. First, in the outline for today, Mr. Hanssen explained he had defined managed care, and what is becoming known as coordinated care, as a health care delivery system, where organized access to care, coordination of care, resource efficiency, patient responsibility and provider responsibility combine to yield quality and cost-effective care. From this definition he said he would like to relate to the committee members very important attributes of managed care entities. Mr. Hanssen proceeded to read from a prepared outline on managed care and workers' compensation (Exhibit C), which had been presented to each of the committee members.
Senator Townsend interrupted the testimony to inform Mr. Hanssen of the committee's request to all presenters to come back to the committee on Wednesday, February 3, 1993, with dollar figures assigned to the various proposals. If, in fact, the committee uses Mr. Hanssen's definition of Exclusive Provider Organizations (EPOs), Senator Townsend suggested Mr. Hanssen work with either Scott Young, Don Jane or Mark Hector of SIIS and come back to the committee on Wednesday with dollar figures assigned for potential savings. The dollar figures need not be exact; a range, from x percent to
x percent, whatever Mr. Hanssen came up with, based on his week-long analyses, would be very helpful.
Mr. Hanssen continued with his outline. When he finished, Mr. Hanssen told the committee his presentation had covered only a few of the topical areas which are involved in managed care. He felt the strongest program would be the most comprehensive program, which coordinated many of these elements. A managed care program can be provided with utilization review only and yield results. However, a greater integrated approach with one strength building upon another, he felt, would yield the most efficient potentials for the future.
Senator Ann O'Connell asked Mr. Hanssen how long he has been in business.
Mr. Hanssen answered Hospital Health Plan (HHP) has been in business for 5 years, since March, 1988.
In response to further questions concerning his business, Mr. Hanssen related HHP currently has 42 full-time employees working on care teams throughout the organization. His organization differs itself from the current SIIS structure. There are four registered nurses (RNs) in the health services department and additionally a medical director, who is an internist. HHP is now in the process of recruiting an associate medical director. Once the recruitment is complete, there will be two physicians and four RNs for 27,000 members.
Senator O'Connell asked how many HHP cases go to appeal.
Mr. Hanssen responded HHP's process is roughly 5 percent, in terms of grieving and denied benefits. He pointed out the benefits in question are somewhat distinct from those of SIIS.
The next question to Mr. Hanssen from Senator O'Connell inquired about the average time an HHP patient with a lower back, soft tissue injury, would be out of work.
Mr. Hanssen did not know, particularly in reference to workers' compensation. On average, the statistics showing days lost due to occupational injuries for 1990 are running 84 days per 100 full-time workers.
Senator O'Connell broadened the question to cover an average patient and how many days are lost on an average.
Mr. Hanssen did not have a number. He did say HHP had return to work guidelines.
Senator O'Connell asked Mr. Hanssen to furnish information on the number of days lost due to workers' compensation. She also wanted to know how involved HHP is with the coordinating of the light-duty with the employer and the patient.
Mr. Hanssen said HHP was not currently involved in that at this point.
Senator O'Connell then asked how often it was necessary to send patients out of state for treatment.
Mr. Hanssen replied sending patients out of state is very minimal. HHP has found the capabilities in Reno, Nevada are extraordinary. Only the high-end casework, for example, pediatric heart surgery or other very high-end cancer therapies, might need to go outside Nevada.
Senator Sue Lowden inquired as to whether Mr. Hanssen worked with an exclusive provider organization.
Mr. Hanssen responded currently the HMO is actually synonymous with an exclusive provider organization. It is a closed panel.
Senator Lowden related the committee has heard "willing provider" language in the last couple days. She asked Mr. Hanssen if he had a concept of what that means and how it would fit into HHP's program.
Mr. Hanssen replied he thought the issue of "willing provider" language is actually an anti-managed care thrust which says one cannot define or have limits on panels. For example, the issue originally came from the pharmacy industry and pharmacists in terms of retail and other pharmacies. These groups said if, for example, "you" are willing to accept a reimbursement from the local; thereby "you" are the panel, regardless of the HMO's desire to keep the panel closed and limited.
Senator Lowden asked if HHP could work within those restraints.
Mr. Hanssen responded he thought all willing provider initiatives are a potential threat to the proper administration of managed care.
Senator Lori Brown asked how a closed panel would be chosen if it were a statewide type of entity.
Mr. Hanssen felt the committee and SIIS will make some determinations as to the adequacy of the provider. One statewide panel may not be practical in terms of sheer intensity of a claimant's file. His understanding is those files are exhaustive. Just the payment of physical therapy claims is extraordinary. He would expect in the request for proposal (RFP) process there will be certain obligations to cover, in terms of geographic coverage as well as the total population and the capability of the company. Another balance to that is if there are 10 providers for the Reno/Sparks area, the potential of the provider leverage is increased and the panel's ability to negotiate rates may be diluted, because everybody will be involved again.
