MINUTES OF THE
SENATE COMMITTEE ON COMMERCE AND LABOR
Sixty-seventh Session
February 12, 1993
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:30 a.m., on Friday, February 12, 1993, in Room 207/208 of the Cashman Field Center, Las Vegas, 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
Linda Krajewski, Committee Secretary
Sheri Asay, Committee Secretary
Frank Krajewski, Senior Research Analyst
OTHERS PRESENT:
Jerry Ash, President, Nevada Hospital Association
Mark Habersack, Harrah's Las Vegas
George McNally, President, Nevada Trial Lawyers Association
Scott Young, Legal Counsel, State Industrial Insurance System
Margaret Vierra, Vice President and Executive Director,
Nevadans Organizing Workers-Comp (NOW)
Barbara-Jo Chagoya, President and Executive Director, Nevadans Organizing Workers-Comp
Robert Eakins, Executive Director, Nevadans Organizing Workers-Comp
Dr. Elias F. Ghanem, Prime Health
Patti Allan, Chief of Operations, Prime Health
Bill Jones, Director of Workmen's Compensation, Prime Health
Senator Townsend announced there would be a presentation by the Nevada Hospital Association and testimony in regard to a number of issues which have come before the committee in the last few days. The structuring of gross to net will be discussed. Also, a presentation will be made on the handling of permanent partial disabilities (PPDs) in surrounding states. Managed care testimony will be given at 10:00 a.m.
Jerry Ash, President, Nevada Hospital Association (NHA), read from prepared testimony, see Exhibit C.
Senator Townsend thanked Mr. Ash for his presentation and asked if any committee members had questions for Mr. Ash.
Senator Sue Lowden asked Mr. Ash if Nevada can have effective managed
care with a competitive market and doctors being promised a certain amount of volume at a certain price. Is it then possible to tack on willing provider language and still be effective?
Mr. Ash responded he liked the term, "willing provider." The fact is, providers today are agreeing to contractual arrangements, apparently willingly, knowing in the overall financial scheme of things, it is creating the very problems he is talking about in terms of shifting the cost to fewer and fewer other persons who are not covered or protected by a managed care contract. The NHA is a willing participant, unfortunately, in a financing system which is becoming more and more inequitable. He stated he appreciates the term, willing provider, but the providers are in a terrible squeeze where they have some very unhappy choices to make. Hospitals find themselves forced into contractual situations they know will shift the overall cost of the operations to other payers.
Mark Habersack, Harrah's, Las Vegas, commended the committee for putting up with personal attacks and doing a job which requires the committee to set aside personal commitments to look at the entire picture. His organization hopes, in spite of the badgering, the committee will continue to proceed on the road it is pursuing in reforming the workers' compensation system in Nevada.
Senator Ray Shaffer clarified it is not all unions responsible for the major badgering. He has been talking to several members of the American Federation of Labor/Congress of Industrial Organizations (AFL/CIO). They are willing to cooperate.
Mr. Habersack replied after listening to a week's testimony he felt the right hand of the union does not know what the left hand of the union is doing. Especially yesterday, when union representatives testified they were trying to work with the committee and stated they were not "disrupting" the proceedings. Thirty minutes later signage and flyers were being passed around which accused committee members of having conflicts of interest. He agreed it is not all the unions, but it appears the right hand needs to know what the left hand is doing.
Senator Lori Brown said she had sat in on a board meeting and observed both employer and employee representatives have been working together and making a lot of compromises to come to a satisfactory conclusion.
