By Christopher Guadagnino, Ph.D.

PA Health Secretary Daniel Hoffman

Published October 1997

• React to this article in the Discussion Forum.

Seven managed care policy work groups were convened on August 6 by state Health Secretary Daniel F. Hoffmann and are now underway to discuss and make recommendations to the Ridge administration in seven areas: consumer issues, data collection, risk assessment-fiscal/financial issues, special needs populations, behavioral health, providers-networks-capacity-access, and standards-quality assurance-utilization-credentialing.

According to Hoffmann, each work group is to send to him recommendations for their topic area by October 31, after which he will publish them in uncensored form for public hearings tentatively scheduled for late November. The public responses will be reviewed by a steering committee—composed of the Health Secretary; the Deputy Secretary for Quality Assurance; representatives from the Department of Health’s Office of Legal Council, Policy Office and Office of Legislative Affairs; the Director of the Bureau of Managed Care; and a representative from the Governor’s Policy Office—and staff from the Departments of Public Welfare, Aging, Insurance and Education.

Hoffmann says he will present final recommendations to the Governor in January, 1998. Ultimately, the recommendations can take the form of either legislation or regulations. Should there be legislative recommendations, notes Hoffmann, the Department of Health will look for legislative sponsors. As there are a number of managed care bills currently in the state legislature, preemptive action on their part is still a possibility before the work group recommendations become public. As for regulatory recommendations, of course, the governor would be able to act upon them independently from bills in the legislature.

The outcome of these newly formed policy work groups may represent a realistic opportunity for shaping the state’s health care landscape simultaneously on several fronts.

A skeptic might charge, conversely, that resulting regulations are likely to be largely cosmetic, unable to penetrate the financial influence and political priorities of the most powerful participants. "Given that there are currently over a dozen pieces of legislation in the general assembly that address abuses by managed care entities such as delayed payments and denials of care," the administration can ill afford to ignore the need for regulations, "or they’re going to come back and bite them either two years or four years hence," notes Don McCoy, director of regulatory affairs of the Pennsylvania Medical Society (PMS). "If they do water this down to the point that it is pro-industry only," adds McCoy, "I think they are going to have to come back and revisit it by means of legislation."

This initiative demands physician attention, as regulation of managed care is a top priority. Other states, most notably New Jersey, have outpaced Pennsylvania in regulating managed care. Now Pennsylvania’s turn may be expedited.

Pennsylvania is long overdue in updating its approach to managed care regulation, proclaims Hoffmann. The impetus for the managed care stakeholder work group project came from "a Department of Health realization that we have 1983 rules and regulations that we’re working with to implement managed care policy," says Hoffmann.

The work group model was chosen because it had worked well when the Health Department issued draft regulations after sunset of the state’s certificate of need law, says Molly Raphael, the Health Department’s deputy secretary for quality assurance. Those draft regulations concern issues such as long term care and cardiac surgery, and are now past their public comment interval and are in the second phase of the drafting process, explains Raphael.

The managed care work groups are comprised of key health care industry stakeholders—approximately 140 individuals from 75 organizations—including insurance, nursing, hospitals, physicians, consumers, business and industry, organized labor, pharmacists, the legal community, mental health, and legislative representatives from House and Senate Health and Welfare Committees, according to the Health Department. The steering committee selected participants by generating a list of major players in the health care arena and inviting representatives from organizations to attend a July meeting in Harrisburg. The organizations were then invited to submit names of participants for the work groups.

Each group was given a defined mission to accomplish and several key questions that need to be answered by the group and that could generate additional questions by the groups, notes Hoffmann. Groups were instructed to balance their final recommendations among the three interests of consumers, providers and insurers.

The providers-networks-capacity-access group, for example, was given questions such as, How do we define, measure and monitor capacity and access? What is the right number of specialists? How many MCOs should one provider or provider group be permitted to join?

The risk assessment group was given the questions, What is the role of risk in managed care? Who should assume risk? Who is accountable? Who monitors consequences? What should be the threshold of regulation? What financial reporting should be required by the state? Should the state regulate solvency?

To the standards-quality assurance-utilization-credentialing group, questions that were posed include: Do all providers within a managed care company have a professional license? Should they? How should we define minimum standards? How do we measure quality of outcomes? How do we connect this to credentialing? What is the right number of specialists?

Physician representation in the work groups is accounted for by the PMS, which has members on each of the seven work groups, according to McCoy. Among the participants representing hospital interests are Hospital and Healthsystems Association of Pennsylvania, Penn State Geisinger and University of Pittsburgh Medical Center. Among the insurance industry participants are the four Blue Cross companies in the state, Health America, U.S. Healthcare, QualMed, Health Partners, PhilCare, Prudential, Best Health Care, Managed Care Association, AmeriChoice and Three Rivers Health Plan.

