SECTION: NEWS; Pg. 1A

LENGTH: 1155 words

HEADLINE: RETHINKING MANAGED CARE

BYLINE: Julie Appleby

BODY:
   Americans want some strong medicine applied to their health system,
but they're not sure how much they're willing to pay.
 

That, in essence, is what all the fighting is about this week
on Capitol Hill over the patients' bill of rights and other health-care
legislation.
 

Five years after President Clinton's health reform was soundly
rejected, Americans are turning to state and federal lawmakers
to fix the health system.
 

More Americans than ever are in managed care plans, pushed there
by employers eager to lower costs.
 

The free market was nice, they say, but it's time to throw in
some government rules to make the system more friendly. Mainly
it's delays in getting care, denials of specific treatments and
paperwork that has Americans asking for change.
 

Trouble is, no one is sure exactly what the impact of changing
the health care might be.
 

"We don't know what the side effects are," says Randall Bovbjerg
of the Urban Institute, a research group in Washington, D.C.
 

Nonetheless, consumers say they want action. A poll funded by
the Kellogg Foundation out today shows that one in three Americans
thinks the health system is critically ill.
 

"The horror stories resonate because everyone in managed care
has their own mini-horror stories," Bovbjerg says.
 

Dozens of states have responded to their concerns, passing laws
requiring health insurers pay for emergency room care or allow
women to stay in the hospital longer after giving birth.
 

Washington, too, is now in the act, debating a set of proposals
that would undo some of the very measures managed care uses to
help control costs: limiting access to specialists and saying
no to some types of treatments and procedures.
 

The fate of current legislation is uncertain, but there's little
doubt the issue will be at the forefront of the 2000 elections.
 

"This is all about the industry feeling the heat and changing
how it behaves," says Jamie Court of the advocacy group Consumers
for Quality Care.
 

But it's also about the role government should play.
 

Americans chose the free market over government regulation when
it rejected Clinton's reform plan in 1994.
 

"The market has done some good things," says analyst Larry Levitt
with the Kaiser Family Foundation. "But managed care has made
people uncomfortable in many respects. They're uncomfortable giving
so much power to private health plans, many of which are for-profit."
 

So now consumers want the government to take some of the power
back.
 

Reform's costs

Insurers say they're willing to concede some things: allowing
for independent review of treatment denials, for example.
 

But insurers warn that the state and federal proposals all come
with a price tag, especially if the courtroom doors are opened
wide to lawsuits.
 

"We know consumers want Congress to act, but I don't believe
consumers want to send the whole system to the trial lawyers,"
says Karen Ignagni of the American Association of Health Plans.
 

Opponents claim that just the right-to-sue provision could add
6% or more to already rising health insurance premiums.
 

Supporters scoff at that figure, pointing to the example of Texas,
which has expanded insurers' liability, yet has not seen a rush
to the courtrooms, nor greatly increased costs.
 

Other analysts rely on a Congressional Budget Office estimate
of an increase of about 1.4% if the right-to-sue legislation is
adopted federally.
 

"In a trillion-dollar health system, that's a drop in the bucket,"
says Levitt.
 

But it was rapidly rising health-care costs in the late-1980s
that was the driving force behind the move to managed care.
 

Managed care promised an answer: lower premiums in exchange for
a more limited choice of doctors and more oversight of benefits.
 

Spending on health care did slow, both for employers and the government.
 

Impact on patients
 

To a small employer, even small increases in the cost of health-care
premiums could mean the difference between providing insurance
or not.
 

For insured patients in managed care plans, the various state
and federal proposals now being debated could dramatically change
the way they get health care.
 

* Federal law, particularly, would create a national standard
to replace the patchwork state-by-state approach that allows patients
in one state to have protections that are absent in the state
next door.
 

"We're arguing here about setting a civilized minimum" of standards,
Bovbjerg says.
 

* Under the federal proposals, the chronically ill may no longer
have to get special approval every time they need to see a specialist.
 

* Patients whose doctors recommend a treatment -- then are told
no by their insurer -- could take their beef to independent review
panels. In states where such panels already exist, patients win
their cases about half the time.
 

* Coverage for experimental treatment may become more common,
as insurers fear the threat of lawsuits if they don't offer such
care.
 

Yet the proposals won't do much "for the patients who don't like
it that they have to wait too long in a doctor's office or have
to submit two letters to get approval for something to be done,"
Bovbjerg says.
 

More information about health plan benefits and appeals processes
would be available to consumers, but many would still have little
choice over which health plan their employer offers.
 

The proposals may also have some other ramifications: Premiums,
already on the rise because of pharmaceutical costs and years
of underpricing by market-hungry health plans, could go up even
more.
 

Employers, facing the possibility of lawsuits if legislation allowing
insurers to be sued is adopted, may drop coverage. Or they might
simply give employees a set amount of money along with a directive
to go buy their own insurance.
 

"Employers would agree with many of the provisions in the bills
on such things as emergency room care and things like that, but
on liability and punitive damages, that's a horrifying prospect,"
says Frank McArdle, a principal at Hewitt Associates, a benefits
consulting firm.
 

In the coming weeks, employers will join the other major lobbying
groups -- doctors, lawyers and insurers -- in trying to convince
Congress, and the public, on what reforms should be adopted.
 

Proponents will warn that care denials and patient horror stories
will continue without reform. The HMO industry will play on a
perceived distrust of lawyers. Its latest ad features a shark
circling a school of fish and warning of a "trial lawyer feeding
frenzy" if Congress passes right-to-sue legislation.
 

"What's troubling about the debate is the incredible exaggerations
on both sides," says Levitt. "It's going to cost a lot less
than the industry says, but it will also produce fewer benefits
than the trial lawyers and consumer advocates suggest."
 

GRAPHIC: GRAPHIC, Color, Grant Jerding, USA TODAY, Source: KPMG Survey of Employer-Sponsored Health Benefits, 1998; HIAA Survey, 1998; GRAPHIC, B/W, Kevin Rechin, USA TODAY, Source: American Association of Health Plans, Congressional Quarterly, USA TODAY research (Chart)

LANGUAGE: ENGLISH

LOAD-DATE: October 07, 1999
 
 

SECTION: Section A; Page 1; Column 6; Business/Financial Desk

LENGTH: 1253 words

HEADLINE: BIG H.M.O. TO GIVE DECISIONS ON CARE BACK TO DOCTORS

BYLINE:  By MILT FREUDENHEIM

BODY:
   The United Health Group said yesterday that it was returning decision-making power over patient care to physicians, breaking with a longstanding element of managed care that has infuriated many doctors and frustrated their patients.

United, one of the nation's biggest managed care companies, said that a patient's doctor would be able to decide without the insurer's interference whether to admit health plan members to a hospital or provide other treatment.

That does not mean the company, which is based in Minneapolis, is giving up cost controls. The company will still review decisions after the fact and urge doctors not to exceed certain averages. When persuasion does not work, doctors can be dismissed from the company's network of approved physicians -- thus forcing patients to transfer to other doctors -- but the company said that sanction was rarely used.

United, which insures 14.5 million people, including 8.7 million in health maintenance organizations and other managed care units, said the rules were being phased in nationally. United has 1.1 million members in New York, New Jersey and Connecticut.

With the decision, United, which said it approves 9 out of 10 care decisions anyway, will save about $100 million, much of which will be spent elsewhere. It also gets a chance to smooth relations with doctors and patients, attract more customers and perhaps avoid some future legal liability as health plans battle a backlash against managed care in Congress and the states and a series of class-action lawsuits. Those suits generally contend that managed care companies misrepresent that clients are getting the best possible care when in fact, the suits say, the cost of care is the determining factor.

The announcement by United is one of several changes by insurance companies that analysts attribute to the backlash. United, Aetna Inc. and several Blue Cross plans have separately offered their members the right to appeal denials of care to an independent panel outside the company. Such panels would be required in the Congressional measures and are already required in 30 states, including New York.

And several big nonprofit H.M.O.'s, like Kaiser Permanente, based in California, and Harvard Pilgrim in Boston, have long relied on doctors to decide when care is considered medically necessary.

Other managed care companies declined to comment on the United announcement, which was reported yesterday in The Dallas Morning News. Spokeswomen for Oxford Health Plans, Aetna U.S. Healthcare, and Empire Blue Cross said they had not seen United's official account.

Physicians and consumer advocates hailed United's move yesterday.

"It's a response to the consumer and political backlash," said Ken Jacobsen, a health care expert in New York at the Segal Company, a consulting firm. "This is a big, significant step."

Explaining its decision to stop requiring doctors to get prior approval for care, United said it was "no secret that state and federal lawmakers want to put an end to much of this practice."

But officials of the American Association of Health Plans, a managed care trade group in Washington, disagreed that the changes being made by health plans were prompted by developments like the "patients' rights" legislation that is awaiting action by a Senate-House conference committee. Provisions include the right to sue health plans for medical malpractice, the right to appeal denials of care to independent review panels and guaranteed access to specialists.

Susan Pisano, a spokeswoman for the trade groups, said the United announcement was "the next stage in the evolution of health care, the edge of a wave of change."

