Document 0geaRDZOOKGLwaov5k78JMQ4V

HEALTH / PAC Health BULLETIN BULLETIN BULLEPTolIicNy Advisory Center 1 PS ROS: A LITTLE TOE IN THE DOOR. The U.S. gov- ernment makes its first foray into regulating medical practice and costs. 8 Southern Empire: HOT HANDED - DUKE. Duke University nur- tures a medical empire while the health needs of Durham go unattended. 20 Peer Review 21 Vital Signs No. 59 July August / 1974 c S Q HEW 8.Plymp PSROS A LITTTOEL E Its potential to improve the quality of IN THE medical care in this country is virtually un- DOOR limited, " says Dr. Henry E. Simmons, Director of the Office of Professional Standards Re- view of the Department of Health, Education and Welfare (HEW). It's " the beginning of the end of the private practice of medicine as we know it in this country, " says Dr. Jos L. Garcia Oller, President of the American As- sociation of Councils of Medical Staffs of Private Hospitals. Both gentlemen are talking about Professional Standards Review Organ- izations, commonly known as PSROs, a form of peer review attached to the Medicare and Medicaid programs by the 1972 Amendments to the Social Security Act. In the short run, the hopes and fears reflected by these assess- ments are probably unjustified, for in the short run the program is destined to have a greater effect on the practice of computer technology than it will have on the practice of medicine. From a longer - range perspective, however, PSROs represent a landmark and possibly a precedent, as the first attempt of the federal government to contain the escalating costs of federally funded health care by interven- ing in the practice of medicine. While the at- tempt has to date been largely emasculated in the process of legislation and implemen- tation, the program may in the future become the basis for more direct federal intervention in health care if and when enactment of national health insurance sends health - care costs on another upward spiral. Physician Control As Cost Control In fiscal 1966 - the last fiscal year before implementation of Medicare and Medicaid on July 1, 1966 - the total American health bill was slightly over $ 42 billion, representing 5.9 percent of the gross national product (GNP). By fiscal 1973, health - care costs had risen to slightly over $ 94 billion, representing 7.7 percent of the GNP. The total dollars coming from the public till for health care increased from $ 10.8 billion to $ 34 billion in the same period, and the anxieties of administrators and legislators increased proportionately. (The Senate Finance Committee report ac- companying the PSRO legislation lamented that the cost of Medicare was then expected to overrun the estimates made in 1967 by $ 240 billion over a 25 year - period.) By providing a public subsidy for a largely private health - care system - in particular, by promising hospitals reimbursement of the " reasonable cost " of treating a patient- Medicare and Medicaid had of course made it financially rewarding for the system to pro- vide more units of care at a greater cost per unit. Safeguards against overutilization were rather rudimentary - hospitals serving Medi- care patients were required to have in house - utilization review committees, and fiscal in- termediaries and carriers were expected to review individual claims and reject those for uncovered or unnecessary care. In Medicaid, the individual state Medicaid agencies were admonished to establish mechanisms to safe- guard against unnecessary utilization of 2 services. By 1970 concern in government circles over the obvious inadequacy of these mechan- isms as cost containment - measures was great enough for HEW to ask Congress for authority to establish so called - program re- view teams of professionals and consumers at the state level to evaluate cost and utiliza- tion of federally funded services and identify areas of abuse. The American Medical Asso- ciation (AMA) reacted with a counterpro- posal for so called - peer review organizations, to be established by state medical societies, to do the job. This notion came to the atten- tion of Sen. Wallace F. Bennett, a conserva- tive Republican from Utah and the ranking minority member of the key Senate Finance Committee. He proceeded to adapt the AMA proposal to a model more closely resembling the review systems in use by doctor - spon- sored foundations for medical care (see BUL- LETIN, February 1973). The Bennett Amend- ment was unsuccessfully introduced in 1970 but succeeded in navigating the murky legis- lative waters of 1972's HR 1 to become part of the mammoth 1972 Social Security Amend- ments, now known to the cognoscenti as Pub- lic Law 92-603 (see BULLETIN, May, 1973). The Senator's strategy, reflecting his anti- interventionist inclinations, was to conduct a rear guard - action aimed at warding off di- rect government interference with the prac- tice of medicine by establishing a privately controlled mechanism for containing run- away government costs. He touted his amendment on the Senate floor as " the best, and perhaps the last, opportunity to fully safeguard the public concern with respect to the cost and quality of medical care while, at the same time, leaving the actual control of medical practice in the hands of those best qualified America's - physicians. " A New Kind of County Medical Society America's physicians under Sen. Bennett's amendment are to construct the guts of the PSRO review system by creating - in 203 lo- cal areas throughout the country, designated by nonprofit HEW - , tax exempt - incorporated membership organizations, with boards of di- rectors, staff and an elaborate committee structure, and with membership open, with- out dues, to all (and only) licensed doctors of medicine and osteopathy practicing in their designated area. Having come into being and having persuaded HEW of their ability to carry out a PSRO's legally mandated func- tions, such organizations will enter into agreements with HEW whereby they will re- ceive formal recognition as the PSRO for a given area. Should an area's practicing phy- sicians balk at carrying out this statutory scenario, the law permits HEW after January 1, 1976 to recognize another qualified agency or organization - say, a medical school, local health department or insurance company- as that area's PSRO. The functions and powers of PSROs are a case of the legislative right hand giving and the left hand taking away. The giving part of the equation comprises a legislative directive to PSROs to ensure that health care paid for under Medicare, Medicaid and the Maternal and Child Health program is medically nec- essary, consistent with professionally recog- nized standards of care and provided in the least costly possible setting. They must ar- range for the maintenance and review of pro- files of practitioners, providers and patients. They have the authority, should they care to exercise it, to review in advance elective ad- missions to hospitals or other institutions. A PSRO's standards for review are to be " pro- fessionally developed norms of care, diag- nosis, and treatment based upon typical pat- terns of practice " in its geographical area. Provisos and Qualifications This impressive - sounding scope of author- ity becomes much less so when one delves into the statutory fine print, where one finds a couple of sleeper clauses that render the law's net effect much less than meets the eye. One such provision limits the functions of a PSRO to " the review of health care services provided by or in institutions, " except in the unlikely event that the PSRO requests HEW to charge it with the duty of reviewing non- institutional care and HEW grants the re- quest. (This limitation, it must be said, was not Sen. Bennett's idea but somehow appear- ed when the bill emerged from a Senate- House conference committee.) The other limiting provision, which the staff of the American Hospital Association (AHA) takes credit for inducing Sen. Bennett to include, requires PSROs to use the services and accept the findings of in house - review committees established by a hospital or other facility, provided that such committees have demonstrated their capacity to perform PSRO - type review. HEW's PSRO Program Manual advises hospitals that if they have beat their local PSRO to the punch in the de- velopment of the criteria, standards and norms required for the performance of re- quired review activities, they may go ahead and use these parameters at least until the PSRO has established committees for their development, at which point those commit- tees may accept the hospital's parameters or require changes. (This is known in the trade as a word to the wise, and the AHA has heard it, of which more later.) Just as PSROs are designed to insulate the medical profession generally from outside. intervention, this delegation provision is de- signed to insulate the medical staffs of par- ticular hospitals from outside intervention, even by other physicians. Assuming that the hospitals in a given area take advantage of the opportunity thus to protect themselves from PSRO review, the concrete functions of the PSRO itself are limited to the occasional monitoring of hospitals'review mechanisms and the collection of data. (For a description of the operation of the particular review mechanisms required of a PSRO or hospital under HEW's interpretation of the law, see box page 4.) The Toothless Giant Legislators and administrators are unani- mous in their view that the intended effect of the PSRO legislation on an erring practi- Published by the Health Policy Advisory Center, 17 Murray Street, New York, N.Y. 10007. Telephone (212) 267-8890. The Health / PAC BULLETIN is published 6 times per year: Jan./Feb., Mar./Apr., June May /, July Aug /., Sept./Oct. and Nov./Dec. Special reports are issued during the year. Yearly subscriptions: $ 5 students, $ 7 other individuals, $ 15 institutions. Second - class postage paid at New York, N.Y. Subscriptions, changes of address and other correspondence should be mailed to the above address. New York staff: Barbara Caress, Oliver Fein, David Kotelchuck, Ronda Kotelchuck, Louise Lander and Howard Levy. San Francisco staff: Elinor Blake, Thomas Bodenheimer and Carol Mermey. San Francisco office: 558 Capp Street, San Francisco, Cal. 94110. Telephone (415) 282-3896. Associates: Robb Burlage, Susan Reverby, Morgantown, W. Va.; Constance Bloomfield, Desmond Callan, Nancy Jervis, Kenneth Kimmerling, Marsha Love, New York City; Vicki Cooper, Chicago; Barbara Ehrenreich, John Ehrenreich. Long Island; Judy Carnoy, San Francisco. BULLETIN illustrated by Bill Plympton. 