Executive Director's Report as of October 24th, 1995 A monthly
report of experiences and observations to RWHC colleagues.
Gunderson & Klug Are Due Our Thanks
"Around 9 p.m. Wednesday, Gingrich resolved a potentially devastating
dispute with 20 rebellious Republican lawmakers by significantly boosting
the Medicare payment formula for premiums to be paid to health plans serving
beneficiaries in rural areas. Farm state lawmakers, led by Reps. Steve
Gunderson (R-Wis.), Greg Ganske (R-Iowa.) and Wes S. Cooley (R-Ore.) were
balking because they felt the reimbursement rates for hospitals were too
low to attract managed care facilities." This is from an article in
the Thursday, October 19th Washington Post,--the day the House
passed their Medicare Reform Bill (H.R. 2425). An explanation of the resulting
improvement in rural Medicare HMO payments is explained in the following
On a separate front, Congressman Scott Klug successfully got an amendment
into H.R. 2425 stating that "the Secretary of Health and Human Services
shall treat the State (of Wisconsin) as a single fee schedule area for
purposes of determining the fee schedule amount for physician's services
under part B of the Medicare program." This long sought improvement
in Wisconsin rural physician payment equity is to the best of my knowledge,
the only place where a state is specifically named in this gigantic bill.
The Senate still needs to finish its version of this bill and President
Clinton is expected to veto the combined version due to what he and many
others perceive as Medicare program cuts far in excess of what is needed
to keep the Medicare Trust Fund solvent. Nonetheless, these are two major
accomplishments of substantial and long standing importance to rural Wisconsin
as the inclusion of these principles in this bill significantly increases
the likelihood of similar language making it into whatever bill is finally
Please thank Steve Gunderson and Scott Klug (as well as the State Medical
Society who has not shied away from the tough and potentially divisive
single payment locality issue.)
A More Rural "Friendly" HMO Formula
Why the emphasis on the HMO payment formula?
(1) This was a key remaining opportunity to help rural communities given
that the House, Senate and President are in rough agreement about the scale
of provider cuts, i.e. falling under the mandate, "if life gives you
lemons, make lemonade."
(2) This is a critical long term issue given the expected major expansion
of HMO managed care and medical savings accounts. "... the future
of the traditional program isn't bright, partly because of tight budget
caps and 'fail safe' devices designed to restrain spending. If spending
exceeds targets, payments to providers would be ratcheted down further
in coming years, potentially driving doctors out of the program (and into
HMO type contracts)." Wall Street Journal, Oct. 20th.
A rural perspective was not evident when the Medicare Prospective Payment
System for hospitals ("DRGs") was implemented in the early '80s.
We have taken over a decade to partially dig out of the inequities inherent
in its initial legislation and regulations. Now, as we enter this new era,
the hole will be less deep.
The "Gunderson Floor" of $300 in 1966 creates for the first time
a minimum monthly payment for HMOs that serve rural (or urban) Medicare
residents. This payment is like the often referenced Adjusted Average Per
Capita Cost or "AAPCC" and also forms the basis for the new Medical
Savings Account payments. I believe (but not have seen the actual language)
that the floor will be indexed upward annually. The effect of this payment
policy is shown for effected RWHC counties in the two charts below.
In addition, the original House bill had in it, as the result of earlier
lobbying, a system of higher than average annual updates for counties with
below average utilization rates. As shown above, this will help lead to
a convergence of the extreme variance of the AAPCC within Wisconsin and
among all states. (This will in part be offset by lower than average annual
updates for counties with above average utilization rates.) It will not
be clear for some time at what point rural county AAPCCs will begin to
be high enough to attract Medicare HMO plan participation.
The differential updates in annual HMO payment rates noted above are based
on the variation in current non-HMO utilization rates. While most rural
counties with lower than average utilization rates also have lower than
average provider payment rates, there are exceptions. We will need to continue
to focus on the fairness of adjustments to these rates for "legitimate
costs of doing business.
