MINUTES OF THE

      SENATE COMMITTEE ON COMMERCE AND LABOR

 

      Sixty-seventh Session

      February 26, 1993

 

 

The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Friday, February 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

Sheri Asay, Committee Secretary

Beverly Willis, Committee Secretary

Frank Krajewski, Senior Research Analyst

 

 

OTHERS PRESENT:

 

William A. Prezant, Lobbyist, FHP Inc.

Dr. William Cunningham, Lobbyist, FHP Inc.

Kathy Costello, President, Sierra Healthcare Options

Dr. John Nanson, Vice President, Medical & Consumer Affairs, Sierra        Health Services

Allan E. Hanssen, President, Hospital Health Plan

Scott Young, General Counsel, State Industrial Insurance System   (SIIS)

Scott Craigie, Chief of Staff, State of Nevada Governor's Office

Richard Frost, Private Citizen

 

 

Senator Townsend opened the meeting by introducing a presentation of managed care.

 

William Prezant, FHP Inc., addressed the committee with a reminder of the $2.2 billion unfunded liability of the State Industrial Insurance System (SIIS). He stated the intention of FHP Inc. was to offer a remedial solution, addressing quality care in the managed care context. He introduced Dr. Bill Cunningham, Medical Director, FHP Inc., who has been involved with workers' compensation in California for the past 2 years.

 

Dr. Cunningham testified regarding provider panels. Referring to California's plan, he described the differences between open and closed panels. Dr. Cunningham said FHP Inc. uses only qualified, credentialed doctors, certified in what they claim to be. He gave an example of a case.

 

Dr. Cunningham stated the practice of industrial medicine in workers' compensation focuses on preventative medicine and urgent care. He said the doctors providing that care must be familiar with workplace issues, and be able to determine whether the injury occurred at the workplace.

 

Senator O'Connell asked how the doctors would get that kind of experience, if they are not already in a closed panel. Dr. Cunningham responded that some doctors choose to get that experience in various ways, i.e. reading books, etc., to familiarize themselves with workplace issues. He stated the doctor must also have the ability to determine whether or not the injured worker is able to return to that type of workplace.

 

Communication with the employer is another skill FHP, Inc. looks for in selecting doctors, as well as good utilization skills, according to Dr. Cunningham. He stated that in a closed panel they try to get a good balance of doctors. Dr. Cunningham also discussed language barriers, an issue particular to California.

 

Dr. Cunningham discussed fraud and abuse issues. He thought some doctors viewed workers' compensation as an environment where they could perform unnecessary services. Dr. Cunningham cited examples of this type of abuse.

 

Senator O'Connell wondered how fraud occurs in a closed panel. Dr. Cunningham thought the only way fraud could occur in a closed panel was if a provider billed for services not actually performed. Senator O'Connell asked if the managed care would prevent that from happening. Dr. Cunningham thought it would be less likely in a closed panel, because you would have better communications with those doctors. He gave an example of this.

 

Senator O'Connell asked if an outside utilization review would help uncover fraud. Dr. Cunningham said it would help.

 

Dr. Cunningham discussed another area of fraud and abuse, the attorney-doctor referral patterns. He said his group would try to screen these doctors out of a closed panel. Dr. Cunningham noted that the provider's ability to provide employee-oriented service decreases litigation. He mentioned self-referral by physicians as another area his group tries to exclude. FHP Inc. looks for doctors who are willing to help make the workplace safer, citing carpal tunnel as a good example of a possible injury to be on the alert for, as it is a common occurrence.

 

Dr. Cunningham stated that doctors control 85 percent of the cost structure of care, and a managed care organization (MCO) should include doctors in a closed panel who are better at medical cost containment. He said the doctors should be knowledgable of early-return-to-work programs and modified-duty programs. Dr. Cunningham added that the doctors should be aware of the employer's environment, and have an understanding of the physical requirements of the job. According to him, doctors should be able to help the patient get through the system, and be willing to structure their time around an urgent care situation.

 

Dr. Cunningham mentioned a Texas company which provides incentives for employees to use the panels, and gave an example. He also talked about the problems managed care organizations have when they accept only physicians who agree to follow their guidelines, noting how difficult it is to remove a physician who does not follow the MCO rules.