John Stone, a spokesman for Representative Charles Norwood, Republican of Georgia, who sponsored the House bill, said that managed care companies that turned over medical decision-making to physicians would not be liable to medical malpractice lawsuits under the bill.

Republican leaders in the House and insurance company lobbyists have argued that the right to sue the companies would increase costs for health plan members. But Mr. Norwood said in a statement yesterday that his bill would "very likely result in lower costs." He said, "the best care in the long run is less expensive than cutting corners."

"This action is historic," said Dr. Thomas Reardon, president of the American Medical Association. He said it was "a long overdue victory for American patients and the care they receive."

Jeffrey Roth, a Manhattan dermatologist, said the change would "help re-establish a sense of trust between the insurers and the doctors" and reduce burdensome paperwork in doctor's offices that they denounce as "the hassle factor."

Health care experts and critics of managed care said the prior review system had outlived its usefulness and was actually costing the companies more than they saved. "This is a confession that H.M.O. bureaucrats cost more than they save," said Jamie Court, a spokesman for the Foundation for Taxpayer and Consumer Rights, an advocacy coalition.

Wall Street investors reacted to the news by driving United Health Group stock up $2.375 yesterday, to $54.9375.

Robert Hoehn, a health care analyst with ING Barings, said that the higher stock price may reflect the belief of traders that the new policy would give United "an advantage over other companies in terms of marketing" and "further insulate them from the risk of litigation."

Dr. Archelle Georgiou, chief medical officer of the United Healthcare unit of the company, said that it had been spending $100 million a year to respond to requests for approval of care, which were almost always granted.

Some of the money saved will go toward programs for patients, she said, like telling patients what to expect in the hospital and keeping tabs on them so they get appropriate care promptly and can return home.

The company will still track doctors' decisions after they are made and urge physicians who exceed the average costs on certain types of health care to bring their practices in line. "When we are talking to physicians and not calling to deny a service, they are so much more willing to listen," Dr. Georgiou said.

"Doctors will still have to be mindful of economic outcomes," Mr. Jacobsen, the consultant said.

Like other health care companies, United will still negotiate discounts on payments to doctors and hospitals. And it will continue to try to minimize expensive hospital stays by reminding members with chronic ailments like asthma, diabetes and congestive heart failure to take their medication and closely follow their doctors' orders.

Mr. Hoehn, the analyst, said that managed care had succeeded in bringing health costs down. Fifteen years ago, he said, reviews like those being dropped by United played an important role in holding down costs. "Now quality and access to care are taking precedence," he said, as prior reviews could no longer show savings.

Dr. Lee Sacks, a family physician in Oak Brook Ill., said he was "encouraged that United is trying to figure out how to work with physicians and patients to provide the best care." Dr. Sacks, a senior executive of Advocate Health Care, a group of 2,700 doctors, said that previously United had approved the group's requests for prior approval of care "in 99 out of 100 cases."

Helen Darling, a senior health care consultant with the Watson Wyatt consulting group, said that "health plans, for the most part, are approving everything."

http://www.nytimes.com

LANGUAGE: ENGLISH

LOAD-DATE: November 9, 1999
 
 

SECTION: NEWS; Pg. 8A

LENGTH: 401 words

HEADLINE: Wall Street may play part in HMO suits

BYLINE: Owen Ullmann

BODY:
   The trial lawyers who won billions from tobacco companies are
now enlisting Wall Street to prod the managed-care industry into
a swift settlement of class-action suits.
 

Richard Scruggs of Pascagoula, Miss., one of the lead lawyers,
said Tuesday that economic pressure from investors, in the form
of declining prices for managed-care stocks, could lead to a deal.
Ultimately, it might include Congress, which is debating legislation
to expand the rights of patients in health maintenance organizations
(HMOs), he added.
 

Scruggs said he hopes to meet with lawmakers next week to discuss
the lawsuits his legal coalition is bringing against the nation's
largest health insurers.
 

Aetna Inc. and Humana Inc. were sued earlier this month, and Scruggs
said suits against several other "major players" would be filed
as early as Thursday.
 

The suits, based on untested legal theory, accuse the companies
of violating federal racketeering laws. They allege that companies
defrauded HMO subscribers by hiding fee arrangements with doctors
and claims processors that are designed to cut costs rather than
meet medical needs.
 

In contrast to the drawn-out legal battle with the cigarette industry,
Scruggs hopes to convince managed-care executives that it's in
their financial interest to settle soon.
 

Trial lawyers have been telling Wall Street analysts that if the
lawsuits are upheld, "they would put them (companies) out of
business," said Scruggs, adding that economic pressure on tobacco
companies came years after lawsuits were filed.
 

Some investors apparently agree, given the drop in industry stocks
since the planned lawsuits were disclosed Sept. 30. "The stocks
have done abysmally," said Todd Richter, a health industry analyst
at Bank America Securities. Share prices for the largest companies
are trading at one-half to one-third of their 1999 highs, he added.
 

So far, HMOs are refusing to buckle. "It borders on extortion
and will backfire," said Karen Ignagni, president of the American
Association of Health Plans. "Working families will have to pay
higher premiums to cover liability costs."
 

Victor Schwartz, a Washington lawyer who advises companies on
such suits, said the emphasis on economic pressure marks "a new
phenomenon" in the law: "The decision to settle is no longer
being made on the legal merits but the price of stock."
 

LANGUAGE: ENGLISH

LOAD-DATE: October 20, 1999
 
 

SECTION: Section A; Page 8; Column 6; National Desk

LENGTH: 717 words

HEADLINE: Illinois Court Lets Patients Sue H.M.O.'s

BYLINE:  By DIRK JOHNSON

DATELINE: CHICAGO

BODY:
   The Illinois Supreme Court has ruled that patients can sue health maintenance organizations for malpractice, declaring that decisions on what treatments the companies will cover amount to medical care.

In the decision, Michael A. Bilandic, Chief Justice of the Illinois Supreme Court, wrote, "Where an H.M.O. effectively controls a physician's exercise of medical judgment and that judgment is exercised negligently, the H.M.O. cannot be allowed to claim that the physician is solely responsible for the harm that results."

The ruling was the latest in a string of decisions by state and Federal judges who have begun allowing patients to sue H.M.O.'s.

The decision in Illinois, which was handed down on Thursday, comes after the state Legislature decided this summer not to give patients the right to sue H.M.O.'s.

In California earlier this week, Gov. Gray Davis signed a bill that allows patients to seek punitive damages from H.M.O.'s for negligence.

The Illinois ruling came in the case of a Chicago woman, Inga Petrovich, who complained of mouth pain in fall 1990 and was told by her doctor to have an expensive diagnostic test. But her H.M.O., Share Health Plan of Illinois, initially refused to approve payment for the test, a magnetic resonance imaging examination.

Nearly a year later, the H.M.O. relented, and when the woman was tested, doctors found that cancer had penetrated the base of her tongue. Ms. Petrovich died last fall; her husband has continued the suit.

In his ruling, Justice Bilandic wrote that "H.M.O. accountability is essential," because the organization is a for-profit venture. The court said that H.M.O.'s act as health-care providers and not just as insurers since their rules on coverage affect doctors' decisions.

A trade group that represents H.M.O.'s expressed concerns that the ruling could drive up insurance costs and ultimately leave more people without coverage.

"We're very disappointed with the ruling," said Christopher Hamrick, a spokesman for the Illinois Association of H.M.O.'s. "It's hard to gauge its impact right now, but we're concerned that it could result in higher costs."

Advocates for patients hailed the ruling, saying it was a powerful tool in holding H.M.O.'s accountable.

"H.M.O.'s are going to be much more cautious about denying needed medical care," said John Cameron, the executive director of Citizen Action, an Illinois group that advocates for consumer rights. "This ruling is part of an increasing trend that recognizes that H.M.O.'s are practicing medicine, even though they don't have a license on the wall."

Besides the laws in California and Texas that allow patients to sue H.M.O.'s, laws in Georgia and Louisiana give patients a mechanism to appeal H.M.O. decisions.

The Illinois suit was initially dismissed by a Cook County Court judge, who ruled that the H.M.O. could not be held responsible for the actions of doctors who were not its employees, but rather independent contractors.

The Illinois Supreme Court did not rule on the merits of the case but decided that Ms. Petrovich's survivors were entitled to a trial.

Lawyers for United Health Group, the parent company of Share Health Plan, have said they will not comment until they can study the ruling.

Justice Bilandic, who served as Mayor of Chicago briefly after the death of Richard J. Daley in 1976, said the Share Health Plan had advertised itself as more than simply an insurer. He noted that the H.M.O. had billed itself as the source of "all your health care needs" and a "good partner in sickness and health."

Politicians in the Illinois Legislature, as in many other states, have been debating whether to allow patients to sue H.M.O.'s. A bill signed in August by Gov. George Ryan of Illinois, a Republican, broadened the rights of patients but did not address the question of whether patients could sue H.M.O.'s.

State Representative Mary Flowers, who supported giving consumers the right to sue, said many patients had come to see H.M.O.'s as arrogant and callous.