Technical Notes (may be skipped)
Caution-this article was written without the benefit of seeing the final
language in writing so it may best be considered an educated series of
"In general, payment rates for each area would be calculated so as
to improve contribution levels in rural and low service utilization markets.
Payments to health plans from 1996 onward would be 'decoupled' from local
fee-for-service expenditures and paid instead on a budgeted system. Rates
would be established so that over time, payments to areas with higher-than
average utilization of services would be increased more slowly than payments
to areas with lower-than-average utilization. In addition, payments would
be calculated so as to ensure that legitimate costs of doing business in
different areas (based on certain input prices) would be recognized in
the contribution levels." (From the September 29th Summary of
the Medicare Preservation Act of 1995 by the Congressional Research
Service, Library of Congress.)
The Preservation Act's formula takes the current allowable HMO rates for
individual counties, adjusts them by an initially legislated input-price
index and calculates the result as a percent of the estimated national
mean. Each area is then assigned to one of five "utilization cohorts,"
the lowest cohort then receives an annual payment update equal to 185%
of the national average while the lowest cohort receives an annual update
equal to 75% of the national average. (The remaining three cohorts receive
updates spread between these two ends.)
I assumed that the 1995 "national weighted average capitation rate"
is equal to $400 per month, that the selected counties have an input-price
index equal to one and that the floor is annually indexed by the differential
update assigned to the lowest utilization cohort.
The Problem Newt Had To Face
In calendar year 1992, Medicare paid 22% or $830 more for services rendered
to urban residents than they did for rural residents. This differential
is the result of lower rural utilization and lower payment rates to rural
providers. As noted in earlier ED Reports, actual county rates vary enormously,
from $114.43 in Puerto Rico to $678.90 in the Bronx.
The national average of Medicare's total program payments per person served
(as opposed to individuals enrolled) was $4,341. Services per rural resident
served were $3,738 (received at both urban and rural sites), 86% of the
national average. Services per urban residents served were $4,568, 105%
of the national average. (Health Care Financing Review, Medicare and
Medicaid Statistical Supplement, page 172, February. 1995)
Medicare/Medicaid Head Speaks Out
Bruce Vladeck, Administrator of the federal Health Care Facilities Administration
(HCFA) spoke at the National Rural Health Association's (NRHA) "Heartland
Rural Health Forum" the morning after the House passed their Medicare
reform bill. While acknowledging the non-partisan character of NRHA he
stated his need to be partisan on behalf of "the wholesale wreckage
being talked about in Congress as Medicare and Medicaid is being slashed
to unprecedented degrees."
"Current proposals would cut Medicare at the end of seven years (compared
to the future spending allowed in current law) by $270 billion and Medicaid
by $182 billion, that is $60 billion from rural Medicare and $45 from rural
Medicaid. While this is a 20% cut in Medicare it is a 33% cut in Medicaid
program expenditures. While Medicare enrollees will absorb more out of
pocket costs, he estimates that 2.5 million rural residents will lose Medicaid
"We are committed to making adjustments for rural, at the same time
we are in this all together, while I 'congratulate' you for your success
(the AAPCC floor), in some sense it is rearranging chairs on the Titanic.
Our first priority needs to be, rural, suburban and urban, to keep the
basic structure and commitment in tact, after that, we can get back to
Reform Déjà Vu All Over Again
The following is a particular clear summary of the current Washington scene
from an article by David S. Broder in the October 8th Washington Post.
"Congressional Republicans now have run into the same stubborn fact
that tripped up President Clinton when he was in the health reform business
two years ago: Americans are damned reluctant to give up medical care they've
"In last week's Washington Post-ABC News Poll, two-thirds of those
interviewed said they did not want to see Medicare changed--not to cut
the budget deficit, not to help reduce taxes. Leave it alone, they say.
Unfortunately, the one thing that the country cannot do is leave Medicare
alone. Everyone agrees that left unchanged, it will run out of money, or
crowd out a lot of other important programs, or both."
