Cyber Stocks: PaineWebber View
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HMO Physicians Beware
This articles by Barbara Fox were published in U.S. 1 Newspaper on March 24, 1999. All rights reserved.
If you are a doctor, and your failure to refer a patient
to a specialist results in that patient getting sicker or dying, you
can be sued — even though the HMO you work for might have discouraged
the referral. If you do refer the patient, you may have to pay for
it yourself.
So says Brad X. Terry, an attorney with Reed Smith Shaw & McClay
at Forrestal Village. He moderates a panel, “Managed Care Liability
in Medical Malpractice Cases,” for the New Jersey Institute for
Continuing Legal Education (NJ-ICLE) on Ryders Lane in New Brunswick
on Saturday, March 27, at 9 a.m. Cost: $179 for morning and afternoon
sessions. Call 732-214-8500.
An alumnus of Messiah College in Pennsylvania and Seton Hall law school,
Terry was an editor at Trial Lawyer Magazine, worked for Blume Goldfadden
et al in Chatham, and joined Reed Smith this year. He frequently lectures
on managed care liability issues.
Physicians can protect themselves against any potential future claims,
says Terry, by not allowing personal or financial interests to compromise
their sound medical judgment when making referrals and using hospital
services.
Most often, these controversies result from HMO payment policies.
In 1975 New Jersey had only two HMOs caring for a total of 5,000 clients.
Now more than 23 HMOs provide care to 2.5 million clients. Most of
them pay doctors a set amount per member patient per month, no matter
what services a patient might need. This is called a “capitation”
plan, and the HMO sets targets for everything from number of hospital
visits to number of prescriptions per member each month. For instance,
an HMO may allocate $4.58 in radiology expenses per member each month,
or $18.01 for specialist care.
Meanwhile the HMO may withhold 20 to 30 percent of the payments and
put them in a kind of escrow, a Performance Risk Pool. At the end
of the year, if a doctor has had more than the allowed number of referrals
or hospital visits, the HMO keeps some or all of the money in the
risk pool, and if the risk pool is depleted, the HMO may even bill
the doctor for the extra.
Although it is in a physician’s financial interest to limit referrals
and treatments, if money clouds the doctor’s medical judgment, the
physician could end up in court. An example of insufficient treatment:
a man showed tell tale signs of stroke. Instead of being admitted
to the hospital for a full neurological evaluation, he was given an
outpatient CAT scan and sent home with aspirin. He died eight hours
later.
“Under state statute,” says Terry, “an HMO is prohibited
from using financial incentives to induce a health care provider to
withhold covered health care services that are medically necessary.
But there will absolutely be instances where your medical decision
will have an economic effect on your practice.” Do not, says Terry,
allow economics to influence your medical judgment in any way. Terry’s
tips to physicians:
Check your contract. If you are paid a “capitated”amount, you want to know not only what percentage is withheld, but,also, the number of other physicians included in the risk pool, andhow often the risk pools are reviewed and paid out.Make sure stop-loss protection or reinsurance is includedin your contract. A stop-loss fund will pay for unexpectedly highmedical costs for a certain patient, so that the medical expenseswill not be deducted from your pool after they reach a certain amount.Be aware of the exact language of the contract about whatservices or medical treatment you must provide, and whether thereare any “carve-outs” or set fees for such services as immunizations.Don’t assume that your patient will get adequate carefrom network specialists. Find out who pays for out-of-plan services.If needed, make the out-of-plan referral, even if you will be penalizedfinancially.Always tell your patient all available treatment options,regardless of whether that type of treatment is available under theterms of the HMO plan. Doctors used to be subject to “gag clauses,”discouraging them from telling patients about more costly treatments,but the New Jersey Health Care Quality Act, which became effectivein February, 1998, prohibits the use of “gag” clauses. Also,the New Jersey Consumer Bill of Rights requires disclosure of treatmentoptions. Now HMOs — attempting to protect themselves against medicalmalpractice suits — often use broad contract language statingthat nothing constrains the provider’s ability to make needed referrals.Keep a record. Write down immediately in medical records– or dictate into a recorder while the patient is sitting there– your suggestion that the patient undergo a certain diagnostictest or seek treatment from a specialist, even if outside the network.If the patient declines an option, note audibly that the patient wasadvised of a recommended treatment and has declined. “If thereis a lawsuit, and your recommended course of treatment is noted inyour medical records, that would be considered by the court,”says Terry.Exercise your right to appeal a utilization review decisionthat is adverse to the health and wellbeing of your patient. Yourpatient can appeal, but you as the doctor (with the patient’s consent)can do it too. Most appeals deal with denial of hospital