1974. tioner is to be educative rather than punitive. In the words of an HEW pamphlet, PSRO- Questions & Answers, " If a physician's pat- tern of practice indicates that he is deliver- ing excessive or insufficient health care or otherwise improperly treating his patients, his peers in the PSRO will advise the physi- cian and recommend appropriate remedies, such as professional consultation and educa- tion. Only in rare cases would sanctions provided by law be imposed... " Those sanctions initially provide that no Medicare or Medicaid payments may be made for services that have been " disap- proved " by a PSRO or in hospital - review sys- tem. (It seems safe to assume that an in hos- - pital medical staff committee will be reluc- tant to reduce the income of a colleague or the hospital.) More generally, if a PSRO de- termines that a practitioner or provider has furnished or ordered care that was not med- ically necessary or in accordance with pro- fessionally recognized standards, it is to give the offender " reasonable notice and oppor- tunity for discussion, " following which it may invok an elaborate review mechanism that involves sending a report and recommenda- tion to the Statewide Professional Standards Review Council to be established in states with three or more PSROs, thence (with the The Nuts and Bolts of Talking Talking about health care review initially requires introducing the jargon. To begin with, review may be prospective, concurrent or retrospective. That is to say, the case may be looked at prospectively, or before care is rendered (should this patient be hospitalized or treated as an outpatient?), concurrently, or while care is being rendered (should this patient have been admitted to the hospital and, if so, for how long?) and retrospectively. or after care has been rendered (was this patient, now discharged from the hospital, properly cared for?). The bulk of the activities of a PSRO or (of an house in - hospital re- view mechanism operating under the law's delegation provision) are concerned with concurrent review of hospital care. The benchmarks of review, in the terminology of HEW's PSRO Program Manual, are norms, standards and criteria. Norms are statistical measures of usual performance e.g., the average length of stay for a term delivery without complications in a given geograph- ical area is five days. Standards are " professionally developed expressions of the range of acceptable variations from a norm or criterion. " Criteria are " predetermined elements against which aspects of the quality of a medical service may be compared. " which are to be " developed by professionals relying on professional expertise and on the profes- sional literature. " Sample sets of norms and criteria are to be adopted by the National Professional Standards Review Council, a body of 11 physicians see (box page 16), and provided to PSROs, which in turn are to establish specialty committees for development of parameters reflecting local practices, either through modifications of the national samples, selection of others already existing or development of their own. (How HEW's gobbledy- gook definitions will translate into something concrete concerning medical care remains to be seen; none of the parameters in question, even at the level of national samples, has yet been published.) The PSRO (or hospital) activities that these norms, standards and criteria are used for comprise concurrent admission certification and continued stay review, restrospec- tive medical care evaluation and analysis of hospital, practitioner and patient profiles. What concurrent admission certification concretely means is that someone perform- ing what is known as the screening function, probably a nurse with the title of review coordinator, examines the patient's chart within a day of admission with reference to a set of criteria specifying indications for admission (e.g., acute myocardial infarction). If such indications appear, the patient's admission is certified as being medically neces- Council's comments and recommendations) to the HEW Secretary. If the case is sufficiently outrageous (the law uses language like " grossly and fla- grantly violating " the law's obligations), the Secretary may temporarily or permanently disqualify the practitioner or provider from Medicaid or Medicare reimbursement or may require him, her or it to cough up the cost of the unnecessary or improper services or $ 5,000, whichever is less. (The practitioner or provider is afforded a panoply of rights to reconsideration, review and, in some cases, judicial review whenever an adverse deter- mination comes down.) Between the cumber- someness of the mechanism, the professional ethos of the medical profession and the insu- lation from PSRO oversight of in hospital - re- view committees, it's unlikely that the Secre- tary will be overburdened by recommenda- tions that the law's sanctions be invoked. The Combatants Come Out of the Woodwork Before the ink was dry on the PSRO legis- lation, the major contending forces on the health - care scene organized - medicine, organ- ized hospitals, foundations for medical care and Blue Cross / Blue Shield - had begun ma- neuvering to shape the implementation of the Professional Standards Review sary and the patient is assigned an initial certification period based on length - of - stay norms, probably the median length of stay for patients in the area with the same diag- nosis and age. This ( means that Medicare or Medicaid reimbursement is assured for at least that length of stay.) If admission does not appear to the screener to be medically necessary, a physician reviewer is brought into action; he must notify the attending physician within two work- ing days of admission to give the latter an opportunity to present his case before the final determination is made as to whether the admission was medically necessary. If the final determination is against admission, the Manual requires that the review committee verbally notify the attending, the patient and, in a Medicaid case, the state Medicaid agency within two working days following admission. (The thought occurs that if the review mechanism doesn't function that speedily, the admission may end up being deemed medically necessary.) Over time, the PSRO or (hospital) may identify hospitals, physi- cians or diagnoses that no longer require admission certification. Certification of emer- gency admissions may be performed on a random basis. What continued stay review concretely means is that the review coordinator period- ically checks on the patient's need for continued hospitalization, starting on or before the day initially assigned during admission certification. If the criteria being used indi- cate that further stay is justified, the reviewer assigns another certification period. If further stay appears unjustified, the case is again referred upward and the attending physician again consulted. If the final review decision is against further stay, the hospital, the attending, the patient and, if appropriate, the state Medicaid agency are notified; notifica- tion must take place prior to the expiration of the certified period " except under unusual circumstances. " As with admission certification, the PSRO (or hospital) may over time identify hospitals, physicians or diagnoses that no longer require continued stay review. In addition to these activities, each PSRO or hospital is required to have at least one medical care evaluation study going at any given time. These are retrospective in depth - reviews, usually based on data relating to the care provided a number of patients by a number of practitioners and " focusing on particular potential problem areas. " The results, the Manual admonishes, " should be used by a hospital or PSRO in the development of curriculum for and in the monitoring of the effectiveness of its continuing education efforts. " program so as to maximize the advantage, or at least minimize the disadvantage, to their respective constituencies. Their initial battle- ground was HEW itself, the battle being over the locus within the massive agency of final authority over PSROs. One possibility was the Office of the Assistant Secretary for Health, a result the AMA lobbied for because that post is one it has some influence in fill- ing. The other option was the Bureau of Health Insurance of the Social Security Ad- ministration, which administers Medicare and which the AHA favored because it has developed good working relations with that branch of HEW. Internal bureaucratic machinations were the main preoccupation of the agency that was supposed to be putting the PSRO show on the road from the law's enactment in Oc- tober 1972 until April 1974, when a Memo- randum of Understanding was negotiated by the warring parties with some prodding from their congressional overseers on the Senate Finance Committee, who had complained to HEW Secretary Caspar Weinberger that PSRO implementation was getting nowhere. The terms of the truce place overall direction of the program, including formulation of policy, in the Office of the Assistant Secre- tary, while directing the Bureau of Health Insurance to develop and implement operat- ing procedures relating to such matters as de- velopment and oversight of the PSRO budget and reimbursement system and coordination of data collection. " American physicians wel- come PSRO with the kind of enthusiasm usually reserved for a major epidemic. " -Medical Opinion December 1973 Needless to say, conducting a civil war had somewhat handicapped HEW in making the PSRO program a concrete reality. It barely made the statutory deadline of Janu- ary 1, 1974 for designation of PSRO areas, publishing proposed designations of such areas in the Federal Register of December 20, 1973 and final designations on March 18, 6 1974. Its first set of final PSRO regulations didn't appear until May 7, and these dealt solely with the procedural niceties of desig- nation of PSROs. As to regulations governing the substantive operations of a PSRO, HEW has to date only managed to produce the first seven chapters of a projected 17 chapter - PSRO Program Manual (issued March 15, 1974), which are described by HEW as only " interim'guidelines. " The Great Boundary Dispute For the AMA, the locus of final PSRO au- thority within HEW wasn't the only question of program implementation affecting its con- stituency; equally important was the ques- tion of how the lines would be drawn deline- ating the PSRO areas to be established throughout the country. Geography may seem like a dull subject, but when it has a di- rect connection with control it acquires inter- est. Control for the AMA meant the maxi- mum possible number of PSROs constituting entire states, for the simple reason that such boundaries would coincide with those of a state medical society, which would then be in a position to spawn a companion organiza- tion without dues that would qualify as a PSRO. (County medical societies outside of New York City weren't of much help, the number of doctors in most single counties not being sufficient to fill the PSRO minimum of 300.) HEW took the position that it would desig- nate statewide areas only in states having fewer than 3,000 physicians. In this stance the agency was backed by Sen. Bennett, who insisted that local review of local med- ical practice was the whole point of the PSRO concept. (The law itself speaks only of " ap- propriate areas, " although the Senate Fi- nance Committee report speaks of the ad- vantages of local sponsorship and operation of PSROs.) The AMA then tried to sell HEW the idea of awarding contracts to statewide organiza- tions in large states, which in turn would subcontract with, and funnel funds to, local PSROs for the conduct of review activities under statewide supervision. HEW compro- mised by creating the concept of statewide PSRO support centers to provide technical assistance to local PSROs within the state; existing state organizations, it was indicated, would be welcome to apply for federal fund- ing for this purpose. (The concept's legal base rests, somewhat shakily, on the law's directive to HEW itself to provide technical assistance to PSROs.) Thus compromised, HEW published pro- posed area designations in December includ ing 26 states and the