"The rhetoric from both parties is misleading. ... The real problem
is not the trust fund or the tax cut. It is that the growth in spending
for health programs is devouring the federal budget. The presidential commission
headed by Sen. Bob Kerrey (D-Neb.) and former senator Jack Danforth (R-Mo.),
reported earlier this year that, unless current trends are changed, by
2010 or 2012--15 to 17 years from now--all federal revenues will be consumed
by entitlement programs and interest on the national debt. Long before
that point is reached, the country would face an agonizing choice between
much higher taxes and vastly reduced government services."
"Because the big health care programs--Medicare and Medicaid--are
the fastest-rising entitlements, savings must be found there. The Republican
approach is more serious than the Democratic in two respects... The Republican
plan is far from perfect. But the Republicans are right to eliminate the
subsidies for the affluent. And they are right in saying this is a big
problem requiring a big fix--not a Band-Aid."
The Blue Cross - Marshfield Saga
This Wisconsin story has attracted national attention given both the importance
of the parties and the legal isues, health policies being disputed. It
will continue to do so. The following is a brief review of the history
of this case as well as a summary of recent actions:
Feb '94 BX files antitrust suit against Marshfield Clinic in federal District
Jan '95 Jury finds for BX and awards $48 in damages.
Feb '95 Judge reduces award to $17 million, issues injunction against Marshfield.
Apr '95 Marshfield appeals.
May '95 Appeals Court "stays" injunction.
Sep '95 Appeals Court reverses lower court except on issue of dividing
market with Wausau which is sent back for a separate trial. All damages
Oct '95 BX asks for rehearing by Appeals Court and Federal Department of
Justice and Federal Trade Commission (FTC) file brief as "friend of
Oct '95 Rehearing denied and language of original opinion amended with
what looks like attempt to answer Justice and FTC concerns.
Oct '95 BX files motion to stay Appeals Court mandate pending appeal to
the Supreme Court.
The U.S. Department of Justice and the Federal Trade Commission had joined
Blue Cross & Blue Shield United of Wisconsin and Compcare Health Services
Insurance Corp. in their anti-trust lawsuit against the Marshfield Clinic
by filing a ``friend of the court'' brief with the U.S. 7th Circuit Court
of Appeals. Having done so, they have said they are not taking sides in
the dispute but that they have "a strong interest in the clear articulation
and proper application of antitrust principles."
It seems that the federal concern was opposition to the Appeals Court appearing
to preclude the possibility of a separate HMO market in any locale--the
central legal issue in this case. They were not taking a position pro or
con the BlueCross position that there is a separate HMO market in northern
Wisconsin that Marshfield has monopolized.
The Appeals Court, while denying the Blue Cross request for a rehearing,
appeared to address the concerns of Justice and FTC. The amended opinion
emphasizes that the Appeals Court found that "HMOs are not a market"
solely given the "record compiled in the district court." "Terms
such as 'HMO' and 'PPO' are used to refer to a variety of different types
of plans which may vary in respect to crucial antitrust liability."
Rural Medical Centers, Next Step
After seven years of preparation, AB 520 awaits the Governor's signature
and then the administrative rule making process. Please take the time to
thank Representative Steve Freese & Senator Dale Schultz who worked
hard to get this bill approved in 1995.
A Tale Of Seven Counties
Wisconsin's Medicaid statewide HMO expansion, initially off to a promising
start, may founder by the State's apparent unwillingness to abandon an
apparent love affair with mapsmanship
Here are the same seven counties as shown in three of the multiple State
Medicaid proposed configurations. While the shaded area reimbursemnt
rates are roughly the same in each picture, look what happens to Grant
and Richland counties. This is reimbursement policy by drawing, no
policy with this basis should be allowed to justify such local payment
swings of over twenty percent.
Alternatives reimbursement models that start with using more than the last
two years of data from rural counties and that would create a statewide
for individual high cost cases appear to have fallen on deaf ears. We hope
that before this plan is locked up, the State of Wisconsin will bring home
the new more rural friendly HMO payment models recently passed as part
of the House Medicare reform bill.
