L.A. physicians anxiously await reform proposals; high-priced specialists appear particularly vulnerable.

As the national debate on health care reform intensifies, the topic of cost controls has many Los Angeles County doctors on the edge of their seats.

Much of the health care reform fervor has focused on cutting costs wherever possible. And a prime cost-cutting strategy under discussion is limiting doctors' fees, especially those of specialists who make far more than the sorely needed primary-care physicians.

But it's largely acknowledged by health care professionals that when the U.S. government implemented a nationwide fee schedule for Medicare patients a year ago, doctors in L.A., along with their colleagues in New York City and Miami, saw the largest drop in reimbursements, said health care officials.

Medicare is the federal health insurance for people aged 65 and older and for the disabled.

That year-old fee schedule, formally known as the Resource-Based Relative Value Scale, was intended to correct inequities in pay between specialists and primary-care doctors. For instance, surgeons were supposed to make less under the revised schedule, while pediatricians were supposed to make more.

But as it turned out, all doctors in L.A. are making less on Medicare reimbursements, especially primary-care doctors, because the fee schedule does not take into account L.A. doctors' relatively high cost of doing business, said health care officials.

"Physicians are making anywhere from 10 to 30 percent less than last year, and a lot of that has to do with the Medicare fee schedule," said Dr. Marie Kuffner, president of the L.A. County Medical Association.

Now many of the power brokers in Washington, D.C., are saying they would like to see that federal fee schedule extended to the private sector.

Rep. Peter Stark, chairman of the House Ways & Means Committee, for one, is a strong advocate of extending the Medicare fee schedule to the private sector.

Stark introduced a health care reform bill last year proposing that all providers be paid the Medicare rate, but that bill never made it out of committee.

If Clinton's health care reform package does not include provisions for paying providers the Medicare rate, then Stark intends to amend Clinton's bill to include that language, said Perry Plumart, Stark's press secretary.

Plumart said Stark has a far greater chance of getting that language adopted this year as part of the health care reform package because Clinton is in power.

"Doctors are the highest-paid professionals in the country and their salaries have been going up 10 percent a year -- three to five times the rate of inflation," said Plumart. "How much more money do doctors need to make?"

Kuffner countered that in the last decade, physicians' average annual cost of doing business doubled from $78,400 in 1982 to $168,400 in 1991.

Kuffner said with the rising costs of doing business, the reductions in Medicare payments, and the trend towards managed-care, doctors are actually losing money.

"Now they (the government) are going to say, 'We are going to cut your fees one more time.' That's why doctors are very upset," she said.

Kuffner said 80 percent of all health care delivered in the United States comes through some sort of managed care system--meaning someone other than the physician is determining the level of payment and accessibility -- and that system strongly discourages the use of specialists.

As she explained, many managed care systems operate with a prepaid pool of money. Therefore, if a primary-care doctor sends a patient to a specialist, payment for that specialized service comes out of the pool.

Much of the care, therefore, has been pushed back to generalists to maximize the amount of pool money and this has resulted in a tremendous drop in specialists' income, she said.

She said specialists who haven't signed on to a managed care plan have seen their practices shrink dramatically.

As one L.A. health professional noted: "Physicians are living their worst nightmare" because their autonomy has been severely threatened.

"A doctor friend told me, 'We used to call each other and talk about cases, now we talk about codes,'" the professional said.

Although there is a great likelihood that the Medicare fee schedule will indeed be extended to the private sector under Clinton's health care plan, the plan will also likely address the fee schedule's inherent inequities to doctors practicing in high-priced L.A., Miami and New York City, said Dr. Richard Corlin, a gastroenterologist from Santa Monica and vice speaker for the California American Medical Association's House of Delegates.

Stark assured doctors at an annual meeting of the AMA that he will make sure doctors in high-priced urban areas are reimbursed at a higher rate for Medicare patients than what they are currently getting, Corlin said.

Stark "isn't always a friend" to the medical profession, Corlin added, but he has a "sense of integrity" and will honor his commitments.

Under the Resource-Based Relative Value Scale, doctors are reimbursed based on three criteria: the cost of work, the cost of malpractice insurance and the cost of overhead.

Each criterion is assigned a unit value and each unit is converted to a dollar amount depending on the city where the procedure is done.

Corlin, who met with Stark in Washington, D.C., in early May, said the last comment Stark made during that visit was that he would like to see the Resource-Based Relative Value Scale system extended to the private sector, but at a higher conversion rate in L.A.

Depending on who you talk to, extending the resource-based system is either good or bad.

Many doctors point out that Medicare currently pays more than many managed care plans.

"If you asked primary care doctors if they could live with a Medicare-only system, they would say, 'Yes,'" said Dr. Herman Kattlove, an oncologist in Long Beach.

He also pointed out that under the Medicare fee schedule, he didn't lose any money because most of his business is diagnostic and therapeutic and the Medicare fee schedule mainly reduced fees for surgical procedures, such as eye operations.

Dr. Jeremy Levenson, an ophthalmologist in private practice in Santa Monica, said his net income has decreased 30 percent since the Medicare fee schedule was implemented. But the Medicare plan is still better than contracting with managed care companies, he said.

Levenson said his biggest fear about national health care reform is that he'll be pushed out of business because specialists won't be used that much.

Dr. Mitchell Karlan, a Beverly Hills oncologist specializing in breast cancer, calls himself a "white elephant" because he is a specialist in private practice and relies on traditional fee-for-service payments.

He said if he sees a Medicare patient for an office visit, he is only reimbursed $35 vs. the $75 he charges private patients.

"I can't even get a plumber for that ($35) amount," he noted.

If the Medicare fee schedule is extended to the nation's entire health care industry, Karlan said he will simply "opt out of the system," meaning he won't contract with any insurance companies.