George McNally, President, Nevada Trial Lawyers Association (NTLA) testified on the figures presented by his association to the committee yesterday. He introduced Marvin Gross, President-elect, NTLA, and a Las Vegas attorney, who was responsible for preparing one of the documents given to the committee. There were several assumptions made in the preparation of the figures. They were not sure if the state cap of average monthly wage was removed from the Governor's proposal, or whether it applied to gross wages, then went to net; or applied to net wages, after going from gross wages to net wages. Therefore, NLTA did the best they could with the tools available. In their computations, the average monthly wage reduction for a single person with one withholding and a $15,000 annual salary, divided by 12, would result in $1,250 per month. This amount would then be multiplied by 66 percent, for a result of $825, which is what the current law provides. An injured worker, receiving this amount of annual wage, would be entitled to $825 per month under the present statute. Mr. Gross then used the standard payroll deductions in the Internal Revenue Service (IRS) documents. Social security was deducted, which was $95.62 and federal withholding of $128, for $223.62 in deductions. This amount was deducted from the monthly average wage, leaving a net of $1,026. This amount was then multiplied by 66 percent for a payment to the injured worker of $677.16 per month, which would be a 17.93 percent reduction if computations for compensation were based on net rather than gross wages.
Senator Townsend asked about the difference in Mr. Gross' figures compared to those of Scott Craigie, Chief of Staff, Governor's Office.
Mr. McNally responded Mr. Craigie's figures begin with the same annual salary of $15,000, but it is not apparent if the rest of the computations are based on a wage earner with eight dependents, or a single person with no deductions. Mr. Craigie's figures simply report a temporary total compensation net versus gross. Therefore, the basis of his computations is not clear.
Senator Townsend said the important issue is to get some type of understanding of the difference in compensation when moving from gross to net.
Mr. McNally explained the state cap would kick in on annual salaries of $35,000 or more. If a worker, in Nevada, earns $2,028 per month, or more, the most that worker, if injured, can receive by way of wage benefits is $1,861. He then referred to the table titled, Annual Compensation Benefit Increases (Exhibit D). This table shows the amount and percent of increase from 1983 through 1993 of the average monthly wage and the percent of growth.
Senator Townsend asked Brian Davie, Senior Research Analyst, Legislative Counsel Bureau, if he could obtain statistics which would show what percentage of lost time is involved in claims. The committee knows the figure is from 9 to 12 weeks, but would like to know how the figures break out in terms of per week. If there is 100 percent of lost time, what percent is only 1 week long; what percent is 2 weeks long; what percent is 3 weeks long, etc. Then the committee will have some kind of sense of where it is.
Senator Brown said another factor which will have to be considered when going from gross-to-net would be how many dependents the injured worker claims. Many workers claim less dependents than they are entitled in order to mitigate the tax bite at the end of the year. These same workers would be penalized for claiming less than the full number of dependents to which they are entitled.
Mr. McNally agreed and added going from gross to net creates problems. Everybody's net has so many variables. Senator Townsend may have a Keough and an Individual Retirement Account (IRA) and Christmas Club
deducted from his gross. His net would be different from someone in his firm earning the same gross, but who has chosen a different income-deduction structure.
Senator Townsend told Mr. McNally he had a very good point. To get back to why the committee asked for figures on gross-to-net, the original concept was, and still is, to find out a disabled person's needs, which has little to do with his gross. Senator Townsend and anyone in America would love to be able to spend his gross wages. Drug dealers get to spend their gross; the wage earner does not. What the committee is trying to find out is, for those persons who have an injury, how are their needs dealt with, based on the income they walk back to their home with every day and put in the bank. That is the question. The amount has to be enough to meet food, mortgage, rent, utilities, whatever. That is what the committee is trying to get to. The one thing which disturbs every member of the committee is the person at $35,000, and even though the decision is not whether to reduce benefits, but simply trying to find out if net is a better wage to work with, the higher income wage earner has no penalty if the decision was to just go gross-to-net and the 66.66 percent is left in place. Senator Townsend did not understand it. There is no one in the meeting or in the legislature who could determine, if benefit schedules were changed, if the higher wage earner would benefit and the lower wage earner would be hurt. There is not one of 63, including the Governor, who can make that determination. Senator Townsend is convinced, because all the committee members have spoken to the Governor at length, the Governor saw the figures presented today, or he would have pulled that particular provision. Now the committee understands what simply going to net would do, leaving 66.66 percent in place. The committee will now have to adjust its thinking. This committee, particularly the four veteran members, talked about going gross-to-net and finding out if the payment were left the same, what percentage of net would it be. The amount arrived at was approximately 82 percent. When new figures came forward and showed a disproportionate hit on the lower income, which would be regressive action, it got the entire committee's attention. It was important to see the newer figures supplied by the NLTA. Whether, in fact, the payroll is adjusted is a separate threshold question. The committee has not made a final choice. The point is, there is no committee member who is going to talk about reducing a benefit to a person making $15,000. A person making $15,000 annually lives pay check to pay check when he is healthy. The figures Mr. Craigie brought forward maintained the man earning $35,000 annually would have no change in benefits if the committee chose to change the benefit schedule. Whether benefits are changed, or not, the committee wants to make sure whatever calculations are done are going to be fair and equitable. There may be no reduction. In fact, there may be an increase in the first 7 days. The committee is not sure, yet, but committee members became confused when these figures were so different from those presented by Mr. Craigie.