District of Columbia as single PSRO areas. The final designations, published in March - after a period for com- ment that the AMA unsuccessfully sought to PSRO extend through April added - Georgia and Washington, both states with over 5,000 phy- sicians, to the statewide list. In April HEW awarded its first contract to a statewide sup- port center, a $ 250,000 grant to the Pennsyl- vania Medical Care Foundation for the pur- pose of stimulating creation of PSROs in the state and helping them develop review pro- cedures. Applications for support center grants had been received from 13 of the re- maining 21 eligible states by the April 30 application deadline for fiscal 1974 funding. Organized Medicine Disorganizes AMA FMC BLUES The general stance of the AMA leadership toward PSROs - and originally the official policy of the Association - has been one of ac- ceptance of the legislation, with a view to- ward having a hand in its implementation and working for ameliorating amendments. Shortly after the law's passage the Associa- tion formed an Advisory Committee on PSROs with eight task forces and reportedly at one point had more people working on PSROs than HEW. The AMA rank and file, however regrettably for the sake of organi- zational unity includes - physicians, largely from places like Southern California, the South and the Midwest, who are intent on re- peating the battle of Medicare. These ele- ments succeeded in muddying the waters at the December 1973 meeting of the 244 mem- - ber House of Delegates, held appropriately at Disneyland in Anaheim, California. The Board of Trustees presented the dele- gates with a report observing that repeal of the law was an unrealistic prospect but that amending it was within the realm of possibil- ity and recommending that the Association " continue to exert its leadership " in imple- menting the law, while pushing for its amendment and attempting to take part in drafting its regulations. The heated debate that followed climaxed with the introduction of an amendment to the report put forth by the ultraconservative Association of Amer- ican Physicians and Surgeons and a coalition of state medical societies. Adopted by the House, along with the rest of the Trustees ' document, the amendment states that " the best interests of the American people, our pa- tients, would be served by repeal of the pres- ent PSRO legislation. " The Trustees and the Council on Legislation are instructed to " work to inform the public and legislators as to the potential deleterious effects of this law on the quality, confidentiality, and cost of medical care. " " (Continued on page 14) 7 ' ;" " " " upton Southern Empire COOL D HANDED urham, North Carolina, has one of the DUKE highest venereal disease rates in the coun- try. The fetal death rate is nearly twice the national average. People in Durham are not very healthy, and all indications point to their getting less so. The health problems of Durham are not due to a lack of doctors or facilities. In fact, health is the leading industry in the city. More than 9,000 people in this city of 135,000 are employed by health institutions. Together the three general hospitals have 1,141 beds. Durham County also has lots of specialized medical services. It has four times the ratio of radiologists to population as the average for the rest of the country, five times that of neurosurgeons, three times the ratio of psy- chiatrists and six times that of orthopedic sur- geons. However, the area has only one- seventh the ratio of general practitioners to 8 population as the country as a whole. A 1973 study sponsored by the Health Planning Council of Central North Carolina documented Durham's priority health needs as emergency services, preventive health programs and accessible primary care. The study reported that " there appears to be no need to increase the number of beds to serve Durham residents. " Undaunted, Durham's powers that be are about to add 250 more beds at two new hospitals, a new medical research center and more specialists per capita. Not surprisingly, these plans coincide with the priorities of Duke University. And according to Terry Sanford, Duke's Presi- dent, " Our University can only be great with a great Medical Center. " The crown jewel of this complex is to be a brand - new, sparkling $ 91 million hospital. Duke University was created by the family of Washington Duke, founder of the Amer- ican Tobacco Company. Mr. Duke's descend- ants and their various financial interests are intertwined with the expansion of Duke's medical center. Just as American Tobacco grew into one of the largest and richest cor- porations in the country (41st in net profits), so Duke grew into a major university. In order to be a great medical center, Duke needs access to a community hospital from which to draw its teaching material and an academic hospital in which to do its research and make its money. The power structure of Durham has been obliging in both respects. A new community hospital is now under construction, and work is about to begin on the new university hospital. Dukes, Durham and Duke Durham derives its very name from a bit of health enterprising in 1854, when Dr. Bart- lett Durham sold a tract of land to a railroad company. The company set up a very profit- able railroad station, which became an ac- tive trade and commerce center. But it was not until after the Civil War that Durham really began to take the shape of the South- ern city it is today, with the health and tobacco fortunes so closely tied together. In 1865, Washington Duke, together with his two sons, started a tobacco firm which soon became the American Tobacco Company. Along with the Duke factories and ware- houses came the bankers, brokers and builders who together built the foundation of what is today Durham's power structure. Tobacco was not the only booming indus- try of Durham, for it made the banking busi- ness possible. A most important name is that of G. W. Watts, who came to Durham in 1878 as treasurer of the Duke tobacco firm and ventured into banking, laying the ground- work for the Watts family's ties to one of Durham's largest banks today. The local tex- tile manufacturers also ventured into bank- ing, and by the turn of the 20th Century, the banking - tobacco - textile interests had control of Durham and had set the stage for the beginning of the health industry. Trinity College, a small men's school affili- ated with the Methodist Church, moved into booming Durham in 1892. Twenty - two years later it became Duke University as a result of an endowment provided by the James B. Duke Trust Fund, set up to honor one of Washington Duke's sons. Not to be outdone by places like Johns Hopkins, the Duke Hos- pital and Medical School was opened in 1930, bankrolled by one of the largest share- holders in the tobacco company, John D. Rockefeller.. Duke Hospital was the third hospital es- tablished by the Dukes and their compatriots. Durham's first hospital was founded by Dr. A. R. Carr, the brother of a textile magnate. George W. Watts, the tobacco treasurer - turned banker, financed the hospital. Watts Hos- pital, which opened in 1895, remained a seg- regated all white - institution until the mid- 1960's. Around the turn of the Century, ac- cording to local legend, Washington Duke was dissuaded by his butler from building a monument to the slaves who fought with the Confederacy and instead founded Lincoln Hospital to serve the Black population. (The only other hospitals on the scene are for spe- cialized populations - a Veterans'Adminis- tration Hospital, a cerebral palsy hospital and an eye, ear, nose and throat hospital.) Health in the Land of Wealth Lincoln and Watts Hospitals are both old and deteriorated. It has been clear for some time that new facilities are needed. A new hospital that will combine the two old ones into one unit is now under construction. But this $ million 21 - , 500 bed - hospital is not being designed to meet the health needs of Dur- ham's people. Construction of the Durham County Hos- pital is being financed through a local bond issue and federal Hill Burton - funds. Public money, however, does not bring public ac- countability. The hospital's board of trus- tees is self selecting - and represents the elite of the Durham business community and Duke University. Its 15 members include a number of bank directors and the leaders of the insurance and real estate industries; Duke is represented by its architect and former Vice Provost - . (For the full composition of the board, see box page 10.) The site of the new hospital serves the interests of those who sit on its board, not of those who will depend upon it for their care. Durham County Hospital is being built miles away from the center of the city. Although promised when the new hospital opens, there is not now a bus line which travels out to it. The site is in a section of Durham County owned by a leading real estate developer and the city's biggest banker. Together they are promoting nearby suburban residential development. To enhance the attractiveness of the area to the upper and middle classes and maximize the developers'profits, a " medical park " for private practitioners is being built adjacent to the new hospital. The people of Durham are not getting the accessible primary care that the Health Planning Council (HPC) study documented as their number one health need. Most people will have difficulty traveling out to the new hospital. But Duke Medical School couldn't care less as long as its needs are being met. Its medical students will rotate through the hospital; the Medical School will run the de- partment of surgery; and the family med- icine training program, which Duke now op- erates at Watts, will be transferred to the new hospital. And finally, the County Hos- pital's 30 percent " service " beds will func- tion as the receiving end of Duke's policy of refusing admission to persons " when other facilities are available... more appropriate to the patient's financial circumstances. " From Dukedom to Kingdom Long content to be just a quiet monument to J. B. Duke's memory, in the past ten years Duke University has decided to " go na- tional. " This decision represents not only the desire to create an institutional name (the Harvard of the South), but also reflects the ambitions of the men in power at Duke. A growing and powerful institution is an im- portant base for their own personal advance- ment. The University as a whole is in an excel- 9 lent position to grow. Its trustees come from deep within America's ruling elite. Native North Carolina industry is well represented by such giants as Burlington Mills (in the person of Henry Rauch, retired board chair- man), R. J. Reynolds Tobacco Company (Charles Wade, Senior Vice President), Hanes Corporation (Clifford Perry, Treasurer) and the state's largest bank, the Wachovia (pro- nounced " walk over ya ") Bank (three lead- The People's Reps (DURHAM COUNTY HOSPITAL BOARD) George Watts Carr, Jr., President of South- land Association, Durham's largest landlord and member of Chamber of Commerce ex- ecutive board. W. A. Roseborough, retired attorney and well - to - do farmer. Spurgeon Boyce, a director of Central Caro- lian Bank and President of Boyce Supply Company. James Ward, Duke's architect. Frank de Vyver, economics professor at Duke, former Vice President of Erwin Cotton Mills and former Vice Provost - of Duke. Mrs. Joseph Robb, wife of Durham realtor and sister of the President of the Chamber of Commerce, who is also chairman of First Union National Bank Board. A. C. Sorrell, a director of Guaranty State Bank. Frank Kenan, President of Kenan Oil Co. and a director of Central Carolina Bank. Edwin Clements, County Commissioner and owner of Clements'Funeral Home. Howard Fitts, professor of health education at North Carolina Central University. John Stewart, President of Mutual Savings and Loan Association. John Wheeler, President of Mechanics and Farmers Bank, a director of North Carolina Mutual Insurance Co. and a director of Mu- tual Savings and Loan. W. G. Pearson, attorney and a director of Union Insurance and Loan Association. R. C. Foreman, retired executive of North Carolina Mutual Insurance Co. W. J. Walker, Vice President of North Caro- lina Mutual. 