 

Dr. Cunningham discussed utilization review systems. "The best kind is one where you don't have an outside organization arguing with a doctor in retrospect, did you or did you not comply...but by getting the doctors involved up-front with the utilization guidelines...and also providing some financial incentive or penalties to the docs for complying..."

 

Dr. Cunningham concluded his remarks with an admonishment to the committee to put systems into place that go one step beyond what they already have, in order to get the most out of managed care and utilization.

 

Dr. John Nanson, Vice President, Medical & Consumer Affairs, Sierra Health Services, testified regarding his company. He favors a closed panel MCO over the "any willing provider" approach for cost effectiveness and quality control. He explained the latter method has no systematic way of detecting and excluding fraudulent and inefficient providers. According to Dr. Nanson, competition is stimulated by having different closed panel MCOs, with varied selected providers.

 

"Management of access is best served in a closed system," said Dr. Nanson, "where there are appropriate provider/claimant ratios, appropriate choices of providers, and management of access to the appropriate primary, secondary or tertiary care provider." He noted the training effect in a closed panel increases the system's efficiency over a period of time. A closed panel also lowers administrative cost, according to Dr. Nanson.

 

Kathy Costello, President, Sierra Healthcare Options, added that the "training effect...allows the coordination between the provider, employer, and the injured worker."

 

Allan Hanssen, President, Hospital Health Plan, stated he agrees with Dr. Cunningham and Dr. Nanson's comments regarding the benefits of a closed panel system. Mr. Hanssen referred to his testimony before the committee of January 26 (Exhibit C), where he defined a managed care system. Mr. Hanssen viewed managed care as a tool which should be used extensively. He noted two aspects of the current system, "...issues of cost and issues of frequency, which ...are aggravating your collective position...managing both...are absolute requirements for effectiveness. In your administrative code, you've chosen to administer and manage cost. However, the issue of fraud and abuse....seems to have gone awry."

 

Mr. Hanssen favored a comprehensive managed care program, which would include a mandatory closed panel, as part of the solution to the problem SIIS faces.

 

At Senator O'Connell's request, a discussion ensued regarding a purported California law which prevents doctors from self-referring. Mr. Prezant explained that in a closed panel, self-referral can be aggressively impacted because of utilization review.

 

Senator O'Connell expressed concern over what criteria would disallow a provider into a panel. Dr. Cunningham responded by defining the criteria which would let a provider into a panel. He cited California's laws regarding a closed panel: (1) an employee can pre-select any physician prior to an injury, as long as the physician complies with the reporting requirements of the state; (2) after 30 days, an individual can choose their own provider. The employer can select any physician in the state. Dr. Cunningham added that FHP Inc. provides its employers closed panels with which to work.

 

In reponse to a question by Senator O'Connell, Dr. Cunningham informed the committee that approximately eight to 10 percent of the patients in his organization enter litigation. He stressed that the cause of litigation was due to various factors, not solely because of the lack of quality care. Dr. Cunningham discussed the length of time a patient would normally be out of work in this system. Senator Townsend noted that seven out of 10 lost time claims in Nevada were 30 days or less. He compared Nevada's system to that of Washington State.

 

Senator Lowden expressed concern that patients might not get quality care from doctors who push the clients through the system to increase their volume. In response, Dr. Nanson reiterated the criteria for establishing a panel. To be considered are; the type of providers required, the geographical distribution, provider credentials, and the ratio of claimants to providers that will ensure good access. The MCO would then monitor the access, changing the ratio if necessary. Once the ratio is established, and quality and service are in place, the MCO should look for the amount of volume that will derive the biggest discounts, according to Dr. Nanson.

 

A discussion ensued regarding the panel screening process. Senator Lowden noted that some doctors thought they might be discriminated against in the selection procedure. Mr. Prezant said that because one in four workers require medical care, there will be a need for as many physicians on the panel as possible. He thought this would result in healthy competition, not unfair discrimination. Dr. Cunningham and Dr. Nanson elaborated on the selection process. Mr. Hanssen added to the discussion by reviewing the relationship of physicians to managed care.