Senator Nevin pointed out whomever was asked to present figures to the committee would more than likely not come up with the same figures as anyone else. What is overwhelming is, with the different figures being presented to the committee, how can an amount of savings be projected?
Mr. McNally concluded the committee must keep in mind, if there is an adjustment on the wage base, the decision of going from gross-to-net, or somewhere in between and if there is going to remain the state maximum wage level to cap always referred to, the cap needs to be massaged also. Once a figure is computed, does the cap come in to gross, net, or whatever?
Senator Brown said, looking at all the variables in reference to net pay, it occurs to her there is probably already equity there, because 34 percent is cut right off the top. Perhaps the reason it was set up that way was to deal with this idea a person does not take home
100 percent. So, if 34 percent is cut off the top, the resulting amount is more what the person usually takes home. Perhaps going through these kinds of machinations is counterproductive.
Senator Townsend added it is important for the committee to know exactly what it is attempting to wrestle with. One of the reasons he started looking at gross to net was to find out if the lower income person could be helped. If someone making a lower income is put in the unfortunate position of a lengthy temporary total disability (TTD), how can he be helped to meet his needs? That is why Senator Townsend started looking at this. Maybe this is the wrong threshold, and, of course, if you have a bad foundation the rest of the building is going to be a disaster. He asked Mr. McNally to address some statistics the committee had. Senator Townsend told Mr. McNally he did not expect him to take a stand on the statistics, the committee just wanted help in understanding them.
Mr. McNally told Senator Townsend he had no idea what kind of constructive critique or criticism he could give this committee on this document.
Senator Townsend said representatives from Southwest Gas Corporation presented these statistics. If there was no one present from Southwest Gas Corporation, he would put them in contact with Mr. McNally so communication could take place concerning the statistics presented to find out if the statistics were accurate or if there was some kind of misunderstanding. Then Mr. McNally could come back and report to the committee.
Senator Lowden offered it was explained to her, when she was given the original copy, the representative from Southwest Gas Corporation went back and tried to find the formula relating to permanent partial disabilities (PPDs), which would be the same for all three states the corporation dealt with. With that formula, Nevada is still paying more.
Mr. McNally said he was informed by Scott Young, Legal Counsel, State Industrial Insurance System (SIIS), the SIIS attempted the same thing, comparison of the three listed states, Arizona, California and Nevada, and SIIS was unable to compute it, because there is no similarity to come to a commonality and then go forward by way of comparison.
Senator Townsend asked if it would be possible for Scott Young to come back on Monday and walk the committee through what each of these three states do in computing PPDs.
Scott Young remembered having done a study on this subject for the committee previously. He said he would have the study pulled out and have somebody prep him on the study so he can explain it, or he will have someone from his office, who knows the study, appear on the video to explain it. Part of the problem with the study was each of the three states uses a different rating system, which made it very difficult to try to take even one injury and rate it under each of the three systems. This is the only way to get a baseline. He agreed to come back Monday with more information.
Senator Lowden hoped representatives from Southwest Gas Corporation would be present on Monday, also. They were very aware of the variants involved. Therefore, they took an enormous amount of time, to her understanding, to try to make it equitable when arriving at their figures.