NRHA Fund Drive Deserves Support
"By keeping the Association strong, you are supporting an effective
voice for rural health as the Congress tries to balance the need for deficit
reduction with the need for providing quality and accessible health care
in rural America." (Cover letter by Congressman Steve Gunderson, initiating
the National Rural Health Associations 1995 Program Campaign.)
In response, the Cooperative has donated this year an extra $1,000 (Tip:
this was made possible by canceling our membership in another organization.)
Please make your own donation in proportion to your means to NRHA, One
West Armour Blvd., Suite 301, Kansas City, MO 64111. Additional information
may be obtained by calling them at (816) 756-3140.
Happiness Is ...
Commentary by Denise Denton, Colorado Rural Health Resource Center at the
Heartland Rural Health Forum:
If you want happiness
for a day, go fishing,
for a week, take a vacation,
for a month, get married,
for a year, win the lottery,
for your life, serve others.
Rural Nurse Execs & Cooperation
The following is an abstract of "Cooperative providers link between
rural hospitals," from the October, 1995 edition of Nursingmatters,
by Sherry Kudronowicz (Darlington), RN, Karon R. Keene (Prairie du Sac),
RN, MSN and Sherry L. Quamme, RN, MS. (Columbus)
" 'As a nurse executive in a rural hospital, the Rural Wisconsin Health
Cooperative (RWHC) Clinical and Executive Roundtables have become lifelines
of information and opportunities for sharing current knowledge. In the
spirit of cooperation and collaboration with each other, sharing in the
process of policy development and learning through a variety of experiences
has proven invaluable to me,' said Beverly Hoege, RN, assistant administrator
at Reedsburg Hospital."
"Cooperation and collaboration are words of the '90s for health care
providers, just as competition frequently is. For nursing leaders and nurse
executives, financial resources have been shrinking as budgets continue
to get tighter. Holding the line on cost to patient populations is a primary
"Competency has also become an important issue for nurse executives
and nurse managers to address with their respective nursing staff members.
One way the member hospitals of RWHC have been successful in addressing
all five issues is through the implementation of the Clinical Nurse Specialist
consultation contact. Member hospitals who need ongoing consultation, staff
development and quality improvement / process improvement work, along with
competency validation, development or documentation can seek this support
through a contractual relationship with the RWHC."
"Perhaps the most valuable, yet intangible, benefit of the RWHC Nurse
Executive group is networking. They do not consider themselves competitors.
Sharing of policies, ideas, and solutions to problems all occur within
an atmosphere of cooperation and willingness to assist. This happens on
both an informal, call-a-friend basis, and through formal sharing at the
"There are special challenges in managing a small hospital and members
appreciate having colleagues to call on who are dealing with similar staffs,
hospital structures and issues. Nurse executives are faced with the need
to provide many of the same services, and meet the same standards as large
hospitals, yet with far fewer human and financial resources."
" 'The RWHC Roundtables offer an opportunity to speak openly about
what is happening in facilities of similar size and circumstance. Analyzing
industry changes affecting small community hospitals delivery of services
- sharing how you or others have met challenges or collaborating on ideas
for doing something new is helpful beyond words,' said Myrna Garnett, director
of nursing-Adams County Memorial Hospital."
Quamme Pres. of Southwest AHEC
Sherry Quamme, Associate Administrator at Columbus Community Hospital has
long served on the Statewide AHEC Advisory Committee and has now been elected
President of the Southwest AHEC Board of Directors. (AHEC stands for area
health education center, our principle mechanism for linking academe and
community, Wisconsin in divided into four sections, each with its own Center.)
Sherry will help the Southwest AHEC continue to develop its strong community
based focus. This is also a good opportunity to publicly say thanks to
Sherry as she ends six years as chair of the RWHC Nurse Executive Roundtable.
RWHC Nurse Consultant
OK, you're noting a theme, I admit it, this section of this newsletter
is focusing on nursing, while deserved, it came by chance, not design--the
design principle of this newsletter. Ever other month until we run out
of people, I will be putting here a snapshot of the individuals who work
out of the Sauk City office so that you can associate familiar names with
sometimes less familiar faces.