"This is a good first step," said Ms. Flowers, a Chicago Democrat. "H.M.O.'s have not had any accountability. That's wrong. We expect and deserve due process in this country. When we feel we've been harmed, we ought to have the right to do something about it."

http://www.nytimes.com

LANGUAGE: ENGLISH

LOAD-DATE: October 2, 1999
 
 

SECTION: NEWS; Pg. 1A

LENGTH: 361 words

HEADLINE: Health plan eases doctor oversight

BYLINE: Julie Appleby

BODY:
   The doctor really does know best, the nation's second-largest
health insurer said Monday.
 

From now on, United Healthcare says, it no longer will require
doctors to get permission before performing expensive tests or
admitting patients to hospitals.
 

The decision moves United Healthcare to the forefront of a trend
to loosen managed care's restrictions, which have fostered discontent
among physicians and patients even as they helped control rising
costs.
 

The company says oversight of doctors and medical procedures,
which the industry relied upon for years to save money, is not
working. It says such oversight costs more money in paperwork
than it saves and does little to coordinate care.
 

"I think we'll improve the health care experience for our members
and we'll restore the joy to the profession," says Archelle Georgiou,
chief medical officer for United Healthcare.
 

But whether better care and lower costs play out remains to be
seen. Some experts say health plan oversight of doctors can protect
patients from unnecessary or dangerous care. Others say restrictions
have harmed patients.
 

United's competitors are certain to monitor the move closely,
as will employers who pay the bills for health care. Loosening
restrictions could fuel premium increases, some fear.
 

United Healthcare, and some medical groups with which it contracts,
still will call the shots on certain disputes over coverage decisions.
 

"This is not an open door to practice experimental procedures,"
says Jay Silverstein, chief marketing officer of Minneapolis-based
United.
 

United says it tested the program for more than two years in Tampa,
Miami, Chicago and other cities before rolling it out to its 14.5
million customers in 30 states this month.
 

The decision comes as the industry remains under attack by lawmakers,
lawyers and disgruntled doctors. Some consumer groups and doctors
are calling on other health plans to follow United's example.
 

"Physicians should not have to battle insurance companies to
do what is best for their patients," says Thomas Reardon, president
of the American Medical Association.
 
 
 
 

LANGUAGE: ENGLISH

LOAD-DATE: November 09, 1999
 
 

SECTION: News; Pg. 2

LENGTH: 424 words

HEADLINE: HMO LETS DOCS GET LAST WORD  INSURER TO HONOR PHYSICIAN DECISIONS ON PATIENT CARE

BYLINE: By CORKY SIEMASZKO DAILY NEWS STAFF WRITER

BODY:
 

In a move that essentially rips up the managed-care rule book, the nation's second-largest health maintenance organization says it will give doctors final say over how to treat their patients.

The action by UnitedHealth Group, part of a growing trend among HMOs to ease up on vexing rules, will cut much of the red tape that has frustrated patients and infuriated many doctors.

"Hallelujah!" said Samuel Kopel, medical director of Maimonides Medical Center in Brooklyn. "Obviously, the devil is in the details, but if more of the decisions are being made by doctors instead of some bureaucrat . . . it will be a good thing."

Penny Schwartz, of the local chapter of the National Association of Social Workers, cautioned that HMOs still have the power to shackle doctors by demanding reams of documentation before paying for a procedure.

"Those doctors are still employed by the HMOs, so this is only marginally better," Schwartz said.

Other experts said the move by UnitedHealth may be a mixed blessing for patients and could result in higher premiums.

HMOs have been credited with controlling rising health care costs. But a tenet of managed care allowing HMO managers to overrule doctors has given the industry a black eye.

UnitedHealth, which covers 14.5 million people nationwide, insists it approved 99% of doctors' requests. But the process "was the root cause of many of the negative perceptions of managed care," Dr. Archelle Georgiou, the Minneapolis-based company's chief medical officer, told The Dallas Morning News.

Still, the company said its action came down to economics. After shelling out $ 100 million a year to screen doctors' requests, the company decided it would be cheaper to leave the decision-making to the doctors.

"We've known all along that these sorts of administrative hurdles are costly, not only in lives and quality of life, but it's also costly to administer," said Lisa McGiffert, a senior policy analyst with Consumers Union in Austin, Tex.

Insurers are already loosening restrictions on doctors by reducing the number of procedures requiring preapproval, according to the American Association of Health Plans, an industry trade group.

Under UnitedHealth's new system, physicians will still be required to notify the insurer if a patient is hospitalized, requires home health care or needs expensive medical equipment.

But although UnitedHealth may ask for more information or suggest less costly treatments, the doctor has the ultimate call.

With News Wire Services

LOAD-DATE: November 09, 1999
 
 

SECTION: NEWS; Pg. 1A

LENGTH: 1385 words

HEADLINE: Who do you call: 911 or your HMO? Kaiser plan widely watched

BYLINE: Julie Appleby

DATELINE: PLEASANT PRAIRIE, Wis.

BODY:
   PLEASANT PRAIRIE, Wis. -- A 59-year-old Colorado man, suffering
chest pains, calls his health plan's emergency number. Seconds
later, he's talking with a dispatcher a thousand miles away in
Wisconsin.
 

"I think I need an appointment with my doctor," the man says,
his voice a little strained.
 

The dispatcher, who works for a company under contract to managed-care
giant Kaiser Permanente, decides -- in this case -- that an ambulance
is necessary. So she puts the man on hold and calls his local
911 number in Colorado.
 

This is the next evolution of managed care: Insurers, who already
dictate what medications are covered and how long patients will
stay in hospitals, now want to oversee emergency services. Whether
you get an ambulance when you fall ill might soon be overseen
by your insurer -- if you dial your health plan instead of 911.
 

The change, supporters say, will help patients who call their
health plans when they should have called 911. And they say similar
efforts are likely to be adopted by insurers nationwide.
 

Critics say the program will confuse patients about what number
to call in an emergency, delay care and undermine the nation's
911 system.
 

"It puts decision-making as to whether a situation is life-threatening
into the hands of a dispatcher, and, whether they're medical professionals
or not, that wastes what could be life-saving minutes," says
George Burke , spokesman for the International Association of
Firefighters. Opposition has come mainly from firefighters, whose
departments may also offer paramedic and ambulance services.
 

By helping decide when to send ambulances to patients calling
health plan advice lines, insurers want to reduce overuse of emergency
care while still providing protection for those who need it.
 

"There's a finite number of ambulances. We want to reserve them
for those who really need them," says Jim Cusick, emergency medical
services director for Kaiser Permanente.
 

Local 911 systems generally send ambulances to whomever calls.
Cusick says that can lead to "not having a hot 911 ambulance
ready for the heart attack or stroke victim because they're off
carting someone with a broken leg."
 

Kaiser first with plan
 

Kaiser is the first to oversee ambulance services, signing a five-year,
$ 600 million deal with American Medical Response, an Aurora, Colorado-based
subsidiary of Laidlaw. Under the deal, AMR will provide all medical
transport for Kaiser, handle claims processing and answer calls
from patients at its Wisconsin center.
 

AMR is touting its program, called Pathways, as a one-stop shop
for everything from appointment scheduling and nurse advice to
emergency rescue.
 

Kaiser tested and refined the program in its Colorado region during
the past two years and is poised to take it nationwide this fall.
Other insurers are watching closely: Humana and Foundation are
testing AMR's program in south Florida.
 

Though the program will vary region by region, Kaiser says it
will retain its own advice nurses but channel urgent calls directly
to Pathways.
 

"Our ultimate goal is to provide a safety net to members who
choose to call nurse advice rather than 911," says Jay Goldman,
Kaiser's medical director for ambulance services.
 

Care quality vs. costs
 

Like other changes in health care, the Pathways program raises
concerns about how to balance providing quality care with the
need to keep costs down.
 

"Done carefully, it's a good service. Done to save money first,
it's risky," says Mark Hauswald, an associate professor of emergency
medicine at the University of New Mexico and author of studies
on paramedic services.
 

Although no one is actively promoting Pathways as a 911 replacement,
critics fear that insurers ultimately might.
 

At the very least, critics say, it heightens already established
fears among patients that they must get permission from their
health insurers before seeking medical care, even in an emergency.
 

"This puts fear into people that if they call 911, insurance
won't pay for it," says Burke at the firefighters' association.
His association successfully lobbied Maryland lawmakers in May
to forbid insurers from creating programs that compete with 911.
 

Though some patients might fear that their bills won't be paid
if they don't call their health plans, others call their health
plans in emergencies rather than 911 because they don't think
their conditions are serious, even when faced with chest pains
or difficulty breathing.
 

On the same day the 59-year-old called, the operators at AMR's
Wisconsin call center handled more than 70 other calls. Most were
from Kaiser staff seeking routine transfers of patients.
 

About a dozen, however, were patients for whom AMR called emergency
ambulances, including a woman with possible internal bleeding.
One caller refused an ambulance. A few other callers were deemed
not to have serious medical problems and were sent back to Kaiser's
appointment system or an advice nurse.
 