Senator Townsend reported the committee had wrestled with the whole PPD idea. Since Nevada calculates benefits differently for PPD, or awards, differently from other states, and they use a different formula, the committee even contemplated at one time of trying to figure out what the average award for that injury would be in the western states. It would still be substantially less than what Nevada is doing now. The committee also contemplated from the l981 change from .5 to .6 going back to .5. It was recommended by an employer group to go to .3. The committee tried to find out what the fairest handling would be, but it is a tough call. In order to make the call, the committee has to better understand the statistics involved to determine the figures to be used.
Frank Krajewski, Sr. Research Analyst, Legislative Counsel Bureau, was called upon to give the committee more information on the issue.
Mr. Krajewski began with information on the Southwest Gas Corporation memo discussed by the committee earlier. He attempted, unsuccessfully, to contact the preparer of the memo and charts. Unfortunately, she has been out ill for some time and Mr. Krajewkski was unable to contact anyone who could provide any information relative to the construction of the charts. He completed a rather lengthy description of PPDs. The committee is correct in stating one of the difficulties in comparing Nevada with the surrounding states is Nevada does not have a schedule for PPD injuries. Consequently, it makes it very difficult to compare. Jim Jeppson, Department of Industrial Relations (DIR), is attempting to contact some of the surrounding states with hypothetical injuries which would result in some comparative statistics for the committee. A memorandum dated October 23, 1992 to the committee took a lower back injury case and provided the committee with comparative statistics for Nevada and California regarding the PPD calculations. By Monday, Mr. Krajewski will have a document he will prepare with a number of enclosures which will give the committee some fairly accurate descriptions of how PPDs are calculated in several western states and a number of the scheduled benefits. Since Nevada does not have scheduled benefits, Nevada will not be on that particular chart.
Margaret Vierra, Vice President and Executive Director, Nevadans Organizing Workers-Comp (NOW) and Barbara-Jo Chagoya, President and Executive Director, NOW and Robert Eakins, Executive Director, NOW, testified jointly. Margaret Vierra referred to two handouts prepared for and distributed to the committee. The first submission was given to the committee previously (Exhibit E). The second submission was presented this morning(Exhibit F). In light of what they have heard in this morning's testimony, the three NOW representatives wanted to go over the second submission. Ms. Vierra apologized, number one, due to their physical conditions they were not up on the fact the committee was meeting so quickly. They, therefore, put the first document together quite hastily. They also went off into left field in some areas. This is why they submitted another 11-page document to clarify particular issues. NOW does believe, wholeheartedly, the injured workers' rights to choose a treating physician should remain in effect. They understand it is the committee's position to lower the cost to the employers and the SIIS. NOW is not coming to SIIS's defense, because they are well aware of the audits which have come forth regarding the mismanagement and the lack of knowledge of legislative statutes by SIIS. Back in 1991 extensive hearings were held and the woes of the injured worker, the employer and the SIIS were heard. Over the last 2 years, the oversight committee has been an added benefit to assist in seeing Senate Bill (S.B.) 7 of the Sixty-sixth Session was adhered to and to see if additional proposals for the legislature were necessary to fine-tune the system.
S.B. 7 of the
Sixty-sixth Session: Makes various changes relating to industrial insurance and other rights of employees.
As the committee has already decided, the system does need to be fine-tuned. However, during the last 2 years, the work put into S.B. 7 of the Sixty-sixth Session and the laws signed into effect were not adhered to. They were put into effect, but not enforced. If they had been enforced, the SIIS, as well as anyone who is self-insured, would have enjoyed substantial cost savings.
Senator Townsend interrupted and told Ms. Vierra it was evident she had gone through a great deal of effort in regard to the 11 page document (Exhibit E) presented to the committee. He thought it might be most productive if the committee could go through the document with her, proposal by proposal.
Ms. Vierra and Ms. Chagoya went over the proposals set forth in Exhibit E with the committee.
Senator Townsend commended Ms. Vierra and Ms. Chagoya on the incredible amount of research done and also for presenting the committee with the unique insight into SIIS none of the committee has. The document provided is based on physical experiences, as well as psychological experiences, but more importantly, creative thinking has been provided, which has not come before the committee in previous testimony. Everyone coming in front of the committee wants to protect his or her own interest and point a finger at someone else. A lot of good testimony has been heard by the committee over the last 5 years, but this testimony may be some of the best. Senator Townsend thanked them both.
