1. Introduction to Health Care Law Professor Edward P. Richards LSU Law Center http://biotech.law.lsu.edu/ http://biotech.law.lsu.edu/

2. 2 Key Issues Scientific medicine is about 120 years old Technology based medicine is less than 60 years old Doctors are not scientists and many do not practice scientific medicine. There is no stable model for medical businesses, leading to constant change and unending legal problems. Health care finance shapes medical care and is a huge mess

3. Critical Dates in Medicine

4. 4 1400s Birth of Hospitals Places where nuns took care of the dying No medical care – against the Church’s teachings No sanitation – assured you would die

5. 5 Early 16th Century Paracelsus Transition From Alchemy

6. 6 Mid 16th Century Andreas Vesalius Accurate Anatomy

7. 7 Early 17th Century William Harvey Blood Circulation – the body is dynamic, not static

8. 8 1800 Edward Jenner Smallpox and the notion of vaccination

9. 9 1846 William Morton - Ether Anesthesia

10. 10 1849 Semmelweis Childbed Fever and sanitation Controlled Studies

11. 11 1854 John Snow Proved Cholera Is Waterborne Basis of the public sanitation movement

12. 12 1860-1880s Louis Pasteur Scientific Method Simple Germ Theory Vaccination For Rabies Pasteurization to kill bacteria in milk

13. 13 1867-1880 Joseph Lister Antisepsis – surgeons should wash their hands and everything else, then use disinfectants Listerine

14. 14 1880s Koch Modern Germ Theory Organic Chemistry Birth of the modern drug business The real starting point for scientific medicine

15. 15 1850s - 1900s Sanitation Movement - Modern Public Health

16. 16 Schools of Practice - Pre-Science (1800s) Allopathy Opposite Actions Toxic and Nasty Homeopathy Same Action as the Disease Symptoms Tiny Doses Less Dangerous Naturopaths, Chiropractors, Osteopaths, and Several Other Schools

17. 17 Most Medical Schools are Diploma Mills No Bar to Entry to Profession Small Number of Urban Physicians are Rich Most Physicians are Poor Cannot Make Capital Investments Training Medical Equipment and Staff Physicians Push for State Regulation to create a monopoly

18. 18 Legal Consequences No Testimony Across Schools of Practice Different from Medical Specialties Surgery, Internal Medicine, Pediatrics All Same School of Practice - Allopathy All Same License Cross-Specialty Testimony Allowed Still important with the rise of alternative/quack medicine

19. Transition to Modern Medicine and Surgery

20. 20 The Business of Medicine Mid to Late 1800s Physicians are Solo Practitioners Most Make Little Money Have Limited Respect

21. 21 Surgery Starts to Work in the 1880s Surgery Can Be Precise - Anesthesia Patients Do Not Get Infected - Antisepsis

22. 22 Effect on Licensing and Education Once there are objective differences (people live) between qualified and unqualified docs, people care You can make more money with better training You can make more money with better equipment and facilities Effective Medicine Drives Licensing Licensing Limits Competition Physicians Start to Make Money

23. The Tipping Point About 1910, going to the doctor, and particularly the hospital, shifted from being more dangerous than avoiding them to increasing your chance of survival.

24. 24 Bars on Corporate Practice of Medicine - 1920s Physicians Working for Non-physicians Concerns About Professional Judgment Cases From 1920 Read Like the Headlines Banned In Most States Real Concern Was Laymen Making Money off Physicians

25. 25 Physician Practices Shaped by Corporate Practice Laws Sole Proprietorships Partnerships Mostly Small Some Large Groups First Organized As Partnerships Then As Professional Corporations

26. 26 Impact of Corporate Bans on Institutional Practice Physicians Do Not Work for Non-Governmental Hospitals Contracts Governed by Medical Staff Bylaws Sham of “Buying” Practices Physicians Contract With Most Institutions Charade of Captive Physician Groups Managed Care Companies Contact With Group Group Enforces Managed Care Company’s Rules Physicians Can Be As Ruthless As Anyone

27. Evolution of Hospital Administration From Nuns to MBAs

28. 28 From Hotel to High Tech - The Evolution of Hospitals Started With Surgery Medical Laboratories Bacteriology Microanatomy Radiology Services and Sanitation Attract Patients Internal Medicine Obstetrics Patients