10 Ge ing officials). A major financial resource is the Duke Endowment Fund, the world's third largest foundation. The University's national connections are no less prestigious and wealthy. Representa- tives of the Ford Motor Company, Mobil Oil, the Shell Oil Foundation and the Chicago Board of Trade sit on its board, along with two ambassadors from the Rockefeller em- pire John Knowles, formerly of Massachu- setts General Hospital, now president of the Rockefeller Foundation, and Nancy Hanks, a former Nelson Rockefeller assistant and ex- ecutive secretary of the Rockefeller Brothers Fund. A major asset in Duke's climb to national power was the recent acquisition of Terry Sanford as its president. A liberal ex gov- - ernor of North Carolina, Sanford ran for president in 1972, posing as a Southern Jack Kennedy. In addition to his political creden- tials, Sanford is an agile fund raiser. In 1973 he announced an " Epoch Campaign " to raise $ 162 million for the University's en- dowment; as of May 1974, over $ 40 million had been received. A major focus of the University's expan- sion has been its Medical Center. During the past decade, while the Duke budget has tripled, the Hospital's budget has increased at about twice the rate. In 1964 Duke Hos- pital's operating expenses were $ 8.04 million. By 1973, $ 49.24 million was spent with only a 35 percent increase in the number of beds. The man most responsible for the Medical Center's expansion is Dr. William G. Anlyan, Duke's Vice President - for Medical Affairs. Anlyan, a surgeon by training, is no stranger to national health politics. He has been on the executive board of the Association of American Medical Colleges (AAMC) for a number of years and was its chairman in 1970-71. He has also been chairman of the Coordinating Council on Medical Education. He was recently named chairman of the newly formed Association of Academic Health Centers, which claims to speak for the nation's schools of medicine, dentistry, nursing and other health occupations. Close to home, he sits on the Durham board of the Wachovia Bank, an office he assumed just two weeks before a branch office was opened in Duke Hospital. His recent book, The Future of Medical Education, articulates a view of an ideal health system dominated at the top by the academic medical center. Duke's mission, he is fond of stating, is re- search and teaching; patient care is a poor third. The power behind the throne at Duke is J. Alexander McMahon, Chairman of Duke's Board of Trustees. After several years as President and chief operating officer of North Carolina Blue Cross / Blue Shield, he was named President of the American Hospital Association. McMahon served on the Health Services Committee of the Cost of Living Council, which administered President Nixon's Phase II wage - price freeze. McMahon's presence on the Duke Board of Trustees provides the major link between the Duke group, with its national connections and aspirations, and Durham's local power structure. McMahon became the first Presi- dent of a unified Blue Cross / Blue Shield in North Carolina. Before him, the Blues had been a collection of insurance agencies with loose ties to each other. McMahon presided over their merger and coordinated the con- struction of a $ 9 million glass and steel struc- ture in Durham to serve as headquarters for the merged organization. In 1971, as the new building opened, the Blues reported a net loss of $ 5.4 million and announced a 32 per- cent rate increase, all the time insisting that the building and the rate increase were not related. For the past two years the Blues have finished in the black, a record marred only slightly by a lawsuit lodged by the In- ternal Revenue Service for overcharging 40 percent of their subscribers. They were charged with violating 15 pricing guidelines, a " mistake " affecting 650,000 North Caro- linians. It seems that McMahon as head of the Blues was violating the pricing guide- lines he was helping to make in Washing- ton, as a member of the Cost of Living Council's Health Services Committee. The man who brought McMahon to Dur- ham is George Watts Hill, Sr. Founder of the state's Blues, Hill served for 25 years as the Board Chairman of Watts Hospital and for 38 years as Chairman of the Blue Cross Board. Although he retired last year (he's Chairman Emeritus), Hill still goes to the new building and terrorizes employees about such things as his preference for glass ash- trays over plastic ones. Hill is Durham's dominant business man. He controls the city's largest bank (the Central Carolina Bank, CCB), the largest white insurance company (Home Security Life), another bank (Guaranty State), the largest hotel, the largest dairy and the town's railroad. His son sits on the Board of Di- rectors of Southland Associated, Durham's largest landlord. Hill's power in the local health establish- ment is cemented through his benevolent be- stowal of board seats on his banks and / or on the Board of North Carolina Blue Cross / Blue Shield. For example, at the head of the quasi public - body that will run the new County Hospital sits Spurgeon Boyce, a com- pliant member of Hill's CCB board. The di- rector of the hospital is Thomas Howerton, whom Hill proudly boasts he " brought to Durham. " Howerton was given a seat on the Blues'Board. The chairman of Duke's De- partment of Medicine also sits on Hill's bank board. Hill himself is a member of the Re- gional Health Planning Council of Central North Carolina, the local comprehensive health planning agency. He was responsible for the recruitment and hiring of that agency's executive director, George Stock- bridge. The Crown Jewel- Duke's New Hospital No medical empire is complete without its imperial headquarters. All of Duke's power, with its national and local connections, has coalesced around its proposal for a new Duke Hospital. Deciding that 200 of the beds in its existing 800 bed - hospital are obsolete, Duke commissioned a major accounting firm to establish the financial feasibility of a new hospital. It conveniently concluded that the resources were available for the construction of a $ 91 million, 1,000 - bed facility. All 1,000 units will be single - bed rooms, thus further emphasizing Duke's highly specialized in- patient priorities. To provide the operating costs of the new hospital, Duke projects a 73 percent increase in average gross costs a day from - $ 151 to $ 263. This increase, of course, will be re- flected in the Blue Cross premiums paid by local people and in the amounts of public money turned over to the Hospital from Med- icaid and Medicare. Sixty million dollars of the cost of the new hospital is to be raised through long term - debt floated at the local banks. The remain- ing 30 $ million or so is to be obtained from hospital operating funds and private sources. Duke Hospital is freeing up this money in 11 predictable ways. Those services that are most profitable are expanded, and the rest are either constricted or the fee scale is raised. For example, visits to Duke's profit- able private diagnostic clinic have increased 73 percent since 1967, while the public clinics have seen only a 4 percent increase in the same period. Since 1971 the private clinics have continued to grow while public clinics have remained at the 1971 level. In the double - think language of Wallace Jarboe, Director of the University's Office of Project Management, " We are not cutting back on outpatient services. That is the terminology of the auditing firm.... What we are doing is freezing our losses. " Another method employed by Duke for generating funds for the new building is through lowering personnel costs at the ex- isting institution. A hiring freeze has been in effect for many months. A recent memo from the director of employment at the hos- pital, Robert A. Duncan, instructed the deans, department heads and division chiefs that " No one is to be hired for the biweekly pay- roll at a rate above the minimum for the po- sition unless approved by me " and that " new employees may be hired below the minimum " up to 10 percent. Jobs requiring skilled technical people are going to un- trained workers to save money. One reper- cussion of this policy has been three job ac- tions by various categories of employees. The dietetic workers, the microbiology tech- nicians and the data terminal workers have walked out because of low pay and under- staffing. The microbiologists'job action was the most recent and also the most dramatic of the three walkouts. Immediately after they walked off their jobs in late May, Duke Hos- pital suspended them for 30 days. Although there were only six workers in this job cate- gory, they appealed to their fellow hospital employees and were successful in gaining support at rallies and meetings. Because of the extensive coverage in the press, the un- sanitary, overcrowded and _ understaffed Duke labs became a local scandal. Because of the support of other hospital workers, the press coverage and the indispensable na- ture of their work, Duke had to capitulate to the technicians'demands. Three weeks after the walkout began, the microbiologists were reinstated at a higher salary, four more tech- 12 nicians are being recruited and the lab space is being cleaned up and expanded. As Duke increasingly squeezes its employees to raise the necessary money for the new hospital, job actions may become more fre- quent and more militant. Heavy Handed - Duke As Duke Medical School has expanded, so has the opposition of people in Durham to Duke's imperial plans. When the new hos- pital proposal was first announced, a coali- tion of community people and health work- ers formed in opposition to it. Since all new Chinks in The Armor Duke Duke is committed to raising $ 30 million for its new hospital from its own funds. But, according to the hospital accounting firm's financial feasibility study for the new hos- pital, several lawsuits now pending against the medical center might seriously under- mine the solvency of the project. It seems that back in 1966, at the beginning of Med- icaid / Medicare, Duke was a little too anxious to get its hands on the money. The state and federal government are suing Duke for more than one million dollars for overcharging its public patients. The federal government is also after Duke Hospital on another front. It is suing Duke for violating the Fair Labor Standards Act. Duke paid its employees below the minimum wage to the tune of another one million dollars. Duke's potential financial problems extend to yet another area. Several people, con- ceivably over thousands of patients who had been