Ms. Chagoya thanked Senator Townsend for his commendation. She reinforced the one thing Ms. Vierra and she want to make sure the committee understands is the issues they have put forth are not based solely on their own physical and psychological conditions. They have had input from hundreds of thousands of injured workers in compiling the document presented to the committee. Both women offered continued input to the committee upon request.
Senator Townsend told them their names would be put on a list of those who would be sent the document, which has many of NOW's proposals in it, prepared by the committee, probably a week from Monday. He encouraged them to call or write with any comments they may have.
The NOW representatives assured Senator Townsend they would respond in writing, unless it was an urgent issue, so all members of the committee would have input. They asked for a list with telephone numbers of those the committee wanted information from NOW sent
to them.
Dr. Elias F. Ghanem, Prime Health, testified his company is concerned about the state of the SIIS and is committed to helping to solve the problems by utilizing a system of managed care as well as sharing the company's expertise. He introduced his staff, Patti Allan, Chief of Operations, Prime Health, and Bill Jones, Director of Workmen's Compensation, Prime Health.
Patti Allan testified Prime Health and all of its subsidiaries, including Silver State Medical Administrators, Silver State Preferred Provider Organization, feel their utilization review program has been the pioneer of managed care in Nevada for over 13 years. With the escalating cost of health care, Prime Health has been able to maintain a program that has given the employees of their clients a mechanism to access quality medical care with the following results: 1) All of their groups and clients within the Prime Health managed care system have been able to maintain the same level of benefits; 2) Prime Health clients do not increase deductibles, co-pays, or exclude cover services as a mechanism to control costs; 3) Prime Health clients have the most competitive health plans in the state and probably the nation. Their clients see minimal annual increases. Experience shows the organization's increases are well below the national trend for medical care. Their clients have access to an expanded provider network which provides accessibility for quality medical care and, although it is a limited and closed panel, there are choices for the employees. Prime Health has over 1,200 physicians and providers contracted throughout the state. Prime Health's utilization management program has been unique. It has provided physician/physician review and has provided large case management for large, catastrophic cases and illnesses and was the first utilization review company to provide industrial case management in the state. Prime Health's groups have competitive fee schedules. Due to the volume of patients and services going to the providers, as well as local knowledge of the marketplace, Prime Health is able to offer the most competitive reimbursement schedules. The organization is continually evaluating their contracts and fee schedules, together with the important billing and payment guidelines, which go with the contracts and fee schedules and are just as important as the discount. Both the employers and the employees benefit. Prime Health also has excellent provider feedback. The providers of Prime Health are part of a coordinated, integrated team. All providers work with the utilization review company, except the claims management system in the adjustments made on the claims and billings, and, as an integrated program, work toward providing quality patient care. The way Prime Health was able to accomplish this, on the health benefits side, was by establishing minimal criteria and characteristics for managed care. Prime Health recommends these criteria be adopted for workers' compensation. The organization feels the SIIS needs to move from the first generation managed care system now in place, which is simple fee schedules, having providers available, and simple case management, to a second generation managed care system. A second generation system has an integrated model approach, with established guidelines and standards and competitive fee schedules. The way Prime Health accomplished this was through experience and preferred provider organization (PPO) and exclusive provider organization (EPO) networks, governed under Prime Health's managed competition model. With the consolidation of volume and the purchasing power of Prime Health and the unique selection and credentialling of providers, Prime Health established administrative guidelines and protocols for their providers, including standards of practice. This ultimately means cost-effective, quality care. Prime Health's effective utilization management program, including large case management, provides and monitors inpatient/outpatient utilization, but it also integrates a treatment plan for the employees who are under catastrophic illnesses and are involved in industrial accidents. Prime Health thinks it is very important the SIIS managed care system have local experience, local knowledge of providers, and knowledge of the SIIS rules and regulations. Local presence and knowledge of the present system current providers is crucial to the nature of the community and to the history of the success of Prime Health's managed care system. It is very important claims management be an integrated portion