days, surgicalprocedures, equipment, or skilled nursing care.New Jersey doctors who appeal a utilization decision are protectedby the Healthcare Quality Act at all three levels: the informal reviewby the HMO’s medical director, the panel of physicians with the HMO,and the nonbinding arbitration before an independent utilization revieworganization. A provider contract may not be terminated by the HMObecause the provider appeals.Though there is no law that the doctor must appeal an adverse HMOdecision, the duty to appeal is implied by the law protecting thedoctor from the consequences of appealing.Take time to get a thorough medical history of your patient.Your malpractice lawyer will find it more difficult to defend youif you were not aware of your patient’s hereditary disease, allergy,or a condition such as an artificial heart valve.No New Jersey doctor has been taken to court for failure toappeal an HMO’s utilization decision, but it happened in Californiain the case of “Wickline v. State.” After back and leg surgerythe plaintiff had circulatory problems in her right leg, and her primarycare physician prescribed an eight-day hospital stay to be sure itdid not get infected. But when the insuring agency (Medi-Cal, a stateassistance program) denied the request, allowing only a four-day stay,the primary care physician did not object. The plaintiff did get aninfection and had to have her leg amputated.The California Court of Appeals ruled that the primary care physiciancomplied without protest, was therefore responsible for the discharge,and that the HMO was not liable.No matter what the legal system does, it pays to be nice, says Terry:A good relationship with your patient is one of the best ways to avoidmalpractice suits.– Barbara FoxTop Of PageCyber Stocks: PaineWebber ViewMany stock gurus warn that Internet stocks are overvalued,but Jim Preissler, head Internet analyst for PaineWebber, disagrees:”I wouldn’t necessarily say they are overvalued. That is not afair or accurate assessment,” says Preissler. Preissler talkson “The Internet: Sizing the Opportunities,” for a PaineWebberseminar, free by reservation, on Tuesday, March 30, at 7 p.m. at theHyatt. Call 800-307-4799 for reservations.Preissler majored in history at Yale, Class of 1993, and worked asa mutual funds analyst before joining PaineWebber four years ago.He has been the firm’s Internet analyst for two years. The Internetis “a brutally efficient marketplace,” says Preissler. “Itbrings the world closer together, and the information flow is instantaneous.It is very democratizing.”Preissler will discuss how to value Internet stocks more fairly, asking:What is the opportunity?What is the opportunity worth?How do you invest and take advantage of it?Internet stocks constitute an incredibly large new category,he says. “In some cases the growth will be incremental and insome cases it will be taking share from other areas. Some existingcompanies will make the change and some won’t, and some new playerswill be created.”Of the media stocks using the Internet, Preissler believes the WallStreet Journal has one of the better strategies in cyberspace. “Someare still trying to figure out how to effectively leverage their contentinformation, and I am not sure they have done that so far.”Media companies should consider whether they have a brand that isstrong enough that consumers directly want to go to it. The New YorkTimes or CNN would qualify for this category. “Or should theyembed their content somewhere else, do they need access and distribution?”By default, many firms fall into this niche.To value an Internet stock, Preissler says an investor should askwhat is the size of the opportunity that is available for the company,and what are the growth rates associated with that. “Barnes&noble.commay not be as ambitious as an Amazon.com,” he points out, “becausetheir market opportunity may not be the same.” Barnes & Nobleseems to focus on selling what is in their store, whereas Amazon.comis saying, “Anything that can be sold over the internet, we aregoing to sell it.”Every analyst wins some and loses some, and Preissler says his biggestincorrect guess was that E-commerce would be more widespread thanit is today. The flurry of correcting the Year 2000 computer bug,he suggests, may have helped to slow the E-commerce programmers.The developers that have been most successful, says Preissler, arethose that provide “clean, fast, efficient, good usable experiences,”such as Yahoo or Amazon. What didn’t work, he says, are those thattried “multimedia intense splashy sites” and some of the contentsites. “Because of bandwidth, there is not a big audience formultimedia content, because most users can’t access it. Once moreusers have faster speeds, that will change.”Two of the biggest music sellers show the contrast. CDNow (which emphasizedclean, fast experience on a white background) and N2K (which has densemultimedia on a black background) merged, and CDNow’s approach won;the site is white.His current pick for electronic trading networks: Knight/Trimark (tickersymbol NITE). “It’s a market maker and gets a lot of order flownot only from traditional firms but from online firms,” says Preissler,noting that many of the other candidates for this category are notyet public and that, in any case, predicting the future of cyberspaceis still a risky business.– Barbara FoxPrevious StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