hospitalized or have used the outpatient clinics, have received bills not only for the services they received but also mysterious, unitemized bills from the Private Diagnostic Clinic. None of these people ever used the private clinic or remember making the ac- quaintance of any of the doctors whose names appear on the bills. Litigation is being considered by both individuals and com- munity groups. If all of these suits are successfully lit- igated, Duke is going to have to figure out some other ways to skin the cat. capital construction that is either publicly financed or underwritten must be approved by the local comprehensive planning agency, this coalition was able to voice its disapproval at a public hearing. About 60 people turned out for the first public hearing. The angry audience was made up of lower income - Blacks and whites who depend upon hospital clinics for their primary care, young middle - level employees of Duke Hospital, workers from other Dur- ham institutions and union representatives. The group had been brought together by a Durham health collective - the local chapter of the New American Movement NAM ( ). I. B. Holley, Duke history professor and Chairman of the Project Review Committee of the HPC, presided. When questions about both the financing of and need for the new hospital were raised at the hearing, Holley took the position that " None of the questions raised can be answered here. This is an in- formational hearing and it is not the proper place and time for answering questions. " After two hours of testimony about Durham's priority health problems, the working condi- tions of health workers, the poor quality pa- tient care provided at Duke Hospital and the unanswered questions about financing, the hearing was adjourned. The audience de- manded another hearing, which was reluc- tantly agreed to by the HPC committee. At the second hearing, the committee un- expectedly voted against the Duke proposal. In most other cases a rejection by the com- mittee meant a rejection by the entire Health Planning Council. But, according to George Stockbridge, Director of the HPC, those who voted against the proposal only " wanted more information and assurances for them to support the proposal. " Stockbridge at- tempted to set up a meeting between those who voted against the proposal and Duke officials, but it was called off when, accord- ing to one committee member, word of the meeting leaked out. To make certain it did, leaflets containing this information were dis- tributed by the opposition coalition at all the hospitals and in downtown Durham. But more was in store at the HPC. Within two weeks the HPC's entire board was called to a meeting at the new Blue Cross building. The Project Review Committee had barely time to make its presentation when George Watts Hill, making a rare public appear- ance, made a motion that the project be ap- Tooling Up At Duke Duke Duke will have a new community hospital, a new academic hospital and, thanks to the generosity of Edwin C. Whitehead, Chairman of the Technicon Corporation, a major re- search institute. Mr. Whitehead, who owns more than 90 percent of the medical instru- ments company, announced that his year- long search for an appropriate university to receive his gift had ended. He chose Duke over such other worthy contenders as Har- vard, MIT and Stanford because it is " the ideal environment for a research center. " The Whitehead endowment of the soon - to- be opened - Whitehead Institute is estimated to be in the neighborhood of $ 200 million, making it a close second to the Rockefeller Institute. In making his announcement White- head emphasized that the new institute would concentrate on " oriented purpose -" re- search, concentrating on particular problems and attempting to translate the solutions as quickly as possible into patient care. Mr. Whitehead waxes, " Too much research is stuck off in the laboratory and never sees the light of day. " One can reasonably assume that the translation of research into the light of day will involve the use of sophisticated diagnos- tic instruments. Mr. Whitehead's benevo- lence will most likely be well rewarded. proved. Hill reminded all present that it was he who brought Stockbridge to Durham and his judgment was to be trusted. Although the Council has a 42 member - board, Hill's mo- tion was passed with only 18 voting for and three against. (The rest abstained.) Whatever intimidation and back room - arm twisting Hill applied apparently worked. (One foot- note to all of the above is that every build- ing in which a meeting of the HPC was held to consider Duke's plans is owned, controlled or donated by George Watts Hill, Sr.) The Duke proposal has already passed its second step in the necessary chain of ap- proval. Here again the power and influence of Duke and Company are apparent. Its pro- posal was approved by the Division of Facil- 13 ities Services of the North Carolina Depart- ment of Human Resources. On the board of this agency sits an official of the Duke En- dowment Fund, the tobacco family's major foundation. The health coalition opposing the Duke expansion contacted a state agency official and asked if the agency had seen a copy of the HPC committee report disap- proving the project. The official answered that they had not. He added that there was no recourse at the state level in any event and that all objections regarding the propo- sal now had to be referred to the Department of Health, Education and Welfare. The Duke experience had been a result of that convergence of factors that make for the growth of a medical empire. An impressive array of nationally connected figures has been drawn to Duke to abet and encourage its expansion. There is a local power struc- ture both unified and determined to back up with its money and influence the wide rang- - ing plans of the University - plans that not only put feathers in their caps but also money in their banks. Despite the opposition of community people and health workers, this mixed chorus sings a familiar song - the people be damned. - -Paul Bermanzohn and Tim McGloin. The authors are members of the Durham chapter of the New American Movement (NAM). PSROs (Continued from page 7) A high AMA official, who chose to be un- identified, was quoted after the meeting as observing that the original report and the added - on amendment " appear to have slight contradictions - at the very least. " The Trus- tees subsequently adopted the position that the pro repeal - language of the amendment was " a considered opinion " of the House of Delegates and not a " directive. " Whatever it was, it reportedly led HEW to change its mind about awarding the AMA a contract for running a training institute on PSROS, which had been close to approval before the Ana- heim debacle. As if that episode weren't enough for the destruction of the credibility of medicine's principal organization, the AMA followed it up in March with an information kit titled " PSRO, Deleterious Effects, " which it mailed to 400 state and county medical societies and the 500 members and alternate members of the House of Delegates. The packet included canned editorials and a canned speech on " Exorcising the Devil from PSRO, " all of which contended that the law favors hospital staff and " HMO - type " doctors over private, service fee - for - practitioners; that it will dis- courage individual physician judgment and retard medical progress; that it is too puni- 14 tive and that the PSRO concept is untested. All of this was a bit much for Sen. Bennett, who blasted the kit as representing " new heights of distortion and misrepresentation, exposing the most non professional - and least credible aspects of the American Medical Association. " One HEW official wryly ob- served that " Some people think it [the kit] could have been the best thing to happen to PSRO. It upset those people who were not sure about the program and switched them over to PSROs. " Whether or not the backlash effect had anything to do with it, favorable positions toward PSROs have been forthcoming from such bodies as the American Society of In- ternal Medicine, the American Academy of Pediatrics, the American College of Sur- geons, the American College of Physicians, the Association of American Medical Col- leges and the American Osteopathic Associ- ation. By late spring, HEW officials were be- ing quoted making statements like " Enough doctors are willing to work with the program so that it's no longer an issue whether the AMA backs us up or not. " The AMA thought it was still an issue, however; its Board of Trustees presented an- other report and recommendations to the House of Delegates meeting at the annual convention in Chicago, June 22-27. This time the House, by a lopsided majority, rejected a number of pro repeal - resolutions and accept- ed the Board's position that the Association should " continue on its present course of leadership " in influencing implementation and seeking amendment of the legislation. Foundations Get It Together Unlike the diehards of the AMA, doctor- sponsored foundations for medical care, now numbering well over 100, have been savvy enough to view PSROs as a bandwagon worth climbing on. After all, medical - care foundations were created in that bastion of conservatism, Southern California, as means of keeping out the liberal menace in the form of the Kaiser Foundation Health Plan with its salaried physicians (see BULLE- TIN, February, 1973). Foundations have developed both as health plans (preserving the independence of the solo, free service - for - practitioner) and as review systems, either monitoring their member physicians for unnecessary services or contracting with insurance companies and Medicaid agencies to review claims. The foundation model became the basis of the PSRO concept; the Senate Finance Commit- tee report on the PSRO amendment approv- ingly cites the fact that medical - care founda- tions " have developed patient and practi- tioner profile forms and approval certifica- tion and other review methods which may provide the bases for development of uni- form data gathering and review procedures capable of being employed in many areas of the Nation.'" President Donald Harrington of the Amer- ican Association of Foundations for Medical Care (AAFMC) observed in September, 1973 that " In every instance we know of, medical societies that have formed foundations are relying on them to take the lead in setting PSROs up. " Shortly thereafter, the AAFMC spawned the AAPSRO - the American Asso- ciation of Professional Standards Review Or- ganizations - whose active membership is limited to member foundations of the AAFMC. A two day - conference on PSROs held by the AAPSRO in April drew over 500 registrants eager to learn the ins and outs of how to apply for a PSRO contract and how to comply with the PSRO Program Manual. And among applicants that met the April 30 deadline for fiscal '74 contracts with HEW as statewide support centers, conditional PSROs or groups doing PSRO planning, med- ical care - foundations were prominently rep- resented. Hospitals Play It Cool The hospital establishment was of course responsible for the provision of the PSRO law instructing PSROs to accept the findings of existing in hospital - review committees that can pass muster as doing the kind of review required of a PSRO. In the alphabet soup of the field, the AHA's QAP now floats to the top. The Quality Assurance