to the managed care concept. A crucial part of the integrated team is constantly being aware of the day-to-day claims status of each workers' compensation patient. This is very important. The status of the employee and the disability needs must be known. The treatment plan of the case managers and the contracted arrangements with the provider must also be known. There need to be set administrative standards for performance of the managed care system. There must be established guidelines for providers, employers, and the entire managed care team. The medical profession must be involved in the claim management utilization review process. Many of the other managed care systems in Nevada need to utilize physicians for a peer review process to work on the treatment plans and to work with the patients and their families in the integrated approach. Physicians are also very valuable in evaluating claims and in assisting in a community advisory component. In addition, in a coordinated, integrated program, as is seen on Prime Health's health care side, access to data and tracking mechanisms is needed to monitor provider performance and recognize fraud and abuse. The claims system, the claims adjustor and all the professionals must have the ability to extract information which will detect provider/employee utilization problems. It is necessary to be pro-active. The managed care system should have experience in the delivery of quality medical care in large case management on injured workers. It must have successful integration of the utilization review, PPO, claims, return to work activities, rehabilitation, safety legal issues and patient advocacy programs. The managed care component needs to be in tune with the state, national and federal reforms that affect health care issues. Prime Health recommends the committee adopt these minimal criteria components of managed health care: encourage managed competition through a request for bid process and let the managed care companies compete for good quality medical care; set up an ongoing system of evaluation to move workers' compensation from the standard, first generation program to this integrated managed care model concept. A really crucial element when considering providing a workers' compensation managed care program is an effective transitional team. From what has been heard and understood, there are ongoing cases, staff in place providing services at this point, and outstanding claims. This means a transition into a managed care model must be set up efficiently. Goals and objectives for the DIR Advisory Council and the SIIS administration must also be established. Continual managed care is the best move to make. The type of managed care now in place is outdated. The kinds of things wanted in the future of health care in the nation include: capitation, possible risk contracting, a quality assurance program, outcome studies, etc. These are very important and should be established by the goals and objectives for the advisory council and administration.
Dr. Ghanem continued for Prime Health. As Patti Allan has discussed, Prime Health has been able to reduce the health care costs of their clients, who represent public companies, local unions and governmental employees. These organizations represent the largest employers in the state. For these clients, Prime Health has been able to decrease or minimize annual health care expenditures. In addition, Prime Health representatives have already discussed their program with labor officials, who have all confirmed this proposed managed care model is what they support. Dr. Ghanem called on the Governor, the legislature, elected officials, management, labor, and all the employees to help solve this deteriorating problem. Let everyone try to do what is best for Nevada and the working class. He told the committee members they were in a very unique position. They are about to embark on the most important road of their lives to change history, to change the medical profession and to make a change which is good for Nevada. Committee members have every opportunity to do the right thing. Without the committee's vote of confidence, nothing will be accomplished. It must be done and done right. The future of Nevada is at stake. He asked the committee's indulgence to think carefully about what is the best for the state....what is the best health care delivery system. Nevada should be a model for the rest of the nation. There is incentive for physicians and all health care providers to stay within the monetary limits and provide the best health care. In 1980 the government spent $200 billion on health care. In 1991 it spent $843 billion. In 1980 the health care expenditures represented 6 percent of the gross national product; in 1993, the government expects to spend $1 trillion, which is 13.6 percent of the gross national product. At this rate, by 1995, the government would spend $1.5 trillion, which is 20 percent of the gross national product. That is when everyone will be broke. It is not what Prime Health can do for the state; it is not what an HMO can do for the state; it is not what doctors, lawyers, or anyone can do for the state; it is what everyone can do together to make the state healthy for a healthy workers' compensation program.
Senator Len Nevin said the committee has been hearing testimony and discussing managed care for 3 weeks. The only difference he could see from Prime Health's presentation and other testifiers is it appears Prime Health wants a closed panel and no willing provider.