At most other insurers' advice lines, callers with serious problems
are told to hang up and call 911. Many patients can and do. But
some may refuse to contact 911 or pass out first.
 

"Fundamentally, we are improving the level of services by providing
access to someone who can get 911 to patients faster than has
been done in the past," says Robert Watson, president of the
Pathways program at AMR.
 

Kaiser is rolling out the program slowly. In some areas, patients
will be directly connected to Pathways with the push of a button
on the telephone. In other states, only non-emergency situations,
such as transferring patients from one hospital to another, will
be handled by Pathways.
 

In Colorado, the Pathways program initially increased ambulance
use, Kaiser's Cusick says. But now, after a number of changes,
ambulance use is down by 17%, he says.
 

Few complaints
 

There have not been a significant number of complaints about the
Pathways program reported to state regulators, says Cindy Ehnes
at the Department of Insurance. Nor have emergency room doctors
seen problems, says Dennis Beck, medical director for CarePoint,
which staffs six hospital emergency rooms in the Denver area.
 

"It's not like it's absolutely without flaw, but it's not a big
problem today," Beck says.
 

Firefighters, however, say Pathways delays emergency care because
patients talk first with the AMR center in Wisconsin before 911
is contacted. Sometimes an AMR ambulance is sent even when another
company's ambulance is closer, firefighters say.
 

Also, callers' addresses and telephone numbers don't automatically
pop up on AMR's computers, as they would if callers dialed the
911 system from anything but a cell phone.
 

"If people were programmed to call 911 instead, we wouldn't have
to worry about the guy in Wisconsin knowing if this was a Littleton
call or a Lakeland call or if the street was north or south,"
says Craig Gravitz, chief of the Denver Health Paramedic Division.
 

Some just doubt that telephone dispatchers, who have minimum of
four weeks training, can make good decisions on who needs an ambulance.
 

"You cannot do telephone triage of patients," says Chief Wayne
Zygowicz of the Littleton, Colo., fire department. "There will
be a percentage of people, and it may be a small percentage, where
you cannot tell what the symptoms are over the phone."
 

And some firefighters say the program will undermine the 911 system
by siphoning off insured patients, potentially leaving fire departments
and non-AMR ambulances to carry a greater percentage of indigent
or uninsured patients.
 

Watson of AMR says the system will not undermine 911. "We're
capturing these people who have elected not to call 911 and putting
them back into the system," he says, even if that means a rival
ambulance company gets the business.
 

As for the firefighters' concerns, AMR's Watson and Kaiser's Cusick
say they welcome scrutiny.
 

"We're the first out of the chute and getting the criticism,"
Cusick says. "It's healthy to have the dialogue and have someone
watching your every move. There's no way I'm going to do something
that will hurt 911 or hurt a patient. My family is out there,
too."
 

GRAPHIC: PHOTO, Color, The Stock Market; PHOTO, B/W, Ernie Layba for USA TODAY; Ready: Emergency technician Kristen Hanson and paramedic Chris Schultz prepare an American Medical Response ambulance at Kaiser/St. Joseph's Hospital in Aurora, Colo.

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HEADLINE: RULES ON PRIVACY OF PATIENT DATA STIR HOT DEBATE

BYLINE:  By ROBERT PEAR

DATELINE: WASHINGTON, Oct. 29

BODY:
   President Clinton kicked off an intense debate today on how to protect the privacy of medical records in an era when doctors can test their patients for genetic defects and send the information around the world with the click of a computer mouse.

In unveiling new rules to safeguard such information, Mr. Clinton said, "These standards represent an unprecedented step toward putting Americans back in control of their own medical records."

But doctors said the rules were inadequate and could actually erode some protections that patients now have. Several physician groups said they had been invited to today's White House ceremony, but stayed away because in many cases the proposal does not require that patients give consent before their records are shared, only that they be notified. Such a rule, they said, does not give patients enough control over the use and disclosure of their medical records.

The Administration estimated that compliance would cost the health-care industry $3.8 billion over five years, but the insurance industry says the costs could be 10 times that amount. With both sides saying they support the goals of the standards, a central point in the debate will be: What is privacy worth in dollars and cents?

Health insurance plans object, in particular, to a provision that would make them responsible for privacy lapses by companies that collaborate in the care of a patient. For example, an H.M.O. that sends a patient to a pharmacy could be liable if the pharmacy improperly uses the patient's records.

Under the proposed rules, patients would gain a new Federal right to inspect, copy and suggest corrections in medical records that have been kept or transmitted electronically.

Federal officials estimated that it would cost doctors, hospitals and health maintenance organizations more than $400 million to issue notices informing patients of their privacy rights, as required by the rules. In addition, the officials predicted, thousands of patients will try to correct their medical records, and it will cost the health-care industry more than $2 billion to deal with these requests over the next five years.

The rules would permit the use and disclosure of medical information without a patient's consent for treatment, payment and a wide range of loosely defined "health-care operations," including many common business practices of H.M.O.'s.

Dr. Donald J. Palmisano, a trustee of the American Medical Association, said, "The A.M.A. believes that mere notice of a health plan's intended use is inadequate."

Many doctors contend that health plans and insurance companies should have to obtain consent from patients before using information from their files to monitor the patients' compliance with recommendations for medical treatment and testing. Too often, the doctors say, H.M.O.'s interfere in the doctor-patient relationship by suggesting a cheaper drug or a different course of treatment.

The Clinton Administration would allow health plans to use personal health information, without a patient's consent, for the following "health-care operations": assessing the quality of care and the performance of doctors and nurses; developing clinical guidelines; setting premiums for the renewal of insurance contracts, and investigating fraud.

Dr. Richard K. Harding, vice president of the American Psychiatric Association, said the proposed rules "give the Federal Good Housekeeping Seal of Approval to practices that could undermine privacy."

Many states allow patients to limit the use of some or all of the information in their medical files. In theory, the Federal rules do not override state laws that provide more protection for privacy.

But William B. Bruno, a lawyer for the psychiatric association, said, "Patients could lose some protections they now have. At present -- because of state laws, court decisions and canons of medical ethics -- many hospitals will not disclose medical records unless the patient gives consent. The Federal Government is now weighing in, saying that's not required. It's giving a green light for significant changes in current practice."

Administration officials insisted that the rules would create protections in areas where none now exist. Doctors, hospitals and H.M.O.'s would, for example, have to keep logs documenting who got access to patients' records for various purposes.

The rules would greatly expand the role of the Federal Government in regulating the practices of the health-care industry. It would set hundreds of detailed Federal standards, with civil and criminal penalties for violations.

Mary Nell Lehnhard, senior vice president of the Blue Cross and Blue Shield Association, described the rules as costly, complex and confusing.

"We believe that all patients should have the peace of mind that comes from knowing their personal records are secure, and we are outraged when breaches of this trust occur," Ms. Lehnhard said. "But why do we need 600 pages of regulations to protect medical records when the Bill of Rights takes only one page to provide Americans with all their basic rights? Why didn't the Administration just simply spell out what activites are illegal?"

Janlori Goldman, director of the health privacy project at Georgetown University, said, "This is a historic day. These regulations will be the first enforceable Federal rules protecting health privacy."

But, Ms. Goldman said, the proposal falls short because "there is no requirement that a judge or a magistrate approve or deny access to medical records sought by law enforcement agencies."

Under the rules, most health-care providers would have to designate "privacy officials" to develop privacy policies and procedures. This rule would apply even to a small office with three doctors, who could designate the office manager as privacy coordinator. Health-care providers would also have to designate a "contact person" to handle patients' complaints about violations of privacy.

Mr. Clinton and Donna E. Shalala, the Secretary of Health and Human Services, expansively interpreted their authority. The rules make doctors, H.M.O.'s and insurance companies responsible for any violation of a patient's privacy by their "business partners."

Kristin A. Bass, director of legislative affairs at the American Association of Health Plans, a trade group, said that an H.M.O. would have little power over a drug store that improperly sold information about the patient to a drug manufacturer.

"They would hold us responsible for the pharmacy's misbehavior," Ms. Bass said.

Health insurance plans could also be held accountable for the misuse of medical records by their other "business partners," including their lawyers, auditors, billing firms and consultants.

Under the rules, health-care providers and health plans would have to get a patient's consent for certain types of disclosures -- if, for example, the information was to be used in marketing.

Doctors and insurers could not insist that people surrender their privacy rights as a condition of obtaining treatment or insurance. In other words, they could not coerce patients into giving consent.

The Administration acknowledged that the rules would create substantial costs for health-care providers and health plans. But, it said, the rules are necessary because computer technology makes it possible to "breach the security and privacy of health information on a scale that was previously inconceivable."

In addition, doctors have many new clues to their patients' destiny. Scientists have developed more than 450 genetic tests that may help identify people with an increased risk of developing breast cancer, prostate cancer, cystic fibrosis and other diseases.

In a preface to the rules, the Administration said they would have "major social benefits" that could not be quantified. Privacy concerns now discourage people from being tested for certain types of cancer and for some sexually transmitted diseases, the Administration said. The new rules will allay these concerns, so more people will receive effective treatments, it said.