Program was de- veloped by the AHA while the PSRO legisla- tion was in the works. QAP contemplates two working committees of a hospital's medical staff, operating under the general direction of a QAP committee including trustees and ad- ministrators as well as physicians. A utiliza- tion review committee would run a utilization review program with some or all of five ele- ments preadmission - certification, preadmis- sion testing program, length - of - stay certifica- tion, length - of - stay review and discharge planning. A medical audit committee would develop criteria (criteria that confirm a diag- nosis, criteria for management of therapy and outcome criteria) through which allied health personnel would screen patient charts and refer to the committee for restrospective review patterns of care that do not conform to them. The committee's armament for cor- rective action comprises educational pro- grams for individuals or groups, administra- tive changes and, as a last resort, limitation of physician privileges. Development of QAP mechanisms by its member hospitals is urged by the AHA as " the best safeguard of the voluntary sector. " Acceptance of QAP under the PSRO pro- gram would free the hospital from the risk of retroactive denials of claims for Medicare and Medicaid payments. Ultimately it is an- ticipated that private health insurers would similarly accept QAP in lieu of review of in- dividual claims. This will mean, notes Dr. Thomas Ainsworth, the architect of QAP, that " physicians, not third party - purchasers, will be making all determinations of the medical necessity of care. " It also means of course that the hospital's cash flow will be appreci- ably more certain. A byproduct of all this will be increasing institutional control over the conduct of phy- sicians who practice in the institution. In the euphemistic words of the AHA: " The utility of such a hospital - based quality assurance program is that it enables the board of trus- tees, the administration, and the medical staff 15 to control the quality of care that their hos- And the PSRO Program Manual instructs pital provides. " It conversely gives the short that " Data flowing from the Medicare and end to the little guy who's not a big muck - a- and Medicaid claims process is to be utilized muck in hospital medical staff circles, a fact to the maximum extent possible. " that may partly explain the divergence within the medical profession between those who feel they can live with PSROs and those whose adrenalin flows at their very mention. The AHA has done its work well in selling QAP's virtues to HEW. It has long insisted Meet the that QAP exceeded the requirements of PSRO review, and in March HEW announced Professional Standards that the two programs were compatible. Review Council This may, by the way, have been a bitter pill for the AMA to swallow - the infamous December meeting of its House of Delegates The PSRO law provides for the creation of a National Professional Standards Review passed a resolution in opposition to QAP. Academic hospitals, it should be said, are a little less sanguine than the AHA about PSROs. Their fear is that norms and criteria developed with respect to community hos- pitals may be imposed on their operations, which might cramp their orientation toward the requirements of teaching and research. The Association of American Medical Col- Council of 11 physicians " of recognized standing and distinction in the appraisal of medical practice, " to be appointed by the HEW Secretary. A majority of the members must be physicians recommended by na- tional organizations of physicians; the mem- bership must include physicians recom- mended " by consumer groups and other health care interests. " The law directs the leges (AAMC) has urged that the next revi- Council to advise HEW on the administration sion of the PSRO Program Manual include a statement acknowledging the special cir- cumstances of teaching hospitals and in- structing PSROs to take them into account. And officials of the National Medical Associ- ation have expressed the fear that standards of the program, review the effectiveness of the operation of PSROs and Statewide Pro- fessional Standards Review Councils, spon- sor studies intended to develop recommenda- tions to HEW and Congress for means of more effectively achieving the law's objec- developed with respect to suburban hospitals serving a middle - class clientele may hurt the care of poor patients using inner - city insti- tutions. tives and at least annually submit to HEW and Congress a report of its activities includ- ing the findings of its studies and its recom- mendations. Blues for the Blues PSROs are not such good news for Blue Cross and Blue Shield, which in their capac- ity as fiscal intermediaries and carriers un- der Medicare have made review of claims a big business, much of which is slated to be phased out as PSRO review is phased in. All is not lost, however, for the Blues have some- thing that PSROs need - a sophisticated com- puterized data processing system that would be expensive to duplicate. The Senate Fi- nance Committee report notes that while the Blues will be left out of the responsibility for review, where they " have existing computer capacity capable of producing the necessary patient, practitioner, and provider profiles... on an ongoing expeditious and economical basis, it would certainly be appropriate to 16 employ that capacity " for PSRO purposes. From something like 200 nominations sub- mitted from something like 50 organizations, the Secretary has appointed the following balanced ticket, in alphabetical order: Dr. Clement R. Brown, nominee of the American Hospital Association, Director of Medical Education at Mercy Hospital in Chicago. Dr. Ruth M. Covell, nominee of the Amer- ican Public Health Association, Assistant to the Dean at the Medical School of the Uni- versity of California at San Diego. Dr. Merlin K. DuVal, HEW's own candi- date, formerly HEW Assistant Secretary for Health, now Vice President for Health Sci- ences at the University of Arizona in Tucson. Until his death in March in an auto acci- dent. Dr. Thomas J. Green, the Council's The data question - which represents both money and control - is on its way to becom- ing a battleground between the Blues and the foundations. A delegation from the Blues to Black member, a Detroit surgeon who was a trustee of the National Medical Association and a member of the AMA's Advisory Com- mittee on PSROs. Dr. Robert J. Haggerty, nominee of the Na- tional Urban Coalition Health Project, profes- sor of pediatrics at the University of Rochester Medical School and head of the study sec- tion of the National Center for Health Serv- ices and Development. Dr. Donald C. Harrington, nominee of the Senate Finance Committee, Medical Director of the San Joaquin Foundation for Medical Care and President of the American Associa- tion of Foundations for Medical Care. Dr. Robert B. Hunter, a family physician from Sedro Woolley, Washington, who is a member of the AMA Board of Trustees and Chairman of the AMA's Advisory Committee on PSROs. Dr. Alan R. Nelson, an internist from Salt Lake City, Utah, who helped develop a PSRO prototype in Utah and is an alternate delegate to the AMA House of Delegates. Dr. Raymond J. Saloom, an osteopath from Harrisville, Pennsylvania and President - elect of the Pennsylvania Osteopathic Association. Dr. Ernest W. Saward, former Medical Di- rector of the Kaiser Foundation Health Plan, now Professor of Social Medicine at the Uni- versity of Rochester Medical School and Pres- ident of the Group Health Association of America, an organization of prepaid group practices. Dr. Willard C. Scrivner, an obstetrician- gynecologist from Belleville, Illinois and Pres- ident - elect of the Illinois State Medical So- ciety, reportedly a candidate of the House HEW Appropriations Subcommittee. A statement made by Dr. DuVal when he was HEW Assistant Secretary described the Council as having been " intentionally cre- ated by the Congress to represent the con- cern and interests of the private practicing physician, giving him, in effect, direct access to the HEW Secretary and assuring him con- stant input on PSRO policy development and implementation. " the August, 1973 meeting of the AAFMC ar- gued that it made economic sense for PSROs to rely on the Blues for their computer needs. Some of the delegates, however, weren't buying largely - out of fear that the Blues wouldn't share their data with them - and a position paper was adopted stating that data analysis was the responsibility of the foun- dation / PSRO and that data should be stored and processed " so as not to advantage any party unduly. " Consumers Get the Short End The whole point of the PSRO program is of course that medical care will be judged only by physicians. (Indeed, the law includes a provision that a final determination as to the propriety of care may only be made by a " duly licensed doctor of medicine or osteop- athy. ") Thus consumers are relegated to an almost nonexistent role in the program's op- eration: Statewide Professional Standards Review Councils, to be established in the 18 states having three or more PSROs, are to in- clude in their membership " four persons knowledgeable in health care " from the state, who need not be physicians, two of whom are to be nominated by the Governor and two chosen independently by HEW. These four are outnumbered by one physi- cian representative from each PSRO, two physicians designated by the state medical society and two physicians designated by the state hospital association. And the func- tions of the Councils are limited to such tasks as the coordination of activities of and dis- semination of data among the state's PSROs; the PSRO Program Manual makes clear that " the State Council has no direct authority over PSROs. " Given this limited arena in which to op- erate, such consumer activities as have ex- isted around PSROs have centered on the question of data availability. Robert E. McGarrah Jr. of the Nader affiliated - Health Research Group (HRG) urged at Senate Fi- nance Committee oversight hearings on PSROs held in May that a PSRO's norms, standards and criteria and the profiles it de- velops of practitioners and providers be made public documents. (HEW's current in- clination is reportedly to mandate release of PSRO parameters, but the question of pub- lic availability of profiles is a hot one and remains unsettled.) " Data is our main focus, " explains McGarrah, " because with this legis- 17 lation there is very little consumer input. " A position paper produced by the HRG and the Consumer Health Project of the Na- tional Urban Coalition urges consumers to submit nominations for seats on the State- wide Councils; their argument is that the Councils are worth serving on because " they will have access to extremely valu- able information on the cost and quality of medicine in the different regions of a state. " Being left out of things might not be worth complaining about if consumers could rest assured that PSROs presage an improvement in the quality of the health care they re- ceive. It seems safe to predict that the pro- gram's direct effect on patient care will for the foreseeable future be minimal at most. The fact that preadmission certification of elective hospital admissions is voluntary and thus unlikely to be engaged in means that the threshold decision to hospitalize will not be examined