Senator Brown stated the SIIS program was much bigger than what Mr. Hanssen was talking about working with. She wondered if he had considered if working the SIIS into HHP's type of structure, or if it were possible on that large a scale.
Mr. Hanssen felt the scale was an issue. He believed there would be multiple providers, which would be held to the same accountabilities. He did not believe the task at hand insurmountable in terms of medical coordination. That was an issue currently being dealt with to the nth degree in the HMO industry.
Senator Brown asked if when Mr. Hanssen talked about providers if he were including alternates to physicians--chiropractors, rehabs, etc.
Mr. Hanssen responded chiropractic care is currently provided under HHP.
Senator O'Connell inquired what HHP's caseload per claims team is.
Mr. Hanssen told Senator O'Connell he would have to extrapolate that statistic for her. Care and managed care are processed differently than in the SIIS structure. He agreed to furnish the committee with those statistics.
Senator O'Connell wanted to be sure she understood how many members HHP had.
Mr. Hanssen stated HHP has 27,000 commercial members.
Senator O'Connell asked for some idea as to who HHP's membership is.
Mr. Hanssen said HHP's membership is predominately public entities, the casino industry and all other commercial type of account. The State of Nevada, Washoe County School District, and the City of Reno are accounts of HHP.
Mr. Hanssen asked the committee to turn to the article from Business & Health/September, 1992, (Exhibit D) which was contained in his handout. He felt the article had a particularly strong overview of managed care coming to workers' compensation. One of the first areas involved demonstrated some of the potential effective cost control initiatives. The graph on the first page of the article showed certain elements of managed care, use of case managers, utilization review, review of physician practice patterns, usages of HMOs and EPOs, recertification, rate negotiation, cost control initiatives and coordination. The graph actually indicates the most effective cost-control initiatives by percentages. In the interest of time, Mr. Hanssen read only those portions of the article he wanted the committee to take special note.
Senator Mike McGinness inquired if employee participation involved some type of deductible.
Mr. Hanssen responded either a deductible or a co-pay structure on each service rendered could be a potential cost-cutting device. For example, the HMO has plans for which there is $3, $5, $10 or $15 co-payment for an office visit, based upon the benefit chosen. The same holds for pharmacy scrips. There is some cost-sharing in every element of how the employee accesses the care system.
Mr. Hanssen went on with his presentation relating there was a collection of organizations which got together in Southern California which covered approximately 7,300 workers. One of those organizations was Humana. Humana was able to shave 10 to 20 percent off its previous year's claims. Connecticut, meanwhile, was seeking to create a statewide provider network for managed care workers' compensation in hopes it would contain annual benefits for a cost savings of approximately 10 percent. One of the issues, very important to note, is the problem which arises when discounts are inflicted on physicians and others. This may not be the best way to eliminate budget shortfalls. It is imperative to have cost-considerate remuneration in order to get the proper cooperation from providers. If providers are collectively grinded upon, they will find ways to get around the limited reimbursements; for example, by increasing the frequency of visits. This is an unfortunate consequence of not providing fair remuneration to the providers. It is important not to look at managed care specifically as a contractual issue or a unit price issue. It must be looked at collectively as a unit price issue for services, as well as a frequency issue.
Senator O'Connell asked if HHP uses capitation.
Mr. Hanssen replied in the affirmative. In the State of Nevada, HMOs are the only organizations allowed, by state regulations, to capitate. Capitations are, in principle, prepayments for care. For example, all HHP's primary care physicians are capitated.
Senator O'Connell asked if, using capitation, HHP has a problem with the primary care provider not making referrals to other doctors.
Mr. Hanssen responded in HHP's model, the primary care provider is not penalized for referring upward to a sub-specialist when they deem it appropriate. There is no financial disincentive for the referral.
Mr. Hanssen continued reading excerpts of the article. He ended his reference to the article by saying, "managed care is not a panacea." One of the important issues is there must be coordination and an integrated system to have managed care yield the most effective long-term results. Since only 16 states allow its employers to direct injured workers compensation claimants to particular doctors and hospitals, successful managed care depends, to a large extent, on employees' beliefs they are, indeed, receiving high-quality care. Managed care will never be a replacement for a safe job work place, job analysis and job matching.
State regulatory barriers are potentially the toughest roadblock to managed care. Mr. Hanssen said there are many considerations which must be faced by legislators when looking at managed care. Many programs pay 100 percent of medical costs, first-dollar coverage, related to on-job injuries, another issue which may impair the efficiency of managed care and cost sharing. In some programs, an injured worker is free to choose a doctor and then switch to another physician if the first physician seems unwilling to certify the injury could be seriously disabling. There may be potential barriers which are regulatory. Additionally, there may be barriers such as quality. The impression of quality from a claimant's perspective is a non-regulatory barrier, but is an important consideration for the future.
