On the wrong PATH. A lawsuit filed by the Association of American Medical Colleges, the American Medical Association, and numerous other medical associations and academic institutions was dismissed April 27.
The suit was filed in an effort to end the PATH investigations that are being conducted by the HHS Office of the Inspector General to expose Medicare fraud. The suit contends the investigation's targeting of teaching physicians is unfair and in need of review.
Judge Carlos Moreno of the U.S. District Court for the Central District of California ruled the suit was not appropriate for litigation at this time because the plaintiffs had not exhausted all of their administrative options.
Because the foundation for Moreno's decision was essentially the issue of timing, his ruling did not address the merits of the case.
The AAMC and the AMA, along with the other complainants, say they will consider appealing the decision after they review the written ruling.
Let the buying begin. InteCardia, a Chapel Hill, N.C.-based practice management company that specializes in cardiology, has secured a commitment of $18 million in venture capital financing from investors led by the Sprout Group.
A portion of the new financing will be used to acquire the operating assets of Scranton Cardiovascular Group, Scranton, Pa. The remainder will be used to fund the purchase of additional cardiology practices and the ongoing expansion of InteCardia's corporate operations, according to Timothy Trost, senior vice president and CFO of InteCardia.
InteCardia has plans to purchase a number of cardiology practices in the eastern United States, with the intention of integrating the practices into regional organizations. The new financing will speed this process along.
Though the Sprout Group, along with Pacific Venture Group and Delphi Ventures, have provided most of the $18 million, Trost expects that affiliated cardiology groups will own more than half of the company in upcoming years.
Exceeding the limits. Surprise raids at 12 teaching hospitals by inspectors from the New York Health Commissioner's office revealed a large number of medical residents are being forced to work well in excess of state-imposed limits: 80 hours per week and no more than 24 consecutive hours.
Inspectors found that working hours for 37% of the 391 residents surveyed exceeded the state limits.
Surgical residents clocked the most hours: For 94% of residents in New York City hospitals, a typical work week consists of more than 85 hours; 77% work more than 95 hours. Elsewhere in the state, 53% of surgical residents worked more than 85 hours and 32% worked more than 95 hours.
Statewide, 37% of the residents surveyed worked more than 24 consecutive hours during a week.
The limits on resident work hours were set in 1989 by the Health Department in an effort to protect patients from medical errors resulting from sleep-deprived and overworked physicians.
PRG results in. Physicians Resource Group, a Dallas-based eye-care physician practice management company, said it earned $379,000, or 1 cent per share, on revenue of $101.3 million in the first quarter of 1998. In the first quarter of 1997, net income was $4.7 million, or 16 cents per share, on $98.5 million of revenue.
The decline was not unexpected, given PRG's recent financial problems (January, February, May 1998). PRG is in the midst of selling or shutting down 44 practices to cut costs.
In a report filed with the Securities and Exchange Commission on May 15, PRG also said that it would amortize its goodwill over 25 years rather than 40 years, retroactive to Jan. 1. Other PPMs, including PhyCor, are charging expenses on goodwill, the intangible benefit of acquiring a practice, over a shorter period because of SEC questioning of whether the 40-year period is too long.
Joining up. Fewer than 3% of the nation's 600,000 active physicians have sold their practices to, or partnered with, publicly owned practice management organizations, according to a recent study by Hambrecht & Quist, San Francisco.
The report, which pegs the market for physician services in the United States at $215 billion, says the growth of managed care, the desire of physicians to accept risk and advances in information technology are pushing physicians to organize and consolidate. But the report notes ther are a variety of busines models among PPMs.
The three preferred revenue-growth strategies for physician organizations, according to the study, are taking on insurance risk, providing ancillary services and securing contracts to provide hospital-based physician services.
Good news, bad news. Despite the expectation that underlying healthcare costs would accelerate in 1998, most medical trend rates -- the factors on which insurers and HMOs base premium increases -- will likely hold steady or increase only slightly, according to a survey of 30 leading health insurers and HMOs by Sedgwick Noble Lowndes, an international employee benefits consulting firm.
However, much of the positive inertia in health plan costs has been achieved through plan design changes and increased employee cost-sharing through deductible, coinsurance or contribution changes rather than the elimination of the underlying rate of inflation.
"While trends held relatively steady this year, the storm clouds are rolling in," says William S. Gibson Jr., the survey's author and Sedgwick's vice president of group benefits. "Future healthcare contracts are expected to be more favorable to providers and rates will begin to pick up late this year and into 1999."
The survey indicates rising prescription drug costs -- increasing at two to three times the rate of medical care -- is causing the most uncertainty in healthcare (see related story, page 32).
The survey examined seven trend components -- inflation, leveraging, cost shifting, antiselection, technological advances, social shifts and utilization.
The survey found medical inflation, which ran 4.2% in 1998, to be the largest component of rising healthcare costs, followed by increased utilization at 1.8% and cost-shifting at 1.1%.