Dr. Ghanem replied without a closed panel, savings cannot be accomplished. There are 700 doctors in Las Vegas. If you call that a closed panel, it is a different ball game. It is necessary to have the expertise to manage the doctors, pharmacists, and physical therapists. Everyone must work together to save money. If the current program does not go up 1 cent in the next 4 years, a great deal has been accomplished. If the state can save 20 percent, much more has been accomplished. Dr. Ghanem feels, with a managed health care program and a closed panel of physicians, a great deal of money can be saved.
Senator Nevin reminded those testifying, it was important to keep in mind the committee must act for the entire state. The rural areas have different problems than southern Nevada and northern Nevada. To be fair, the committee must look at the total picture.
Ms. Allan stated Prime Health's position is accommodations can be made for the rural areas. The majority of the population, which is in the Reno/Las Vegas area, need to be in a closed panel, where there is the competition between the providers, and there is the ability to divine base discounting. There is also an administrative concern. When a true managed care program is discussed, it means a program which actually looks at and manages every case. To have a willing provider/open panel system would be, administratively, so costly there could not be a proactive approach. The system would be constantly trying to trail and monitor providers and access to providers who are not within the system. The initial impact of doing a willing provider network with criteria and a discount arrangement would be a short term from which the state would see some benefits. However, most PPOs and managed care companies are going on the continuum from a PPO large panel network system to a closed panel, exclusive provider network, gatekeeper system, to eventually an HMO look alike program. That is what is going to be needed long term. Monitoring over-utilization will still be necessary and the system will have to meet with the doctors and do the necessary case management. That is why Prime Health feels a closed panel is necessary to accomplish those goals.
Senator Lori Brown said the committee has heard a lot of testimony on how the willing provider system works and how these kinds of things are dealt with. Prime Health testified closed panel works and willing provider does not. Senator Brown is not familiar with any instance in which "willing provider" has been tried. She asked if Prime Health had tried the willing provider system and experienced problems.
Ms. Allan stated Prime Health is experiencing problems right now, even though the company has a large open panel. For years, the Prime Health system allowed any physician who qualified under credential- ling, who was willing to accept a fee schedule, to come onto the Prime Health network. The larger the panel gets, the less efficient is Prime Health's ability to manage the care. That is why Prime Health is going to a smaller panel, EPO system....some with and some without a gatekeeper model.
Senator Sue Lowden recalled Prime Health representatives have indicated there are already a number of local unions in their managed care system, as well as a number of public companies. She asked if there had been any complaints about not having enough physicians. Senator Lowden opined if Prime Health has not had complaints, why then are the local unions testifying before the committee consistently advocating willing provider language.
Dr. Ghanem replied he had talked to several union representatives. All of those he had spoke to have purported to be in favor of managed health care and a closed panel. In fact, Blackie Evans and Jim Arnold, union representatives, told Dr. Ghanem he could use their names as among those supporting the closed panel concept.
Senator Lowden asked how many years unions have been part of the Prime Health system, and whether there have been any complaints Prime Health does not have enough doctors, or there are not enough choices.
Ms. Allan reported with the growth of Las Vegas and with the geographical spread of Las Vegas expanding, about the only request Prime Health usually gets is, when a new provider enters the community in a geographical area that is not currently being serviced, to add the new provider to their list. Under those circumstances, providers are added. Providers are also added in specialties which are not covered or not covered effectively. Prime Health uses national data to determine the number of providers needed to access the population.
Senator Townsend inquired whether Prime Health's managed care proposal, closed panel or not, includes claims management.
Ms. Allan replied Prime Health feels claims management needs to be integrated into the panel of providers and utilization management program. Prime Health representatives feel they can work with either the system set up for claims management through the state, or it could be bid out with the option of a claims component. The committee should evaluate both possibilities.
Senator Townsend thanked the Prime Health representatives for their presentation, and asked permission to call upon them for clarification of any issues which may arise.
There being no further business, Senator Townsend closed the hearing at 10:45 a.m.
RESPECTFULLY SUBMITTED:
Sandy Arraiz,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE:
??
Senate Committee on Commerce and Labor
February 12, 1993
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