A person who violated the rules could be required to pay a civil penalty of $25,000. The rules authorize tougher penalties for criminal violations: a $50,000 fine and one year in prison for willful violations; a $250,000 fine and 10 years in prison if the offender tried to use or sell data for "commercial advantage, personal gain or malicious harm."

The public will have two months to comment on the proposals, which are to be published in the Federal Register on Nov. 3. The Secretary of Health and Human Services is supposed to issue final rules, with the force of law, by Feb. 21, 2000.

Mr. Clinton said he was acting because Congress failed to meet its goal of adopting comprehensive privacy standards by Aug. 21.

"I am taking this action today because Congress has failed to act and because, a few years ago, Congress explicitly gave me the authority to step in if they were unable to deal with this issue," he said.
 

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GRAPHIC: Photo: President Clinton offered rules yesterday that he said would put "Americans back in control of their own medical records." He also met with the health secretary, Donna E. Shalala, at the White House. (Associated Press)(pg. A10)

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HEADLINE: CLINTON TO UNVEIL RULES TO PROTECT MEDICAL PRIVACY

BYLINE:  By ROBERT PEAR

DATELINE: WASHINGTON, Oct. 26

BODY:
   President Clinton will soon announce sweeping new Federal rules to protect the privacy of billions of medical records and will assail Congress for failing to enact any safeguards, Administration officials said today.

The proposed regulations would be the first comprehensive Federal standards specifically intended to protect the confidentiality of medical records. The move comes at a time when doctors, hospitals, pharmacists and health maintenance organizations are sharing more and more data, often without the knowledge of patients, and insurance companies are demanding more information to justify the payment of claims.

Consumer advocates support most of the Administration's proposals. But the proposed rules have generated criticism from insurance companies and hospitals, which say the rules would be costly to carry out. Law-enforcement officials have also expressed concerns because they believe the rules could require them to obtain search warrants in cases where warrants are not now required. And psychiatrists have criticized the rules, saying they may unintentionally weaken a patient's control over medical records.

The proposed rules would cover any medical records that are kept or transmitted electronically, as well as paper printouts of electronic transactions. Patients would generally have a right to review and copy their medical records, and to supplement the records or correct mistakes, Administration officials said. Doctors, hospitals and insurers could not disclose personal health information except for certain specified purposes like medical treatment and the payment of claims.

Most medical records are still kept on paper, but a growing number of health plans require doctors to submit claims electronically. In practice, health care experts said, the proposed rules would set standards for all medical records because it is not practical for doctors and insurers to follow different policies for the use of personal medical information kept in different forms.

Congress has been trying to write such protections into law, but the effort has stalled because of profound disagreements between privacy advocates and the health care industry. In 1996, Congress imposed a deadline on itself, requiring the Secretary of Health and Human Services to issue privacy rules if lawmakers failed to pass health privacy legislation by Aug. 21, 1999. The Administration's new proposals carry out that requirement.

The public will have an opportunity to comment on the proposed rules. Under the 1996 law, the Secretary of Health and Human Services must issue final rules by Feb. 21 next year.

In offering the proposed rules, White House officials said, Mr. Clinton will try to achieve three political purposes. He will put pressure on Congress to pass legislation, to provide a solid statutory framework for the new standards. He will present himself as a champion of privacy rights, a politically popular cause. And, by making aggressive use of his power, he will try to counter the perception of himself as a lame duck.

The President expressed impatience on Monday, when he criticized Republicans for blocking his proposal to provide prescription drug benefits under Medicare. In a fleeting reference to his next initiative, Mr. Clinton said: "Because they have not taken action to protect the privacy of medical records, I will use the power of my office to do that in the coming days."

Chris Jennings, the health policy coordinator at the White House, said: "We would have preferred that Congress pass bipartisan legislation. They gave themselves three years to do it. But in the absence of action on Capitol Hill, the President will act."

Federal officials are still analyzing the cost of their proposals. A recent study by the Blue Cross and Blue Shield Association said that compliance with such standards could cost tens of billions of dollars because health care providers, health plans and insurance companies would have to retrain employees, hire privacy experts, rewrite contracts and reprogram computers.

Administration officials are compiling data to try to undercut those cost estimates.

The rules appear stricter than the comparable provisions of a landmark bill hammered out last week to overhaul the nation's financial system. Under that bill, divisions of a big financial conglomerate -- for example, an insurance company and a consumer bank -- could share information about a customer under many circumstances, and they would have to inform customers at least once a year of their policies on privacy and disclosure.

Under the medical privacy rules, an insurer would also have to inform the subscriber of its privacy practices, but it would be more difficult for the insurer to share health information with an affiliated company. In most cases, the insurer would have to get the consumer's permission before allowing use of the data for purposes unrelated to medical treatment or the payment of claims.

The proposed rules will probably not go far enough to satisfy psychiatrists, but may go too far for some law-enforcement officials.

Dr. Paul S. Appelbaum, vice president of the American Psychiatric Association, said: "The Administration's proposal would protect notes taken by a therapist in the course of psychotherapy, and that's good. But it would take away some of the power that patients have traditionally had to decide when and if their records are released to third parties. Under these rules, much information could be disclosed without the patients' consent to anybody involved in their care."

In general, law-enforcement agencies would need a search warrant, a subpoena or some other legal authorization to get confidential medical records. Federal, state and local law-enforcement officials said they wanted to preserve their ability to get immediate access to medical information without a warrant in emergencies -- when they are investigating a bomb threat or trying to rescue hostages, for example.

John R. Justice, chairman of the National District Attorneys Association, said investigators often did not have enough time or specific information to get a warrant for medical records in "exigent circumstances." For example, he said, the police may want to know about the health problems of a person who is holding hostages or being held hostage.

Experts on health privacy in and out of the Government said the rules also included these provisions:

*Health care providers and H.M.O.'s would not have to get a patient's consent before disclosing information needed for medical treatment or the payment of claims. But they would have to get the patient's consent if the information was to be used for marketing and certain types of research.

*The Federal rules would establish minimum protections for patients' privacy and would not override any contrary provisions of state law that were "more stringent" than the Federal requirements.

*Before disclosing data, doctors would have to take reasonable steps to make sure they did not disclose more information than was needed to accomplish the purpose of the request. The rules would forbid the wholesale release of entire records when a small part would suffice.

*Doctors, hospitals and health plans could charge a reasonable fee to cover the cost of copying records.

Under Federal law, doctors and hospitals can be fined up to $50,000 for the improper disclosure of confidential medical information, and they are subject to larger fines if they sell such data for "commercial advantage" or "malicious harm." Under the proposed rules, patients would not gain any new Federal right to sue a doctor or an H.M.O. for divulging medical records. Federal officials said only Congress could create a new right to sue.

The proposed rules would provide additional protection for some sensitive personal information in mental health records, but not as much protection as many psychiatrists want.

Under the proposal, a psychotherapist would not need a patient's consent to disclose information about the diagnosis of a condition, the patient's level of functioning or medications when such information was necessary for treatment or for the payment of claims. But the therapist would have to get the patient's consent before disclosing more detailed information about a patient's feelings or sexual relationships.
 

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SECTION: Section C; Page 5; Column 1; Business/Financial Desk

LENGTH: 418 words

HEADLINE: Health Insurer Shares Fall on Threat of Suits

BYLINE:  Bloomberg News

DATELINE: HARTFORD, Sept. 30

BODY:
   Shares of Aetna Inc., the United Healthcare Corporation and other major health insurers fell amid reports that trial lawyers were preparing lawsuits on behalf of managed-care patients.

Aetna, the nation's largest health insurer, fell $10.5625, to $49.125, an 18 percent drop. United Healthcare, the No. 2 health insurer, fell $11.50, or 19 percent, to $49.

Lawyers who gained high profiles in tobacco litigation and other cases are preparing to sue managed-care companies and seek class-action status after some large legal judgments against the insurers, The Wall Street Journal reported today. Such lawsuits could hurt companies' ability to control health costs, analysts said.

"People in the investment community have their suspicions that it could be a large negative, but you can't quantify either the potential monetary liability or the time frame," said Greg Crawford, a health care analyst at Fox-Pitt, Kelton. "A lot of this is saber-rattling stuff from the attorneys."

Shares of the Cigna Corporation, the third-biggest health insurer, fell $8.6875, to $78.3125. Pacificare Health Systems Inc. fell $2.4375, to $43.625. The Morgan Stanley Health Care Payer Index, which tracks the performance of big health insurers, fell as much as 10 percent.

Among lawyers working on the suits is Richard Scruggs, who led the litigation against tobacco companies that resulted in a $206 billion settlement, The Journal reported. Also involved is David Boies, the lawyer who is leading the Justice Department's litigation against the Microsoft Corporation, the paper said.

Managed health care plans, like health-maintenance organizations are a form of health insurance in which insurers limit their coverage of doctors, hospitals, procedures, drugs and other parts of health care to hold down costs. Some patients, physicians and consumer groups have complained that the plans go too far in their limitations, putting profit before the well-being of patients.