29. 29 Post WW II Technology Ventilators (Polio) Electronic Monitors Intensive Care Hospitals Shift From Hotel Services to Technology Oriented Nursing

30. 30 Post World War II Medicine Conquering Microbial Diseases Vaccines Antibiotics Chronic Diseases Better Drugs Better Studies Childhood Leukemia

31. 31 Hospital Liability - Old Days Charitable Immunity No professional services Physicians provided or supervised professional services No Independent Liability for Nurses No Liability for Physician malpractice

32. 32 Reformation of Hospitals Paralleled Changes in the Medical Profession Began in the 1880s Shift From Religious to Secular Began in the Midwest and West Not As Many Established Religious Hospitals Today, Religious Orders Still Control A Majority of Hospitals

33. 33 After Professionalization Demise of Charitable Immunity Liability for Nursing Staff Negligent Selection and Retention Liability for Medical Staff

34. 34 Hospital Staff Privileges Physicians are Independent Contractors Hospitals Are Not Vicariously Liable for Independent Contractor Physicians Hospitals Are Liable for Negligent Credentialing and Negligent Retention Hospitals Can Be Liable if the Physician is an Ostensible Agent

35. 35 Joint Commission on Accreditation of Hospitals 1950s Now Joint Commission on Accreditation of Health Care Organizations American College of Surgeons and American Hospital Association Split The Power In Hospitals Medical Staff Controls Medical Staff Administrators Control Everything Else Enforced By Accreditation

36. 36 Contemporary Hospital Organization Classic Corporate Organizations CEO Board of Trustees Has Final Authority Part of Conglomerate Medical Staff Committees Tied To Corporation by Bylaws Headed by Medical Director Constant Conflict of Interest/Antitrust Issues

37. 37 Medical Staff Bylaws Contract Between Physicians and Hospital Not Like the Bylaws of a Business Selection Criteria Contractual Due Process For Termination Negotiated Between Medical Staff and Hospital Board

38. 38 Health Care Finance From the Blues to Managed Care

39. 39 Paying for Medical Care Pre-WW II Mostly Private Pay Some Employer Provided - Kaiser WW II Price Controls Post WW II Health Insurance As Benefit Private Insurance The Blues Medicare/Medicaid

40. 40 Blue Cross - Blue Shield - 1930s Developed by Docs and Hospitals Sold to Teachers Assure Access Assure Payment Jump started by WWII Non-pay benefits under wage controls

41. 41 The Blues Reimbursement Policy Pay Whatever Was Charged Subsidize the Rural Areas Subsidized Over-bedding and Over Treatment

42. Federal Programs

43. 43 Social Security Income and Disability 1930s Lifted the elderly out of poverty Provided disability insurance for workers The disability is quite a big and valuable program and pays for a lot of medical care

44. 44 Hill-Burton Post-WWII Funded construction of community hospitals Had community service requirements, but those have all expired Created the US emphasis on hospital based care Spent from the 1970s to the 1990s reducing hospital beds to control costs Excess beds or Surge Capacity?

45. 45 The Great Society Medicare Old People Certain disabled people Medicaid Poor People Nursing Homes About 40% of medical dollars Fought by the AMA Made Docs Rich

46. 46 No Good Old Days for Patients Gaming the System under Fee For Service Right to Die As Example Cannot Just Open the Checkbook Greed Is Not Good in Medical Care Fee for Service Drives Unnecessary Care Hospitals Have to Care More About Money Than Patients Rich Docs Are Not Always Better Docs

47. 47 Federal Interventions Feds Pay nearly 50% of Health Care Other Plans Follow the Feds Usual and Customary Charges for Docs Based on the Community Adjusted for the Docs Previous Charges Complex

48. 48 Hospital Costs Big Dollars Are in the Hospital Charges Docs only get 20-25% of the health care budget Hospitals get a lot of the rest Drugs are an increasing share Fee for Service Drove Unnecessary Care Open-end Reimbursement drove High Prices Hospitals did not even know costs

49. 49 Diagnosis Related Groups - DRGs - 1983 Watershed in Health Care Reimbursement Prospective Payment (Capitation) Based on Admitting Diagnosis Fixed Payment Some Adjustments Encouraged health insurers to also manage physician care

50. 50 Making Money Under DRGs Fewer Tests and Procedures Complete Reversal of Prior Reimbursement No Bump for ICU Reduce Length of Stay Dropped About 20% at Once, continued to drop Ideal Is Out the Door, Dead or Alive Patients Discharged Much Sicker Which Was Right, Then or Now?