Mr. Hanssen concluded his testimony by referring to the handout materials he had furnished the committee, which he felt would provide committee members with a brief summary of what is going on in the industry.
Senator Len Nevin had a question on Mr. Hanssen's outline, (Exhibit C), where it referred to the potential considerations for managed care. He asked Mr. Hanssen if the future potential for privatization of SIIS administration necessitated less political interference and the ability to run a program to have a good managed care program. Apparently from the content of the Governor's State of the State Address, the Governor wants to get rid of the SIIS Board of Directors and turn SIIS over to the insurance commissioner. In essence, isn't that privatization? Just put it out there and let them be competitive and start the programs.
Mr. Hanssen said there were a variety of ways to answer Senator Nevin's question. First, it might be important to look at the fundamental purpose of SIIS and how the legislature will look at it. He felt there was an issue covering workers injured on job sites. The verification, or certification, the injury actually happened on the job site to make sure from that time forward the worker would receive the best care possible and be rehabilitated. Mr. Hanssen felt SIIS's function was to be very diligent in this regard. Secondly:
Another very important issue is the care management--the networks, the claims payment, the analysis, the utilization review and case management. To turn over SIIS to the Nevada Department of Insurance will provide some influences the department and the commissioner have related to how other insurances govern and regulate. However, it is important to get at the fundamental issues, the intersection so to speak, first, about certification, avoidance of abuse and, secondly, once that person is certified, proper guidance thereafter. This may be able to happen in a publicly run organization. It may be that certain portions will have to be privatized and certain portions remain public. It is important, in total, to look at how to proceed. The first issue, predominately, is medical management for SIIS. It seems to be running away. There is reasonably no identification of who is on first, let alone the abuses in terms of certification. First and foremost, the medical management issue must be resolved in order to stem the outflow of cash dollars. It is analogous to charting the sinking of the Titanic. A report may be received every month about how far the bow is going below the water, but it is in analogous to get into the medical management side to start the pumps working and pump the water out first. Then, look at what else must be done.
Senator Townsend thanked Mr. Hanssen and reminded him he had agreed to return on Wednesday with his analysis on cost savings for an EPO and PPO and an HMO. Senator Townsend asked Mr. Hanssen furnish the committee with ranges of amounts, not exact dollar figures.
Rabbi Mel Hecht, SIIS Chairman, picked up on Senator Nevin's question and the response of the presenter. Rabbi Hecht feels the issue is control. His impression of this legislative session as opposed to last session in which he participated early on, is almost like night and day. Rabbi Hecht's impressions are Senate Bill (S.B.) 7 of the Sixty-sixth Session and other mandates did not give SIIS the controls needed to bring workers compensation into the proper perspective.
S.B. 7 of the
Sixty-sixth Session: Makes various changes relating to industrial insurance and other rights of employees.
It is important for everyone to understand the critical nature facing SIIS at this time. He told the committee he takes a great deal of pride in the fact, since he came on board two years ago, the whole temper of the SIIS board has dramatically changed. Whatever knowledge the board now had is based on the kind of research demands and questions the SIIS board has requested from SIIS management. SIIS has a highly professional and competent management team. With regard to Senator Nevin's question, Rabbi Hecht said he had his staff look at some of the surrounding states with regard to the issue of control. Managed care, managed guidance, all of these things ultimately have the potential of bringing the cost under control. It also has the potential of giving better service to what workers' compensation is all about, the injured worker. Very few states, if any, perhaps Idaho and maybe Washington, found it necessary not to have a board as a cushion between the political process and the actual management of the system. All other states, including one of the premier states, Oregon, has in position a 5-member board of directors, appointed by the Governor. In that respect, Oregon is very similar to Nevada's system. The issue is not who is going to do this; the issue is whether or not, whoever does it, has the necessary ingredients in place to effectualize the desired results. Hearing the discussion about managed care and its implications for the system just delights him to no end.
Senator Townsend said the committee would take the Governor's testimony on Tuesday afternoon in a joint hearing with the Assembly Committee on Labor and Management.
Rabbi Hecht said he supported the concept of multiple approach as the only way to handle the awesomeness of the caseload involved. To hand the system over to one primary managed care group would never work, in his opinion.
Senator Townsend said it was obvious the board had looked at the managed care issue. Obviously, Nevada has three general regions, Southern Nevada, Northern Nevada and the rural areas. Within those regions, it was Senator Townsend's understanding, Rabbi Hecht was saying multiple provider organizations were needed. He asked if the board had determined whether multiple provider organizations for the system covering all Nevada, or one provider organization in each region was needed.