Industry critics say the health plans skimp on care to improve profits. Employers, however, credit health-maintenance organizations and other forms of managed care with bringing their rising health costs under control while starting to institute measures of quality to compare the performance of health plans.

"What's different about this and tobacco is patients have a great deal to lose if we go away," said Karen Ignagni, chief executive of the American Association of Health Plans, a health insurance industry group.
 
 

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SECTION: Section 1; Page 1; Column 6; National Desk

LENGTH: 1518 words

HEADLINE: SERIES OF RULINGS EASES CONSTRAINTS ON SUING H.M.O.'S

BYLINE:  By ROBERT PEAR

DATELINE: WASHINGTON, Aug. 14

BODY:
   In a string of rulings over the last 20 months, judges across the country have begun allowing patients to sue health maintenance organizations for medical malpractice, after years in which such claims were repeatedly rejected by the courts.

In the past, Federal and state judges often allowed H.M.O.'s and other managed-care companies to avoid liability for their decisions, saying patients had no right to sue for damages. But rulings by judges on Federal District Courts and appeals courts in recent months show that they have become more receptive to lawsuits attacking the quality of care provided by health plans.

The suits have become common as patients chafe under the cost-control restraints of managed care, now the dominant form of health insurance in the United States.

Whether patients should have the right to sue their health insurance companies has been the most divisive issue before Congress as the Senate and the House debate legislation known by its backers as the patients' bill of rights.

The Senate recently passed a bill that would expand protections for a limited number of Americans in managed-care plans, after rejecting Democratic efforts to guarantee the right to sue. President Clinton said he would veto the measure because it offered "toothless, half-hearted protections." A move is afoot in the House to draft a version that would include new rights to sue.

The Federal law that regulates employee benefits has long formed a protective shield around H.M.O.'s. The law, the Employee Retirement Income Security Act of 1974, known as Erisa, made it difficult for consumers to win liability claims for the denial of benefits, partly because Congress wanted employers to establish health and pension plans without being exposed to expensive litigation.

Patients and their lawyers have recently found ways to get around a provision of the law that allows patients to recover only the value of denied benefits, not punitive damages or compensation for lost wages or pain and suffering.

For example, a Federal District Court in Urbana, Ill., ruled this year that a woman could sue a health plan, Health Alliance-Midwest, on the ground that its nurses failed to diagnose her husband's cardiac distress over the telephone. A nurse told the 42-year-old man, Gary L. Crum, that his chest pain was probably a result of "excess stomach acids," the lawsuit said, but Mr. Crum died of a heart attack a few hours later. His wife, Kelly A. Crum, is challenging the "quality of medical care," not a denial of benefits, so she may press her claim under Illinois's wrongful death statute, Judge Michael P. McCuskey said.

Until 1995, the Supreme Court emphasized the broad reach of Erisa, which pre-empts "any and all state laws insofar as they may now or hereafter relate to any employee benefit plan." But since 1995, the Court has emphasized its presumption that states may exercise their "historic police powers" in "fields of traditional state regulation," including health care and insurance.

In an effort to hold health plans more accountable, state insurance commissioners recommended this month that all states establish appeal procedures for people who want to contest the denial of care by H.M.O.'s. Model legislation, issued by the National Association of Insurance Commissioners, would allow consumers to appeal to an independent panel of medical experts.

Legal experts say that without a change in Federal law, it is difficult to sue an insurer for denying care to a patient under the terms of an employee benefit plan. But plaintiffs are already using novel arguments to win damages for inadequate quality of care -- in short, for malpractice.

In the past, when a patient sued for malpractice, the target was usually a doctor. But Promutual Group, a malpractice insurer based in Boston, says "managed care organizations are being held liable in more and more medical malpractice cases."

Daly D. E. Temchine, a Washington lawyer who represents managed care organizations, said patients and their lawyers liked to name H.M.O.'s as defendants because the health plans were seen as having "deep pockets." In recent months, judges in more than 15 states, from California to Texas to New York, have forced H.M.O.'s to defend their actions in cases involving suicide, heart attacks, sudden infant death syndrome, cancer and other illnesses.

The Federal judges, appointed by Presidents of both parties over many years, have said H.M.O.'s can be sued on a variety of legal theories. Some courts have held H.M.O.'s legally responsible for the negligence of their doctors, especially if the doctors act like agents of the H.M.O. Other courts have allowed patients to sue H.M.O.'s for "breach of fiduciary duty," meaning their obligation to act in the interest of participants and beneficiaries.

In Connecticut, Judge Christopher F. Droney of Federal District Court ruled recently that one of the state's largest H.M.O.'s could be sued for negligence by a man whose son had committed suicide. The plaintiff, Stewart R. Moscovitch, said the H.M.O. had stopped paying for psychiatric care at Danbury Hospital for his severely depressed son, Nitai, and arranged for the youth to be transferred to a drug treatment center, where he hanged himself.

The judge said the lawsuit could go forward in state court because it involved "claims for medical negligence, not claims for the improper denial of plan benefits."

In an interview this week, Mr. Moscovitch said: "I felt that the H.M.O. in this case had to be held accountable. I do believe, and know in my heart, that they killed my son by making a medical decision for profit."

Alice C. Ferreira, a spokeswoman for the H.M.O., Physicians Health Services of Shelton, Conn., said, "The tragic outcome of this case saddens us all." But she added, "Once all the facts are presented in court, they will prove that P.H.S. fulfilled its obligation" to the Moscovitch family.

President Clinton, Democrats in Congress and some House Republicans say the right to sue is an essential element of any managed-care legislation, because health plans often decide what kind of care patients receive. But Senate Republicans, H.M.O.'s, insurance companies and employers adamantly oppose any new right to sue, saying it would increase the cost of insurance and lead to an increase in the number of Americans without health insurance.

Justice Ralph J. Cappy of the Pennsylvania Supreme Court addressed such concerns in a recent ruling. "We acknowledge that by allowing negligence claims, there will be a financial impact on H.M.O.'s," he wrote. But, he insisted, "patients enjoy the right to be free from medical malpractice."

David L. Trueman, a New York lawyer who has represented scores of patients, said, "The courts' willingness to protect the consumer is consistent with changing public attitudes toward managed care and the need to hold H.M.O.'s responsible for actions that harm patients."

The Supreme Court of Pennsylvania this year allowed a lawsuit against an H.M.O. by a man who said he had become a permanent quadriplegic because of a three-hour delay in his transfer to a university hospital for treatment of an infection in his spinal column.

The health plan said the Federal law on employee benefits barred such claims, and to support its contention it cited several decisions of the United States Supreme Court in the 1980's and early 90's.

But Justice Cappy of the Pennsylvania Supreme Court said the United States Supreme Court "noticeably changed tack" in 1995. As a result, he concluded, "Congress did not intend to pre-empt state laws which govern the provision of safe medical care," nor did it intend to block lawsuits making negligence claims against an H.M.O.

In January, a California jury returned the largest verdict to date against an H.M.O.: $120.5 million for a woman whose husband had died of stomach cancer. The woman, Teresa Goodrich, was allowed to sue because her husband, David, had been a county prosecutor, and Erisa's limits on damages do not apply to health plans for government employees.

The recent rulings have pleased consumer advocates and caused concern among managed care organizations.

Health plans say the court decisions show there is no need for changes in Erisa, because patients can vindicate their rights under existing law.

But patients' rights and judges' rulings are, at the moment, somewhat unpredictable, and patients often must shuttle back and forth between Federal and state courts.

Mr. Trueman, the New York lawyer, said that despite recent court victories for consumers, "the law in this area is in flux, often limited and at times confusing."

Prof. Timothy S. Jost, an expert on health law at Ohio State University, said: "It's still pretty clear that you cannot directly sue a plan for denial of benefits, no matter how egregious the denial is. That protects much of what health plans do."

Jamie Court, director of Consumers for Quality Care, a consumer group based in Santa Monica, Calif., said Congressional action was needed to clarify patients' rights.

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SECTION: Section 4; Page 1; Column 1; Week in Review Desk

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HEADLINE: The Nation: Rx Redux;
Fevered Issue, Second Opinion

BYLINE:  By ROBIN TONER

DATELINE: WASHINGTON

BODY:
   THE signs are unmistakable: Washington is rediscovering the health care crisis. It did not, after all, go away with the failure of the Clinton Administration's attempt at universal coverage in 1994.

New Census data show the number of uninsured Americans is climbing, in the face of an extraordinary economic boom. The cost of health insurance, after a few years of stability, is rising as well. The House of Representatives spent last week in angry, anguished debate over the state of the nation's health care, then passed a sweeping new bill to rein in the managed care industry and protect patients' rights. And out on the Presidential campaign trail, candidates are beginning to offer their solutions -- with much political forethought -- to the increasingly apparent problems of access, cost and coverage.

President Clinton all but snapped an "I told you so" when confronted with the Census numbers last week. "We told you in 1994 that if this were voted down, the insurance companies would continue to drop people, or employers would, because of the system we had," he said, clearly stung by the notion that 44.3 million uninsured Americans would be part of his legacy.