The PMS, as the sole physician voice in the process, brings a number of concerns to the table. It hopes the work groups generate a documented rationale to guide new managed care regulation, statutes and statements of policy, replacing a medley of advisories, partial regulations and policy statements that have no force of law and change with the administration, says McCoy.

As an example, McCoy notes that one of the advisories generated in the early 1990s instructing HMOs how to gain Department of Health approval to use nurse practitioners as primary care providers did not go through the public comment process. The PMS hopes to be able to produce in the work groups "a statement that there will be no ‘end runs’ in advisory opinions or policy statements unless it is of an emergency nature, and that those things be supplemented with regulations as soon as is feasible," says McCoy.

Among the agenda items the PMS is advocating in the groups, notes McCoy, is defining in regulations the role of the primary care provider and whether it should be expanded to include other practitioners, or whether it should be defined according to the types of services that they are permitted to provide within their scope of practice. McCoy says he has been in contact with a number of primary care groups during the process.

Another concrete PMS goal is to put regulatory force into the existing statement of policy on risk assumption by integrated delivery systems, which heretofore has been interpreted in various ways, depending on whether an insurer wanted to work with provider- or physician-sponsored organizations or wanted to restrict competition, notes McCoy.

Also on the PMS agenda, McCoy adds, is for the work groups to build a set of consensual professional standards that could weather ongoing changes in health care delivery without the need continually to generate new regulations. Those standards would apply to HMO credentialing organizations, HMO credentialing of physicians, practice standards by national specialties, collaborative arrangements among practice types in a market, annual site visits required for providers in a network and patient satisfaction surveys, says McCoy.

McCoy believes the outcomes of the managed care work groups will be significant. He sat on 10 of the 14 quality assurance task forces this past winter that were assembled in response to the certificate of need sunset, and were used as the model for the present groups. He notes that participants were successful in putting aside their constituency hats and developing substantive recommendations for clinical standards in chapters of hospital rules and regulations that he believes were universally endorsed by the participants.

The process at hand can run into difficulty, McCoy concedes, in the imposition of clinical standards versus monetary or administrative standards of the managed care industry; in assigning roles to various practitioners; in determining freedom to access those who are not primary care providers, specialists, or who are out of the network and, plainly put, "who’s calling the shots."

One could question the objectivity of the administration’s handling of the work groups’ output, a point McCoy acknowledges: "You have an administration that basically wants to try to minimize regulation by state government of any industry, and to allow marketplace changes to influence the market. But I think they have recognized that there have to be certain minimum standards there for protection and fairness in the system." Given the considerable media publicity and consumer advocacy of such issues, McCoy maintains, "I don’t think they can turn their back on those issues, nor do I think they would."

To the question of the administration’s objective handling of the groups’ output, Hoffmann responds that "to have these work groups just go through the steps and then do what you want anyway would be an illogical extreme and a lot of work for nothing. That’s not my intent. All of these recommendations are going to be taken very seriously, and if they’re going to be modified, it will be because of the balance issue. It’s not like we’re starting with a foregone conclusion and having it seconded by these committees."

As to whether the work groups’ outcomes may weigh more heavily in favor of insurance companies because of the industry’s considerable clout, Hoffmann responds, "That’s always a risk. Final product will be the measure of the day." Another mitigating factor is that the insurance companies themselves are in competition and do not collectively represent a monolithic lobby within the work groups.

Although physician groups other than the PMS are not represented on the work groups, they may still play an essential role in the process, believes John Nickoloff, executive director of the Pennsylvania Society of Internal Medicine (PSIM). "Physician organizations have taken an active role in Harrisburg, both in the legislative and the regulatory process. They do play an ongoing role with daily discussions with the Departments of Health, Aging, Public Welfare, Labor and Industry," he says. "The people involved in those ongoing discussions for PSIM, for the Academy of Family Practice, for the Academy of Pediatrics and other organizations are going to continue those efforts, watch carefully what comes out of the managed care work groups and seek to have additional input as that process unfolds."

These work groups are going to have a significant impact on managed care policymaking, believes Hoffmann. He explains that the Health Department will attempt to assimilate consumer, provider and insurer interests reflected in all points of view from the groups into a balanced set of recommendations for the Governor’s consideration, a task he concedes will likely be difficult. "We’re going to look for rationality, whether they’re internally balanced to their work group mission. Then we’re going to have to take them against the recommendations that other work groups have. There may be contradictions that we will have to balance." The validity of the recommendations in the eyes of the Health Department, says Hoffmann, will be based on how well the groups attempt to balance their competing interests.