Rabbi Hecht responded, in the board's discussion of managed care, the most reasonable approach seemed to be to divide the managed care provider's responsibility to coincide with the geographic portions of the state.
Scott Young, Legal Counsel, SIIS, also responded to Senator Townsend's question. The board talked about having more than one provider in each area. The board wants to make sure the rural areas are covered, but because of the size of the SIIS operation, it is probably not possible for one organization to cover even the Las Vegas area. From what Mr. Young has heard internally is SIIS would be considering multiple providers throughout the state.
Senator Lowden asked how Rabbi Hecht and Mr. Young felt about the language concerning the willing provider.
Mr. Young replied currently in the SIIS proposal prepared by the staff, there is no willing provider language included. "As Mr. Hanssen said, there are certain advantages to a managed care program which come from not having willing provider language." Mr. Young felt SIIS was open to considering all sorts of proposals and they wanted to hear from all the interested parties. The standing committee had asked the board to work with other interested parties and to hopefully come back to the legislature with some kind of compromise position. The process of doing that would be ongoing. At least, for now, Mr. Young's understanding of management's position is they would prefer a program of managed care which did have willing provider language.
Senator Townsend announced there would be a number of presentations the next day on managed care. He said Monday's hour-long meeting would be canceled as he was hopeful he could obtain a copy of the particulars of the Governor's proposal. The committee could then spend Monday morning reviewing the Governor's proposal. On Tuesday, there would be presentations on the three proposals made at the beginning of the week and last week--Bill Draft Request (BDR) 53-124, the SIIS business plan; BDR 53-1157, the consensus legislation, and BDR 53-65, which contains the controversial matters not dealt with in BDR 53-124 and BDR 53-1157.
BDR 53-124:Makes various changes relating to State Industrial
Insurance System.
BDR 53-1157: Makes various changes to provisions relating to
industrial insurance.
BDR 53-65: Establish system of "24-hour" health insurance
coverage.
Senator Townsend stated Tuesday afternoon the committee hopes to have a joint hearing in Room 119 with the Assembly Committee on Labor and Management where the Governor's proposal would be presented to both committees at the same time. Testimony would also be taken at that meeting. Wednesday morning testimony will be taken from all the managed care people heard to date. There would be a workshop on managed care actual dollars and their effects on the system. The committee would be given ranges of dollar amounts so when a vote is taken, the determination could be made not on just what the committee thinks is right, but with monetary statistics included for consideration. Thursday afternoon, February 4, 1993, public testimony would begin at 4:30 p.m. Friday's agenda is not yet firm.
Senator Townsend gave the committee a copy of a handout provided by FHP, Inc. (Exhibit E). Copies were also provided to those in attendance. FHP is another managed health care organization. FHP will make its presentation tomorrow.
Senator Townsend thanked those attending the meeting, as well as those who testified. He suggested everyone who has not had an opportunity take time to review the three proposals, BDR 53-124, BDR 53-1157 and BDR 53-65, copies of which are available in his office. He asked everyone to review them, and call colleagues if they might be interested in testifying before the committee. He said it is the intent of the committee to listen to anyone wishing to impart information.
Senator O'Connell wanted to know if the proposal would be teleconferenced to Las Vegas.
Senator Townsend said people were checking into the availability of the room and the equipment. The hard part was getting the word out to people in Southern Nevada. He asked committee members and the legislative counsel staff to broadcast, even buy newspaper space, to let people in Southern Nevada know the Governor's proposal would be teleconferenced to Cashman Field. He encouraged attendance of all interested parties.
Senator O'Connell asked Bill Champion, Employer Coalition of Southern Nevada, to be the voice to let employer groups in Southern Nevada know the Governor will be presenting his proposal on Tuesday afternoon and could be seen by teleconference at Cashman Field.
Senator Townsend suggested those disseminating the information check with him first to be sure of the time and place for the Governor's proposal presentation. The agenda will be posted as soon as possible.
Senator O'Connell felt it would be very helpful to new committee members if a copy of the third reprint of S.B. 7 were provided to them. The new members should be sure to read S.B. 7 and familiarize themselves with what the Senate passed last session.
Senator Townsend instructed Brian Davie, Research Analyst, Legislative Counsel Bureau, to see that all new committee members had a copy of the bill.
Senator asked if there was anyone else wishing to testify. When no one volunteered, he announced the committee will meet again tomorrow morning at 8:00 a.m. to discuss managed care and some of the other options available relative to medical components.
The meeting was adjourned at 9:07 a.m.
RESPECTFULLY SUBMITTED:
_______________________
Sandy Arraiz,
Committee Secretary
APPROVED BY:
__________________________________________
Senator Randolph J. Townsend, Chairman
DATE: ___________________________________
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Senate Committee on Commerce and Labor
January 26, 1993
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