in a setting where such ex- amination could make a real difference. Once a patient is hospitalized, the concern of the review mechanism is limited to the question of length of stay (see box page 4). The ques- tion of quality is only addressed through retrospective studies of groups of patients, whose effect on any individual can only be indirect and long term -. The program may have the byproduct of indirectly inducing physicians to practice a form of medicine by protocol, known vari- ously as " cookbook medicine " or " textbook medicine " by its detractors and proponents. PSROs are mandated to develop criteria of care for various diagnoses, primarily for " PSRO will cause little change in the way most physicians practice medicine. " PSRO Questions & Answers, an HEW pamphlet their use in retrospective medical care eval- uation studies. Physicians may decide that conformance to such criteria will bring pro- tection against suits for malpractice, a de- cision the law encourages through a pro- vision that no physician may be held civilly liable for action taken in compliance with a PSRO's norms, provided he exercised " due care. " Thus in the long run PSROs may have something of a levelling effect on the prac- 18 tice of medicine, with conditions whose treatment is amenable to standardization be- ing uniformly well cared for, while treat- ment by medical geniuses for more eso- teric conditions may suffer. Much of course depends on the actual content of the param- eters developed, whose language may be so general and so hedged with qualifications (as " indicated, " " where appropriate, " etc.) that almost anything goes. Publication of the profiles of practitioners and hospitals to be developed by PSROs - if it happens potentially - would have the fur- ther effect of beginning to make it possible for consumers to make informed choices as to what physician and what hospital they should patronize. Such data may, however, be a long time in coming - HEW has told PSROs to date only that they must review such profiles " when the capacity exists to de- velop them in their area. " The data will of course cover only hospital - based care, and within that category may be so sketchy as to be of limited practical usefulness. And its potential usefulness in any event depends on the consumer being sufficiently well- situated geographically and economically to be able to exercise a choice among sources of care. Health Workers to the Periphery Nonphysician practitioners of the healing arts are only slightly less neglected than are consumers in the scheme of things under PSROs. They too get a few seats to sit in- these on advisory groups attached to the Statewide Professional Review Councils or to PSROs in states without Councils. (Only licensed doctors of medicine or osteopathy of course are eligible for membership in a PSRO itself.) These advisory groups are to include representatives of " health care prac- titioners " other than physicians, as well as representatives of hospitals and other facil- ities; their mandate is simply to " advise and assist " Councils or PSROs in carrying out their functions. Although the law and HEW pronouncements to date are unclear as to how broadly the term " practitioner " is to be defined, it seems to contemplate primarily folks like dentists, podiatrists, optometrists, pharmacists and professional nurses. As to the involvement of such practitioners in the review process itself, the PSRO Pro- gram Manual admonishes that " while the PSRO retains ultimate responsibility for the decisions made under its aegis, it should seek the participation of all health care prac- titioners " in the development of review pa- rameters applicable to their professions, the establishment of review mechanisms to re- view the care they give and the actual con- duct of such review. Given their absence from the seats of power in the PSRO or on in hospital - medical staff review committees, the influence of nonphysician practitioners appears destined to be peripheral at best. PSROs will, however, increase the job market for nurses. Most of the review mech- anisms involved (see box page 4) contem- plate a fairly mechanical screening function as the first stage of review, a task to be per- formed by someone usually called a review coordinator, whom it is apparently contem- plated will be a nurse. When the process gets close to real decision - making, her role becomes essentially that of a nag nudging - a physician reviewer to please either con- vince an attending physician to discharge a patient because his certified length of stay has expired or else to certify that the stay should be extended so the hospital won't lose its reimbursement. But Is It Cost Effective -? It will of course prove something of an em- barrassment to HEW and the Congress if the cost of the PSRO review system - which will include a network of potentially very ex- pensive data processing systems - turns out to be greater than the money saved from elimination of unnecessary health care. An argument for this possibility can be found in the case of the Hospital Admission Sur- veillance Program (HASP), a venture of the Illinois Foundation for Medical Care, under contract with the state's Medicaid agencies, that certifies hospital admissions and lengths of stay for Medicaid patients. A six month - study of the program's operation at Cook County Hospital found that $ 129,820 was saved from denials of admissions and of ex- tensions of stay - this at a cost of $ 228,578 to Cook County Hospital plus $ 267,654 to HASP, for a total cost of almost $ 500,000. That $ 500,000 figure also represents one estimate of the annual cost of operating a single PSRO (the first PSRO contract, award- ed in June to the Utah PSRO, was in fact for $ 951,000); half a million dollars multiplied by 203 PSROs equals something over $ 100 million, to which must be added the cost of maintaining HEW's PSRO staff, now number- ing 120 and projected by HEW to increase to 250 to 350 within the next year. (HEW's budget request for the 1974-75 fiscal year- a period during which few, if any, PSROs will be fully operational - is $ 55 million.) The law requires HEW to reimburse PSROs for " expenses reasonably and neces- sarily incurred " in carrying out their func- tions; HEW has yet to issue the chapter of its PSRO Program Manual that promises to detail exactly what that means. One unan- swered question concerns payment of phy- sicians for the time spent as members of a PSRO's specialty committees in the develop- ment of local standards; the national spe- cialty medical societies have volunteered to write sample standards free of charge, but it's not clear whether their local counterparts will be that generous. There's also the fact that if PSROs succeed in reducing the length. of stay in hospitals, the cost per patient day will be increased; this because the most ex- pensive care is given a patient during the first few days of his hospitalization. Missing the Point If PSROs fail as a cost containing - strategy, then such options as their mandatory exten- sion to noninstitutional care, the reimposition of price controls on health - care providers or even the introduction of direct government intervention in the practice of medicine be- come real possibilities. All such approaches, however, ignore the cost effectiveness - ques- tion that would have a real effect on the collective health of the American people-- the question of priorities. All such approaches, that is to say, fail to ask whether the finite supply of health - care dollars would better be spent on the screening and treatment of hy- pertension than the performance of open- heart surgery, or whether an infusion of re- sources into the state of Mississippi might not bring more value for the money than an infusion of resources into the island of Manhattan. Such a strategy is not even attempted by PSROs, even if expanded and strengthened -nor for that matter by national health in- surance, however comprehensive - for such an approach requires appreciably more than funding or regulating an essentially private system. It requires what the AMA would have good reason to get mad at - a nation- alized health system. -Louise Lander 19 Peer Review ANOTHER WORD ON CHIP Dear Health / PAC: I would like to add one ob- servation to Ronda Kotel- chuck's excellent dissection of Nixon's Comprehensive Health Health Insurance Plan, CHIP, in the March / April BULLE- TIN. CHIP is a leading mem- ber of one of the two general types of national health insur- ance proposals before Con- gress. The CHIP group, which includes the AMA's " Medi- credit, " the commercial health insurance industry's " Health Care, " and the Long Ribicoff / " Catastrophic Health Insur- ance Plan, " would operate di- rectly through the private in- surance industry. The other group, which includes the Big Labor backed -, Kennedy / Grif- fiths " Health Security Act, " the new Kennedy / Mills " Compre- hensive National Health Insur- ance Act, " and the old Javits expansion of Medicare plan, would eliminate the insurance industry entirely (Kennedy / Griffiths), or restrict it to a Medicare - like fiscal intermedi- ary role. This, in my view, is the major issue concerning NHI proposals presently be- fore Congress: what role will the private health insurance industry play? CHIP gives it a major role, as Kotelchuck points out. That major role would lead not only to administrative com- plexity but would also lead to enormous profits for the pri- vate insurance industry, at taxpayer expense. According to the Social Security Bulletin (February, 1974, p. 32, Table 13), on the $ 11 billion in pre- mium income which the pri- vate, commercial insurance Cross Blue Shield) currently take in, they suffer an " under- writing loss " of about 6 per- cent. That is, they pay out, in benefits and administrative costs, 6 percent more than they take in. However, they do not make public the figures indicating the money which they make by investing the premiums while they have them. They could break even simply by putting the money in a good savings bank! If they make a 15 percent return on investment, they are net- ting about $ 1 billion per year in profit! This is a key to CHIP, which would tremendously boost the growth of the private insur- ance industry, and support it with federally mandated - em- ployer employee / (read em- ployee consumer /) payment and tax funds. Yet another area of potential profit to the insurance industry (which MCHR's Billions for Band - aids shows to be at the center of American corporate and bank- ing capitalism) is actually running the health care sys- tem with all employed health workers, including doctors and dentists. The profit poten- tial from fees now paid to private entrepreneurial - med- ical and dental practitioners is truly enormous, particularly if the product is mechanized, ex- panded by introducing large numbers of lower - paid " phy- sician extenders -" and market- ed vigorously. But that's an- other story. The main point is that CHIP represents Amer- ican capitalism's drive to pro- duce the real profits potential- ly recoverable from the health care industry. -Steven Jonas, M.D. Associate Professor School of Medicine State Univ. of New York 20 companies (not including Blue at Stony Brook >| Vital Signs STRIKING SAN FRANCISCO RNS WIN PATIENT - CARE IMPROVEMENTS, PAY INCREASES Over 4,000 registered nurses, represented by the California Nurses Association, struck 