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PROs presage tighter squeeze on hospitals and labs.

"If I were responsible for a hospital lab today, I'd be developing strategies to diversify that business, especially into the outpatient setting."

That assessment comes from Andrew Webber who, as executive director of the American Medical Peer Review Association, is a full-time student of a just-launched Federal effort to shrink Medicare hospitalization significantly over the next two years.

Webber's association represents most of the Peer Review Organizations that have recently contracted with the Federal government to eliminate an estimated 1.4 million unnecessary or inappropriate admissions. "The point is to squeeze discretionary hospitalization out of the system," Webber explained. "PROs will further force the unbundling of the hospital industry that was started with prospective payment. It means that inpatient utilization will continue to drop, and I don't see it bottoming out any time soon.

"We're experiencing a real revolution in health care, and I don't think that's too strong a term."

Few who have explored the PRO concept would disagree. Prospective payment, of course, reversed financial incentives for hospitals and left the results to the marketplace. With PROs, on the other hand, less is being left to chance. Not only must many Medicare admissions now be approved, but PROs must set specific targets for improvement in line with a 300-page Health Care Financing Administration menu of state-by-state objectives.

In Wisconsin, for example, the agency has identified 94 doctors whose patients' length of stay exceeded established norms. HCFA wants the state PRO to scrutinize these physicians' future admissions, as well as retrospectively review past hospitalizations that generated a combined 7,000 claims.

In New Jersey, one goal is to cut admissions by 2,936 in 28 hospitals found to have higher-than-average admission rates for 10 diagnoses, including back ailments, bronchitis, pneumonia, and high blood pressure.

PROs are the reborn form of peer review that began in the early 1970s. Congress created Professional Standards Review Organizations in 1972 after deciding that hospital utilization review committees could not effectively restrain Medicare costs.

Over the next eight years, PSROs couldn't persuasively demonstrate that they could, either. HCFA stood by the review groups, but a Congressional Budget Office report concluded that they cost more to administer than they were saving.

In 1980, the anti-regulation forces that arrived in Washington with Ronald Reagan needed no more than the CBO findings to get Congress to curtail the review panels.

Two years later, however, law-makers listenened to Sen. David Durenberger (R-Minn.), who claimed PROs were necessary to insure that Medicare health services are reasonable and medically necessary, meet professionally recognized standards of care, and are provided in the most economical setting. Congress passed PROs into law as part of the Tax Equity and Fiscal Responsibility Act of 1982, the same measure that spawned prospective payment.

After spending months establishing area and eligibility requirements, HCFA early last year began accepting bids for PRO contracts, and most organizations were approved and finally operating by the close of 1984.

Physicians initially won a major victory by convincing Congress that their peers should be the ones conducting the reviews through groups such as a state medical society or foundation. During hearings, Senator Durenberger agreed that he wouldn't want "an insurance clerk deciding whether my mother should be hospitalized for three days."

But Congress also left HCFA with substantial leverage, giving the agency the right to decide as the one-year contracts expire whether each PRO's performance warrants renewal, or whether to turn the job over to a fiscal intermediary. And that power has physicians and some PRO officials nervous. Will the multitude of objectives HFCA has spelled out prove arbitrary? Will performance be judged simply by the numbers?

HCFA Administrator Carolyne Davis, Ph.D., has characterized the goals as targets and insists they are not meant as mandatory quotas. AMPRA's Webber believes "Dr. Davis understands that it will be very difficult to meet all the objectives that have been prospectively set."

PROs are assigned both "admissions" and "quality control" objectives. The first involves monitoring inappropriate or unnecessary hospitalizations by case type, specific doctor, or hospital, as well as admissions that could be safely performed on an outpatient basis. In seeking bids, HCFA provided a list of the 20 most frequent DRG claims for each state and asked bidders which five they would concentrate on. In some cases, procedures with the highest annual growth rate were selected.

"Quality" objectives cover problems such as mortality risks, 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 8,700 admissions) the number of operations, treatments, or diagnostic tests that could have been given safely on an outpatient basis. These include breast biopsy, kidney dialysis, surgical tooth extraction, as well as procedures to examine the bronchial tubes, digestive tract, and bladder.

* Delaware is to reduce 321 admissions through 100 per cent retrospective review of physician admitting practices.

* California will attempt to cut by 20 per cent (2,010 cases) the number of unnecessary readmissions due to "substandard" prior care.

* Missouri will seek to eliminate 450 complications from nosocomial infections.

* Connecticut will aim to reduce by 30 per cent postoperative infections resulting from the use of a cathether after six surgical procedures.

Depending upon a state's objectives, physicians will have to receive a PRO's permission before admitting a Medicare patient. According to HCFA's Office of Medical Review, aggregate objectives set for the nation's PROs over two years will result in 600,000 Medicare patients receiving, as outpatients, care formerly rendered in hospitals. Another 700,000 who might have been hospitalized will instead receive, upon their physicians' "reconsideration" of need, no treatment at all.

Such estimates stem from a variety of sources, including relatively recent studies on variations in medical practices. Dr. John Wennberg, a Dartmouth medical researcher, has studied differences in medical treatment for a decade. One of his investigations found a difference of 2,500 hysterectomies between two comparable Maine cities over the last 10 years. Treatment patterns, not medical necessity, he said, accounted for the $10 million worth of hospital care for the additional procedures. Dr. Wennberg has told Congress that his work dispels the idea that "most medical services are undifferentiated necessities."

Another researcher, Dr. Paul Gertman of the Boston-based Health Data Institute, claims his studies show that 19 per cent of the nation's hospital patients were treated there unnecessarily.

If the researchers and HCFA officials are correct, and the PRO movement functions as anticipated, it undoubtedly means a major reduction in in-hospital Medicare lab testing. And that, AMPRA's Webber points out, is just part of the story.

"The PROs are also actively pursuing private sector business," he explained. "Corporations especially are anxious to study ancillary services in hospital care," he said. "They want better information on all sorts of things, such as where health care 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 the late 1960s and early 1970s. "It fed itself on cheap gas and then faced 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."
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Publication:Medical Laboratory Observer
Date:Feb 1, 1985
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