 

In response to a question by Senator Lowden, Dr. Cunningham said that in California a panel was set up outside of the Health Maintenance Organization (HMO) panel to provide workers' compensation coverage. This was due to geographic conditions, and a need for short, quick-access industrial care, he said. Dr. Cunningham added that "...we had to bring on additional members when we set up our program."

 

Dr. Nanson responded affirmatively when asked if his organization also had to add doctors when it became involved in workers' comp-

ensation. "Yes," he replied, "because the types of provider and the distribution of them are different in this particular product line." Mr. Hanssen elaborated on the necessity for expanding the panel when dealing with workers' compensation.

 

Senator Lowden asked for comments on physician self-referral. Mr. Hanssen said the issue of self-referral is, "a dilemma for MCOs, and we look at them as a potential for over-utilization." He noted that studies indicate that is true, i.e., pricing for x-rays. Mr. Hanssen claimed that the American Medical Association advocates that a physician not be involved in self-referral. Mr. Nanson cited the checks and balances used to guard against abuse of self-referrals. Mr. Hanssen added that Hospital Health Plan uses their data base retroactively to uncover such abuse.

 

Senator McGinness asked if current panel members help in the selection process of new members. Mr. Hanssen explained that in his organization a subcommittee of the board evaluates potential members. Dr. Nanson and Dr. Cunningham said a similar peer process occurs in their organizations. Senator McGinness wondered whether that process might be a problem, "...because it's a closed frater-

nity, and you can't get in."  Dr. Cunningham did not think so.

 

Another discussion on discrimination followed. Mr. Prezant concluded it was an illusory concern. The criteria for selection was reiterated.

 

Dr. Nanson talked about the degrees of managed care. He said one must apply the amount of restriction or intervention the economic situation calls for.

 

Senator Lowden again expressed discrimination concerns. A discussion followed regarding the role government should play in managed care.

 

Senator O'Connell asked for comment from the testifiers about a having a closed panel in a right-to-work state. Dr. Nanson stated the closed panel would not be a monopoly, but rather managed competition. He thought the MCOs needed enough latitude from the government to compete, along with the regulatory oversight.

 

Marie Soldo, Sierra Health Services, expressed her thought that most employers use closed panel systems, and that these organizations are currently regulated.

 

Mr. Prezant stated the majority of the major employers in Nevada

have become self-insured and are contracting with closed panel providers to get control of the cost. Senator O'Connell reiterated her concern over the possibility of monopoly, and of economic discrimination of providers, within a closed panel system.

 

 

Mr. Prezant referred back to the problem of healthcare costs nationwide, as well as in Nevada. He suggested managed competition as a solution which will address the delivery of health benefits through MCOs. "By their very nature," explained Mr. Prezant, "you're going to create purchasing organizations that are going to be monopolies, in a sense." He said the insureds will combine to negotiate rates with the MCOs. At the national level, an annual survey is planned to evaluate the performance of the organizations, according to Mr. Prezant.

 

Mr. Hanssen talked about performance accountability among healthcare organizations.

 

A discussion ensued between Scott Young, General Counsel, SIIS, and Senator Townsend regarding last Tuesday's SIIS board meeting.

 

Scott Craigie, Chief of Staff, Governor's Office, addressed the committee. He mentioned the Governor's belief that the SIIS board should be one person. Mr. Craigie pointed out that a group board would have to appease a large number of people, whereas the Governor, acting as the board, would have more clarity of direction.

  

Richard Frost, Private Citizen, testified before the committee regarding abuse of the system by workers. He suggested copayment as a possible solution to the problem. Mr. Frost also suggested the injured worker show up for training on a daily basis (so they cannot be working somewhere else while collecting benefits). 

 

There was discussion regarding an 800 number to report abuses, and it was questioned whether or not the public would respond to it.

 

Senator O'Connell discussed the light duty issue in relation to workers' compensation.

 

A discussion followed on the pros and cons of copayment.

 

There being no further business, Senator Townsend adjourned the meeting at 10:15 a.m.

 

            RESPECTFULLY SUBMITTED:

 

 

 

                                    

            Sheri Asay,

            Committee Secretary

 

 

 

APPROVED BY:

 

 

 

 

                                     

Senator Randolph J. Townsend, Chairman

 

 

DATE:                                

 

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Senate Committee on Commerce and Labor

February 26, 1993

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