The new politics of health care is, not surprisingly, framed by the failure of the Clinton plan. Even as the uninsured return to the political agenda, nobody is out campaigning for a plan on the scale of Mr. Clinton's -- or, for that matter, for anything like what was routinely discussed by several Democratic Presidential candidates in 1992 with what now seems breathtaking naivete.

Even as some experts bemoan the shortcomings of piecemeal, incremental steps to expand health care coverage, much of the political class seems committed to the approach; witness the package of tax breaks intended to encourage coverage that Republicans in the House passed to much fanfare last week.

Still, the past seven years have in some ways profoundly changed the lay of the land: Managed care is no longer a theory but a reality for most Americans. The Clinton Administration did not restructure the health care system, but the private sector did. As Bob Blendon, an expert on public opinion and health at Harvard, put it, it was a "top-down" revolution that people never got to vote on.

Hence the backlash: The most popular enemy on Capitol Hill last week was not the bureaucrats in "big government," as it was during the struggle over Mr. Clinton's 1,342-page health plan, but the bureaucrats in health maintenance organizations and other forms of managed care. Government regulation, in fact, was presented as a necessary check on out-of-control H.M.O.'s; Representative Charlie Norwood, a conservative Republican dentist from Georgia who was elected to Congress in 1994 as a fierce opponent of the Clinton plan, was now standing shoulder to shoulder with the Democrats and Mr. Clinton, leading the charge against H.M.O.'s.

Andrew Kohut, the director of the Pew Research Center for People and the Press, says this concern about the power of H.M.O.'s has made health care more of an issue for middle-class working people with coverage. The percentage of people polled by the Pew Center who say "reforming health care" should be a top priority rose from 56 percent in January 1997 to 69 percent in January 1999. A particularly big jump occurred among men aged 30 to 49, Mr. Kohut said. This helps explain why a Republican-controlled House, much of whose leadership is deeply uncomfortable with government regulation, passed the managed care reform bill by such a lopsided vote last week.

THE managed care backlash is only one piece of the health care puzzle, although perhaps the easiest piece politically. To many health care planners and lawmakers on Capitol Hill, the primary concern is the steady rise in the uninsured, many of whom are low- and moderate-income workers.

"I worry what will happen when there's a recession," said Dr. Judith Feder, dean of policy studies at Georgetown University and a former top health adviser to the Clinton Administration. "If low-wage workers are in trouble in good times, where will they be in bad?"

Celinda Lake, a Democratic pollster, says voters raise similar concerns in focus groups, something she calls the Jack Nicholson effect: "What if this is as good as it gets?"

Still, politicians have only recently begun to venture near the issue again; there are no easy fixes for the uninsured, big solutions carry big price tags and the cost, complexity and political ham-handedness of the Clinton plan are painful, lingering memories.

It is no coincidence that Vice President Al Gore and former Senator Bill Bradley are leading the way; concern about the uninsured tends to be higher among Democratic primary voters, according to Ms. Lake.

Deborah Steelman, who is advising Gov. George W. Bush of Texas on health care, said the issue is "really on his radar screen," particularly the plight of low-income workers who lack insurance, but she also indicated that his health care proposal was not imminent.

Still, while concern may be rising, even many voters who worry about the uninsured are wary of big solutions, some analysts say. "I just don't think there's a mood out there for some big government program that involves big intervention," Mr. Blendon said.

Mr. Bradley's plan, which won praise for its boldness because it set a goal of universal "access" to health insurance, was a careful political document that avoided the new governmental structures and mandates of the Clinton plan. (Even so, its estimated $65 billion a year cost may eventually prove a tempting target.)

In fact, the constituency for "health care reform" is divided and complicated, several experts said. Some voters are insured but angry at their H.M.O.'s. Some voters are motivated by the plight of the uninsured, and others are mostly concerned about Medicare and coverage for prescription drugs. "I just don't think this health care issue is a cohesive issue the way it was in 1992," said Mr. Blendon.

MOREOVER, what some experts see as the most worrisome trend in health care -- rising costs -- is the most difficult to discuss politically. Managed care leaders have tried hard to make the case that putting new mandates on the industry -- particularly opening it up to lawsuits -- would raise costs that would ultimately be passed on to employers and consumers. And industry officials seem stunned at times at how little credit they get for making care more efficient and, at least for a while, for controlling costs.

But cost-control in health care is a risky business: the cost-containment provisions in the Clinton plan led to fears of rationing. And the gatekeepers and referral requirements of managed care led to one horrific anecdote after another on the floor of the House last week about dying children and heedless bureaucrats on the other end of the phone.

Some experts worry that the managed care revolution has already squeezed out the easy savings. "I've thought for many years that there was an underlying upward trend in medical spending because of the increase in new capabilities in medicine, which we're now seeing fairly dramatically in pharmaceuticals," said Joseph Newhouse, a professor of health policy and management at Harvard. He suggested that after "some one-time gains from the managed care revolution" that upward trend may be reasserting itself.

Rising health care costs, of course, can have a direct effect on the number of uninsured. And higher costs can raise profound questions of equity; for example, Congress is currently struggling with the fairness of a Medicare program that lacks prescription drug coverage, just when the pharmaceutical revolution offers immense promise for many of the ills of old age.

The complex, interlocking nature of these issues pushed the Clinton Administration -- and many other health planners, for that matter -- to go for a grand, comprehensive plan. Working on these problems with incremental measures, step by step, is harder, some health planners say, but is probably all the political system can handle.

Families USA, a consumer group, and the Health Insurance Association of America plan to convene a conference of past combatants to try to seek common ground on the uninsured. Ms. Steelman, a lobbyist and longtime Republican adviser, said of the larger struggle: "This isn't about one big-bang theory. This is about trying to balance costs and needs and rights. It's the crucible of American politics. It's where it all comes together."

Advocates for the uninsured take heart from the fact that, at the very least, the eerie political silence around 44.3 million Americans is breaking.
 

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GRAPHIC: Photo (The Stock Market)

Chart: "The Uninsured: Who Are They?"
An estimated 44.3 million people, or 16.3 percent of the United States population, had no health insurance in 1998. Shown is the percentage of selected groups who are uninsured.

Age

Under 18 -- 15.4
18 to 24 -- 30.0
25 to 34 -- 23.7
35 to 44 -- 17.2
45 to 64 -- 14.2
65 and older: -- 1.1

Race/ethnicity

Non-Hispanic/white -- 11.9
Black -- 22.2
Asian -- 21.1
Hispanic origin -- 35.3

Education

No high school diploma -- 26.7
H.S. grad., only -- 18.3
Some college -- 15.9
Assoc. degree -- 12.3
Bachelor's degree or higher -- 8.5

Work experience

Worked sometime during year -- 18.0
Worked full time -- 16.9
Worked part time -- 23.2
Did not work -- 27.0

Place of birth

U.S. born -- 14.4
Foreign-born -- 34.1
Naturalized citizen -- 19.2
Not a citizen -- 42.9

(Source: Census Bureau)(pg. 16)

LANGUAGE: ENGLISH

LOAD-DATE: October 10, 1999
 
 

SECTION: Section B; Page 1; Column 5; Metropolitan Desk

LENGTH: 1260 words

HEADLINE: Length of Stay Is a Target For H.M.O.'s

BYLINE:  By JENNIFER STEINHAUER

BODY:
   More and more managed care companies in the metropolitan area are refusing to pay for one or more days of patient hospital stays as a way to increase their own profits, hospital administrators say.

The Greater New York Hospital Association, a trade group representing area hospitals, has asked the State Attorney General's office to look into the practice, known in the industry as a "day carve-out."

Hospitals say that managed care companies most often refuse payment for the last day of a patient's stay, but that they also apply the practice to days mid-stay if they deem that the time was spent inefficiently. Payment may be denied, for example, for an entire Sunday during a stay that began on a Thursday and ended on the subsequent Tuesday, because no tests or significant procedures occurred that day.

While the costs cannot by law be passed on to patients, the hospitals maintain that this trimming in reimbursement rates is hammering away at their profits and taking up hospital workers' time with clerical tasks, both of which could undermine patient care.

Administrators also point out that the carve-outs are done after a retrospective review -- an evaluation of a patient's hospital stay after it has ended, instead of as it goes along.

"This activity has been just phenomenal," said Kenneth E. Raske, president of the Greater New York Hospital Association. "The hospital and doctor frustration levels are rampant."

The trade association and hospital administrators said that the practice of day carve-outs had increased substantially in the last nine months, accounting for as much as 30 percent of days submitted for billing. A year ago, that figure was closer to 5 percent, they said.

"We are working with the hospitals, reviewing the claim information to determine whether any improper activity is occurring," said Marc Violette, a spokesman for the Attorney General's office. "We are concerned about it."

Insurance companies, while acknowledging the increase in day carve-outs, counter that New York hospitals are woefully inefficient and need to learn to do things like surgery and diagnostic tests more quickly and on weekends.

"We have found an acute increase in the number of denied days," said Dr. Marjorie Schulman, a medical director for Aetna Inc. "This points out how much further behind the New York market is in getting with the program and becoming efficient."

