“If I were responsible for a hospital lab today, I’d bedeveloping strategies to diversify that business, especially into theoutpatient setting.” That assessment comes from Andrew Webber who, as executive directorof the American Medical Peer Review Association, is a full-time student of a just-launched Federal effort to shrink Medicare hospitalizationsignificantly over the next two years. Webber’s association represents most of the Peer ReviewOrganizations that have recently contracted with the Federal governmentto eliminate an estimated 1.4 million unnecessary or inappropriateadmissions. “The point is to squeeze discretionary hospitalizationout of the system,” Webber explained. “PROs will furtherforce the unbundling of the hospital industry that was started withprospective payment.
It means that inpatient utilization will continueto drop, and I don’t see it bottoming out any time soon. “We’re experiencing a real revolution in health care, andI don’t think that’s too strong a term.” Few who have explored the PRO concept would disagree.
Prospectivepayment, of course, reversed financial incentives for hospitals and leftthe results to the marketplace. With PROs, on the other hand, less isbeing left to chance. Not only must many Medicare admissions now beapproved, but PROs must set specific targets for improvement in linewith a 300-page Health Care Financing Administration menu ofstate-by-state objectives. In Wisconsin, for example, the agency has identified 94 doctorswhose patients’ length of stay exceeded established norms. HCFA wants the state PRO to scrutinize these physicians’ futureadmissions, as well as retrospectively review past hospitalizations thatgenerated a combined 7,000 claims. In New Jersey, one goal is to cut admissions by 2,936 in 28hospitals found to have higher-than-average admission rates for 10diagnoses, including back ailments, bronchitis, pneumonia, and highblood pressure. PROs are the reborn form of peer review that began in the early1970s.
Congress created Professional Standards Review Organizations in1972 after deciding that hospital utilization review committees couldnot effectively restrain Medicare costs. Over the next eight years, PSROs couldn’t persuasivelydemonstrate that they could, either. HCFA stood by the review groups,but a Congressional Budget Office report concluded that they cost moreto administer than they were saving. In 1980, the anti-regulation forces that arrived in Washington withRonald Reagan needed no more than the CBO findings to get Congress tocurtail the review panels. Two years later, however, law-makers listenened to Sen. DavidDurenberger (R-Minn.), who claimed PROs were necessary to insure thatMedicare health services are reasonable and medically necessary, meetprofessionally recognized standards of care, and are provided in themost economical setting. Congress passed PROs into law as part of theTax Equity and Fiscal Responsibility Act of 1982, the same measure thatspawned prospective payment.
After spending months establishing area and eligibilityrequirements, HCFA early last year began accepting bids for PROcontracts, and most organizations were approved and finally operating bythe close of 1984. Physicians initially won a major victory by convincing Congressthat their peers should be the ones conducting the reviews throughgroups such as a state medical society or foundation. During hearings,Senator Durenberger agreed that he wouldn’t want “an insuranceclerk deciding whether my mother should be hospitalized for threedays.” But Congress also left HCFA with substantial leverage, giving theagency the right to decide as the one-year contracts expire whether eachPRO’s performance warrants renewal, or whether to turn the job overto a fiscal intermediary. And that power has physicians and some PROofficials nervous. Will the multitude of objectives HFCA has spelledout prove arbitrary? Will performance be judged simply by the numbers? HCFA Administrator Carolyne Davis, Ph.D., has characterized thegoals as targets and insists they are not meant as mandatory quotas.
AMPRA’s Webber believes “Dr. Davis understands that it willbe very difficult to meet all the objectives that have beenprospectively set.” PROs are assigned both “admissions” and “qualitycontrol” objectives.
The first involves monitoring inappropriateor unnecessary hospitalizations by case type, specific doctor, orhospital, as well as admissions that could be safely performed on anoutpatient basis. In seeking bids, HCFA provided a list of the 20 mostfrequent DRG claims for each state and asked bidders which five theywould concentrate on. In some cases, procedures with the highest annualgrowth rate were selected. “Quality” objectives cover problems such as mortalityrisks, postoperative complications, and readmissions due to prior”substandard” care. Typical two-year objectives for PROs: * New Jersey will try to reduce by 95 per cent (or 8,700admissions) the number of operations, treatments, or diagnostic teststhat could have been given safely on an outpatient basis.
These includebreast biopsy, kidney dialysis, surgical tooth extraction, as well asprocedures to examine the bronchial tubes, digestive tract, and bladder. * Delaware is to reduce 321 admissions through 100 per centretrospective review of physician admitting practices. * California will attempt to cut by 20 per cent (2,010 cases) thenumber of unnecessary readmissions due to “substandard” priorcare. * Missouri will seek to eliminate 450 complications from nosocomialinfections.
* Connecticut will aim to reduce by 30 per cent postoperativeinfections resulting from the use of a cathether after six surgicalprocedures. Depending upon a state’s objectives, physicians will have toreceive a PRO’s permission before admitting a Medicare patient.According to HCFA’s Office of Medical Review, aggregate objectivesset for the nation’s PROs over two years will result in 600,000Medicare patients receiving, as outpatients, care formerly rendered inhospitals. Another 700,000 who might have been hospitalized willinstead receive, upon their physicians’ “reconsideration”of need, no treatment at all. Such estimates stem from a variety of sources, including relativelyrecent studies on variations in medical practices. Dr. John Wennberg, aDartmouth medical researcher, has studied differences in medicaltreatment for a decade. One of his investigations found a difference of2,500 hysterectomies between two comparable Maine cities over the last10 years.
Treatment patterns, not medical necessity, he said, accountedfor the $10 million worth of hospital care for the additionalprocedures. Dr. Wennberg has told Congress that his work dispels theidea that “most medical services are undifferentiatednecessities.” Another researcher, Dr.
Paul Gertman of the Boston-based HealthData Institute, claims his studies show that 19 per cent of thenation’s hospital patients were treated there unnecessarily. If the researchers and HCFA officials are correct, and the PROmovement functions as anticipated, it undoubtedly means a majorreduction in in-hospital Medicare lab testing. And that, AMPRA’sWebber points out, is just part of the story. “The PROs are also actively pursuing private sectorbusiness,” he explained. “Corporations especially are anxiousto study ancillary services in hospital care,” he said. “Theywant better information on all sorts of things, such as where healthcare dollars go, for which employees, and the frequency of services.This whole area of private sector review is just in its infancy.” Webber compares the hospital industry with the auto industry of thelate 1960s and early 1970s.
“It fed itself on cheap gas and thenfaced a severe change. Hospitals fed themselves on Hill-Burton,comprehensive health insurance packages, and cost-based reimbursment.Now they are in the midst of severe change.”