43 hospitals in the San Francisco Bay area June 7-27. The RNs ' primary demands were for as- surances that untrained per- sonnel would not be assigned to specialized units (such as intensive care units) and for the right to take part in the determination of the nursing needs of each patient and each hospital service. They also sought a 5.5 percent sal- ary increase, which manage- ment countered by offering an 11 percent increase, apparent- ly in an attempt to undecut the RNs'patient - care de- mands. The House of Dele- gates of the American Nurses Association, meeting at the ANA's annual convention in San Francisco during the strike, voted a resolution of support for the striking nurses, affirming in particular the RNs'right " to participate in the decision making - process in their respective agencies. " Negotiations with the three hospital groups being struck (Permanente Kaiser -, Affiliated Hospitals and Associate Hos- pitals) at one point broke down over management's re- fusal to discuss the issue of adequacy of nurse staffing. Negotiations resumed when the parties, as well as HEW Secretary Caspar Weinberger, requested the mediation serv- ices of W. J. Usery Jr., head of the Federal Mediation Service. The settlement package, rat- ified June 27, includes salary increases averaging close to 11 percent, an agreement that specialized training will be provided nurses assigned to seven specialized units, except in emergencies, and a pledge that nurses will be permitted to " participate " in determining patients'needs for nursing care. (In its September - Oc- tober issue, the BULLETIN hopes to include a detailed analysis of the strike.) NEW JOURNAL TACKLES BLACK HEALTH ISSUES A bimonthly journal, the Journal of Black Health Per- spectives (JBHP), is now being published by Masks, Inc., a nonprofit health education and research organization located in Berkeley, California (PO Box 2243, Berkeley 94702). A statement of editorial philos- ophy appearing in the Journal's first issue stresses its belief that " imperative to Black control over what hap- pens to Blacks is the notion that we must develop an un- derstanding of all forces that impinge upon the health sta- tus of people in our commu- nities. " The first issue also in- cludes articles dealing with such subjects as experimental research, family planning and an overview of Black related - diseases, as well as regular JBHP features including an editorial forum, an interview and a discussion of legal is- sues relating to health. HEALTH PRICE CONTROLS END, INI ATION BEGINS AGAIN The lifting of price controls from the health sector April 30 was followed, not surpris- ingly, by an increase in May in the medical care services component of the Consumer Price Index (CPI) double that of the previous month, name- ly 1.2 percent, or an annual 21 rate of 14.4 percent. (The over- all CPI rose 1.1 percent for the month.) HEW Secretary Caspar Weinberger had attempted to forestall such a development by summoning to his office May 3 representatives of 20 medical, hospital and health insurance groups, whom he lectured on the virtues of ex- ercising voluntary self - re- straint. The alternative, he warned, was a parade of hor- rors ranging from " congres- sionally imposed shock treat- ment controls " to legislation creating " a federal monopoly . health. to replace the private health system. " The American Hospital Association, it must be said, is doing its part for the cause; the AHA sells for $ 63 a cost containment - train- ing program complete with slides and manuals tailored to " the hospital's own needs. " The AMA, for its part, has written its members that they should consider " the political, economic and personal conse- quences of fee adjustments " at a time when " impulsive ac- tion could seriously and irre- versibly affect the health of the public, the future of the in- dividual physician and the nature of the medical profes- sion. " LABORPOWER POLICIES UNDER FIRE Administration policies on the training of health profes- sionals came in for some hard knocks in June. First, the Gen- eral Accounting Office re- leased a report on current aid programs to health profes- sions students, finding that medical and dental schools frequently use " inequitable ' and ambiguous methods and criteria for determining finan- cial need " for federally sup- 22 ported loans under the Health Professions Student Assist- ance Program, that HEW has failed to develop adequate regulations or otherwise prop- erly monitor the program and that the program overall has not significantly increased the output of medical and dental schools, improved the quality of their students or influenced the distribution of physicians and dentists. Later in the month Senators Kennedy and Javits leaked to the press a confidential study conducted by HEW's Health Resources Administration, which sharply challenged the assumption underlying current Administration health labor- MEDICAL Y'Y' COSTS Y' B.P power policy that a sufficient supply of health professionals is being produced by current- ly existing educational pro- grams. The study cited esti- mates of a current shortage of 30,000 physicians, with more serious problems caused by their maldistribution, accused the Administration of underes- timating future demand for health services and overesti- mating future increases in health laborpower productiv- ity and warned that the Ad- ministration was pursuing a " high - risk strategy " through its policy of freezing the na- tion's capacity for training health professionals at pres- ent levels. IF YOU CAN'T BUILD'EM, MANAGE'EM What does a proprietary hospital chain do when com- prehensive health planning and high interest rates make new hospital construction more difficult to bring off? Ten such corporations have de- cided that the thing to do is go into the business of managing nonprofit hospitals under con- tract. Leaders in the field are Hospital Affiliates, Inc. (HAI), with 30 such contracts, and Hospital Corporation of Amer- ica (HCA), with nine. The Fed- eration of American Hospitals, the proprietaries'trade asso- ciation, calls contracting " the most exciting aspect of the growth potential " for hospital chains and claims that " Man- agement contracts, especially with financially troubled hos- pitals, are winning new con- verts to the investor - owned sector. " In most cases where man- agement contracting is em- ployed, the hospital's admin- istrator has departed; his re- placement is provided by the contractor. If the administra- tor is still there, he usually be- comes the company's em- ployee. HCA insists that its administrator be made either chairman or secretary of the hospital's board of trustees; HAI asks that its administra- tor be a board member. Both firms insist on autonomy from board interference in day - to- day operations, pointing out that the board retains ultimate authority because it can ter- minate the contract. In addi- tion to the administrator, a typical contract will involve sending in consultants such as accountants, nursing special- ists, dieticians and medical records librarians. Fees range from 4 to 6 percent of gross annual revenue at HCA, while at HAI the typical rate is 5 to 8 percent. HOSPITALS POLISH THEIR IMAGE The J. Walter Thompson ad agency has a new half - a - mil- lion dollar - account, namely the American Hospital Associ- ation. The AHA is buying four 30 second - spots to run during network news broadcasts of all three networks in Septem- ber, as well as during the Washington, D.C. telecast of NBC's " Today " show to catch the congressional audience. According to the AHA, " The spots are designed to show that hospital people are re- sponsible and efficient, that hospital care has been con- sistently improving, and that rising costs are necessary to provide high quality - care. " ' In the meantime, Johns Hop- kins Hospital in Baltimore has hired TWA's Special Market- ing Training Services to pro- vide instruction by a former stewardess to 450 of its non- professional employees on the benefits of a " positive self- image. " The one day -, six hour - class, at a price of $ 10 per stu- dent, includes such lessons as " Feel cheerful on the inside, and you will look cheerful on the outside. " TWA reports that hospitals in three other states have bought the course, which most hospitals provide to their admissions personnel. Accord- ing to a TWA spokesman, " Whether or not professional personnel receive the training depends on the climate at the individual hospital. Needless to say, attempting to teach doctors or professional nurses requires an enormous amount of tact. We must imitate Henry Kissinger in how we approach this. " AHA ~~ ARIZONA JOINS THE UNION Nine years after passage of federal Medicaid legisla- tion, the Arizona legislature -on its sixth attempt - has voted to end its status as the only state without a Medicaid program, starting in October 1975. The state's projected share of the program's cost, $ 56 million, is $ 3 to $ 6 million less than what the present state - run program of medical care to the poor would be costing by then, and will be supplemented by $ 87 million in federal funds. 23 HEALTH / PAC PUBLICATIONS WHO WILL PAY YOUR BILLS? A HEALTH / PAC SPECIAL REPORT ON NATIONAL HEALTH INSURANCE A detailed analysis of various proposals and an overview of the issues behind national health insurance. 30 pp..50 $ apiece:.30 $ apiece for ten or more (postage included). A CONSUMER CRITIQUE OF NATIONAL HEALTH INSURANCE A quick way of getting a grasp on key issues in national health insurance. 8 pp. $.07 apiece for orders of five or more (postage included). YOUR HEALTH CARE IN CRISIS: A HEALTH / PAC SPECIAL REPORT A 14 page - illustrated pamphlet that analyzes the forces in the health system that prevent most Americans from getting good health care..15 $ apiece plus $.15 postage. PRIMER ON PRIMARY CARE by Bonnie Towles An illustrated pamphlet describing and analyzing the types of primary care including solo practice, HMO's, OPD's, etc. 28 pp. $.50 apiece; $.35 for orders of ten or more. EVALUATION OF COMMUNITY INVOLVEMENT IN COMMUNITY MENTAL HEALTH CENTERS * The Health / PAC study, done under the auspices of the National Institute of Mental Health, is an in depth - analysis of how the community is manipulated, ignored, and contained by the mental health establishment. (Accession * #PB 211 267) AVAILABLE FOR $ 6.00, ONLY FROM U.S. Department of Commerce, National Technical Information Service, 5825 Port Royal Road, Springfield, Va. 22151. CONEY ISLAND HOSPITAL: A CASE STUDY IN THE POLITICS OF HEALTH A 16 page Health / PAC report documenting the politics and decision making of a New York City municipal hospital: Coney Island Hospital - who controls it, how they control it, and the power of the present leadership. $.15 apiece plus $.15 postage. NEW YORK CITY'S MUNICIPAL HOSPITALS: A POLICY REVIEW by Robb Burlage The study which blew the whistle on the NYC hospital crisis in the late 60's. Now considered a classic, it foresaw the current problems created by benefit cost - reforms. 700 pp. $ 10.00. THE AMERICAN HEALTH EMPIRE An analysis of the American health system - who profits from it and who loses. It identifies growing centers of power in the health system and documents the bankruptcy of recent reform programs from Medicaid to National Health Insurance. 279 pp. PAPERBACK $ 2.00, plus $.15 postage. Mail orders to: Health / PAC 17 Murray Street New York, N. Y. 10007 24