"Surgeries are not taking place on weekends," Dr. Schulman added. "Diagnostic tests are not being done on weekends and after hours -- most metropolitan regions are doing this. The payers are not disputing the need for patients to be in the hospital. What we are trying to apply are nationally recognized guidelines of what constitutes acute care."

As with all things connected with managed care, New York is coming to the day carve-out situation late, health care experts said. While states like California have seen managed care companies trim days for several years, New York is just starting to feel the squeeze. This is because of the combination of a relatively new payment system in New York and of increasingly aggressive techniques among insurance companies all over the country, experts said.

In 1997, under deregulation of the New York hospital system, New York changed its way of doing business with all insurers. Under the old system, the hospitals were reimbursed by diagnosis, getting a set amount, for example, for cardiac surgery and another for a Caesarean birth. The number of days a patient stayed in the hospital was irrelevant.

Under the new system, hospitals are paid per diem. "It dawned on all the payers that if you can lop off days of stay, you can save megabucks," Mr. Raske said.

Health care experts outside New York said that while the day carve-outs were motivated many years ago by rampant hospital abuses -- admitting patients on Friday for procedures that would not be done until Monday to gather their own "megabucks" -- the practice may be gaining disturbing momentum.

"Some hospitals believe that some payers are automatically not paying the last day," said Douglas A. Hastings, a health care lawyer for Epstein Becker & Green in Washington who has represented both insurance companies and health care workers. "We got day lengths down to about as far as we can squeeze them, and some have gotten to point of wondering if you can squeeze any more."

The trimming of days seems as random as it does rampant, hospital executives say. No particular diseases or procedures are chosen for the carves more frequently than others, and hospitals staffs agreed that all of the region's major insurance companies -- Aetna, Oxford Health Plans, Cigna and Blue Cross and Blue Shield -- seem to use the practice regularly.

And large and small hospitals alike are seeing it. At Montefiore Medical Center in the Bronx this year, for instance, a woman with a history of heart problems was being prepared for outpatient surgery but developed severe stomach pains. She was admitted to rule out a heart attack, and it was determined the next day that she needed an appendectomy.

The insurer, which the hospital declined to name, citing legal issues, carved out the first day, contending that the pain evaluation should have been done without the overnight stay. The decision was reversed six months later after an appeal.

At Sisters of Charity Health Care on Staten Island, a woman went through the emergency room one recent Sunday, bleeding from her colostomy bag. The plan was to give her an internal exam the next day, but she was admitted for the preparation and given fluids that seriously needed replenishing, said Susan Hansen, administrative director of clinical resources at the hospital.

"Should we have sent a 91-year-old woman who needed an IV home and had her do her own bowl prep?" Ms. Hansen asked.

At New York University Medical Center, a young Wall Street executive with a terminal brain tumor had the last day of his three-day stay carved out because the insurance company believed it was medically unnecessary, said Dr. Michael Gruber, head of neuro-oncology there.

"They are carving out days on the sickest patients," Dr. Gruber said.

The tension between hospital and insurance company administrators has become so intense in recent months that insurance companies have been forced to change some of the ways they do business. At Oxford, for instance, retrospective reviews were stopped altogether in August, said Dr. Alan Muney, the company's chief medical officer.

Payers constantly berate hospitals for not providing timely information, but hospitals (and often patients) counter that getting a live human on the phone at a health maintenance organization is often akin to winning the state lottery.

Executives at H.M.O.'s also argue that keeping a patient in the hospital longer than necessary ultimately exposes him or her to more health risks, so pushing hospital efficiency is all the more important. While some experts agree with that theory, they doubt that it is the motivating factor of day carve-outs, or of hospitals learning to do more services at odd hours.

"There are two sides to this," said Robert I. Field, the director of the graduate program on health policy at the University of the Sciences in Philadelphia. "I do think that insurers have gotten people out of the hospital faster. But to the extent hospitals increase the times they do surgery, it is to increase volume. The implications that they are increasing quality of care is probably not the case."
 

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LOAD-DATE: October 19, 1999
 
 

SECTION: Section A; Page 1; Column 6; National Desk

LENGTH: 1008 words

HEADLINE: MORE AMERICANS WERE UNINSURED IN 1998, U.S. SAYS

BYLINE:  By ROBERT PEAR

DATELINE: WASHINGTON, Oct. 3

BODY:
   The number of Americans without health insurance rose last year by 833,000, to 44.3 million, despite a strong economy and a new law intended to provide coverage for children, the Census Bureau reported today.

The ranks of the uninsured have grown by more than 4.5 million since President Clinton took office in 1993, promising health insurance for all Americans.

Since the failure of Mr. Clinton's effort to have Congress approve a comprehensive health care proposal in 1994, the President and Congress have agreed on a series of incremental laws intended to expand coverage. But health policy experts say the continued increase in the number of the uninsured raises questions about the effectiveness of that strategy.

The Census Bureau report comes just three days before the House is scheduled to take up legislation defining a range of new patients' rights.

Many Republicans, insurance companies and business groups have opposed such legislation, saying it would raise premiums and contribute to further increases in the number of uninsured, a contention disputed by many Democrats.

At the same time, the plight of the uninsured is emerging as a major issue in the 2000 Presidential campaign, with former Senator Bill Bradley calling for a renewed commitment to providing every American with access to coverage.

The Census Bureau said 16.3 percent of Americans did not have health insurance last year. That figure, the highest in a decade, was up slightly from 16.1 percent in 1997.

In households with annual incomes of $50,000 or more, the number of people without health insurance increased 1.7 million last year, to 12.2 million, the bureau said.

"This is a troubling trend," said Chris Jennings, the health policy coordinator at the White House.

The data for 1998 are somewhat surprising because the economy was vibrant, family income was up, the unemployment rate was at the lowest level in nearly three decades and employers were competing for workers in many parts of the country.

Health policy experts gave several possible reasons for the increase in the number of uninsured.

Some employers have cut health benefits for employees or their dependents. Many employers still offer coverage but require employees to pay more, and many low-income workers say they cannot afford the premiums. Most of the jobs created in the last few years are in small businesses, which are less likely to offer health benefits. Finally, many people leaving welfare have lost Medicaid coverage without getting any insurance to replace it.

The Census Bureau found that the number of women without health insurance rose last year by 947,000, to 21.3 million, while the number of men without coverage declined by 116,000, to 23 million. In the last five years, the bureau said, the number of women without insurance has increased by 3.2 million, while the number of uninsured men rose 1.4 million.

In 1997, Congress created a special health insurance program for children, and Mr. Clinton has repeatedly prodded Federal and state officials to enroll eligible children.

But the Census Bureau said the number of children under 18 without health insurance increased last year by 330,000, to 11.1 million, following a rise of 188,000 in 1997. The proportion of children without insurance also rose, to 15.4 percent in 1998, from 15 percent in 1997.

The increase was most notable among poor children under the age of 6. The proportion of such children without insurance climbed to 23.6 percent last year, from 20.1 percent in 1997, the bureau said.

Cuts in the Medicaid rolls appear to be one reason for the increase. The number of people with Medicaid coverage dropped by 1.1 million last year, to 27.9 million, after falling by 2.5 million in 1997, the Census Bureau said.

Jennifer A. Campbell, the main author of the Census Bureau report, said, "Medicaid was the most widespread type of coverage among the poor, with 40.6 percent of all poor people covered by Medicaid at some time" in 1998.

"This percentage is down significantly from the previous year, when 43.3 percent of poor people were covered by Medicaid," Ms. Campbell said.

Most poor children are eligible for Medicaid. But the number of poor children with such coverage declined by 766,000 last year, to 7.8 million, after falling by 501,000 in 1997, the bureau said.

Administration officials say they believe that some recipients of Medicaid do not realize they have coverage and did not report it when interviewed by the Census Bureau.

Overall, poverty declined and incomes rose last year. (A family of four was considered poor if it had an income of less than $16,660.) But nearly one-third of poor people, 11.2 million of the 34.5 million in poverty, had no health insurance, the Government said.

About 5.6 million people worked full-time last year and were still poor. About half of them -- 2.7 million, or 47.5 percent -- had no health insurance.

Among various racial and ethnic groups, Hispanic Americans were the least likely to have health insurance. The Census Bureau said 35.3 percent of Hispanic residents were uninsured, compared with 22.2 percent of blacks, 21.1 percent of Asian-Americans and 11.9 percent of non-Hispanic whites.

More than seven million of the people without health insurance are not United States citizens, the report said. Nearly 43 percent of the 16.6 million noncitizens are uninsured.

Using the average for 1997 and 1998, the Census Bureau reported that 24.5 percent of Texas residents were uninsured, the largest proportion for any state. Hawaii, with 8.8 percent, had the smallest proportion.

Arizona also had a high rate, with 24.3 percent of its people uninsured, while the proportion without coverage was small in Minnesota (9.2 percent) and Wisconsin (9.9 percent).

The proportion without health insurance was well below the national average in Connecticut, where 12.3 percent were uninsured.

The figures were slightly above the national average in New York (17.4 percent) and New Jersey (16.5 percent).

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LOAD-DATE: October 4, 1999