51. 51 Federal Laws Enabling Managed Care for Docs Federal HMO Act in the 1970s Preempted State Laws Banning Prepaid Care ERISA Passed to allow labor unions to negotiate national health plans with big employers Preempts state regulation of certain self-insured health plans Gave self-insured plans an edge and drove most employers to them

52. 52 Managed Care Organizations - MCOs Insurance Plans That Control Patient Care Includes the Old Alphabet Soup HMOs PPOs IPAs

53. 53 Two Major Variables Employer or Contractor Do the docs work for the plan or a captive group? Do the docs contract with many plans, treating patients based on different plan benefits? Open or Closed Do the docs treat only patients from a single plan or a mix of plans? Why do these matter? Leverage on the doc's decisions

54. 54 Direct Controls on Costs Pay Less for Services Use Market Power to Bargain Control Access Points Limit Hospital Stays Limit Tests, Procedures, and Referrals Direct Control of Access Pre-approval Tell the Docs What to Do Most Honest

55. 55 Indirect Controls Capitation CRF--Consultation and Referral Funds Withhold and Incentive Pools Stop-loss and Reinsurance Total Capitation Economic Credentialing Dumb Down Services Free Ride on Other Plans or the Government

56. 56 Deferring Care Stop-gap Care Keep You Out of the Hospital Keep You Away From Specialists Managing Crises, Not Solving Problems Only works in the short term, but plans only think in the short term Unsustainable Policies - Plans Are Going Broke

57. 57 How Patients Get Hurt - Easy Answers Denied Care - the Usual Lawsuit Incompetent Care by Bad Doc Incompetent Care by a Non-doc Putting Patients in Dangerous Facilities Not Using Proper Drugs Simple Negligence

58. 58 Good Docs Do Bad Things Too Little Time to See the Patients Inadequate Labs and X-ray Available Locked Into Problematic Specialists Patients Cannot Get in to See You Lose Control in the Hospital

59. 59 Why Fears of Malpractice do not Improve Care Too Far Away in Time Too Uncertain Fight for Quality - Die Today Lose Your Job Get Hit With Restrictive Covenants Get Blackballed by Other Plans Get Reported to the BOME for Alleged Bad Care ERISA Preemption

60. 60 Kill the Messenger Phase - 1990s Plans Will Not Tolerate Dissent Key Issues: Avoid Notice of Problems Keep Other Staff in Line Keep Patients in the Dark Keep Regulators Ignorant Gag Rules Fire’em Gresham’s Law

61. 61 Post-Pegram Days Pegram hinted at plan liability for meddling in care Plans moved to global controls Limitations in the policies Incentives and holdbacks to force rationing on the physicians Generally are pushing down the payment for care Primary care income has been falling for a decade

62. 62 Hospital Economics Old Days More Patients Meant More Money More Docs to Admit Patients Insurance Was So Generous It Cross-subsidized Indigent Care Now Hospital beds are being closed to save money DRGS- Insurance and Government Pay is Very Limited - No Cross-Subsidy Under-Insured or Over-Cared-For Patients Cost Money

63. 63 Nursing Homes Mostly for-profit Driven by changes in effectiveness of medical care and demographics Hospitals kept patients for months in the old days As care improved, there was pressure move chronic care patients out

64. 64 Nursing Homes and DRGs DRGs shortened hospital stays Acuity went up More pressure to move patients to nursing homes Relatively lax standard and regulations, compared to hospitals Lots of litigation

65. 65 Specialty Hospitals Complex care is safer when regionalized Specialty hospitals can provide better care at lower prices Do not need to provide money losing services Do not take uninsured patients Shift the most valuable patients from community hospitals Dramatically increase unnecessary surgery

66. 66 Bottom-Line Health care is an industry in transition Key Problems Access Cost Distributive justice Quality

67. 67