Linda Briggs, RN, MS
Linda has worked for the Cooperative for three years as a Clinical Nurse
Specialist. Living in Fitchburg, she is married with three boys. As an
athletic part of the office, she loves volleyball, softball and all Badger
Interdisciplinary Primary Care
The historic convening of a joint work group of the Council on Graduate
Medical Education and the National Advisory Council on Nurse Education
and Practice has just completed its Final Report. The two co-chairs
are both from Wisconsin and active in stateprimary care policy initiatives,
David Kindig and Vivian Littlefield. "The work group focused on two
issues of particular importance to an interdisciplinary work force: collaboration,
and territorialism and power...".
Their statement was as follows:
Education in the Health Professions
The concept of teamwork must be developed in the educational setting, when
attitudes and identities are being formed. At the same time, educators
should ensure that students have developed all of their areas of competence.
Whereas a team works collaboratively, leadership on a team could best be
described as collegial. Situational leadership may work on a team. However,
it is important that a single individual take responsibility for a patient.
Roles of Team Members
Each professional has something unique to contribute to the team, with
the result being synergistic. It is important to stress that one professional
is never to be "substituted" for another.
Professional ethics need to be ensured. Particular points to be stressed
are a focus on patient care, rather than team dynamics as such or service
to the system, an understanding of limits to competence, collegiality,
the presence of checks and balances, responsibility, and commitment.
Various Social Factors
Other factors affect the operations of teams, from gender and age differences,
to the need for diversity, to the sometimes dysfunctional relationship
between medicine and nursing.
Midwest To Mideast Via Web
Our new World Wide Web site and advertisement for RWHC competency-based
education (CBE) materials has lived up to its name. This week we received
our first international inquiry, an email request for more information
from Saudi Arabia. Our CBE materials define performance expectations for
a wide range of health professionals through a master competency checklist
and performance criteria. In two months, we have received over 500 "visitors"
from US and as far as we know, also Canada and Puerto Rico.
We All Need Additional NRHA Members
A common thread about all that you have read so far in this newsletter
is the National Rural Health Association. As a member of the NRHA Rural
Health Policy Board I have agreed to recruit new members. If you are not
listed in their Membership Directory, please call me so that I can help
get you informational materials, and get credit for you joining. Our national
association can not be too strong if your local interests are to be kept
out in front of the national debate. Organizational dues range from $300
to $1,100 based on annual operating expenses. Individual memberships (i.e.
those paid by personal check) are $100.
By Peter Archer, Court Correspondent for the Press Association News
"The Queen suffered bruising when she was hit by a plummeting bird
shot on a highland grouse shoot. The shot grouse hit the Queen's shoulder
with some force when it fell from a misty sky during a shoot two weeks
ago at Balmoral, her Scottish estate. Buckingham Palace confirmed that
'a shot bird spiraled from the sky on a misty morning and brushed off the
Queen's shoulder,' a palace spokesman told PA News 'the shoulder was bruised
but there was no serious damage and the Queen carried on.' "
We in Wisconsin will have a rare opportunity to see Harold Brown, NRHA
President and consequently always on the road, offering welcoming remarks
for a NRHA workshop on Community Development. It takes place at the Hyatt
Regency, Savannah, Georgia, from the evening of December 7th though noon
on the 9th.
"The conference will offer rural health providers, concerned citizens,
community leaders and policy-makers the opportunity to learn about how
to improve local involvement in effective community health care decision
Call NRHA at 816-756-3140 if you did want more information.
Regional Health Networks Meeting
The National Cooperative of Health Networks (NCHN) is holding its winter
conference in Phoenix, Arizona on December 3rd to the 5th. This is a meeting
by and for regional network administrators. In addition to a NCHN business
meeting and strategic planning session the following workshops will be
- Monitoring and managing Health Information
- Loan Tracking
- Home Health Network Development
- Outsourcing Services
- Community Based Health Plans
Call Paul Hazen at the National Cooperative Business Association (202-638-6726)
for more information.