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A New Jersey federal judge in November tossed out the state's lawsuit challenging limits on federal funding for the State Children's Health Insurance Program. But state officials and policy experts said some good still came out of the case, part of a nationwide outcry against the new policy that led the Centers for Medicare & Medicaid Services to delay enforcement of the limits, at least temporarily.

The CMS directive -- which was first announced Aug. 17, 2007, and took effect a year later -- prohibits states from using federal funds to cover uninsured children in families earning more than 250% of the federal poverty level. States can avoid the restriction only if they can prove that at least 95% of eligible children at or below 200% of the poverty level are enrolled in Medicaid or SCHIP, as well as meet other standards. They also can cover kids at higher family incomes using state dollars alone.

In October 2007, Gov. Jon S. Corzine sued CMS to block the rules, alleging that the government violated federal law by issuing such a significant policy change without any notice or public comment period. New Jersey received the government's approval in 1999 to expand its SCHIP program to children in families earning up to 350% of the federal poverty level.

The changes threatened coverage for as many as 10,000 children enrolled in the state program, known as FamilyCare, according to a friend-of-the-court brief filed by the New Jersey Chapter of the American Academy of Pediatrics and other patient advocates. That figure did not include the thousands of other eligible children in the state not yet covered by SCHIP.

The rules -- which were deemed to affect at least 17 states -- also drew widespread criticism from a number of other states, federal lawmakers and physician organizations, including the American Medical Association.

At least 17 states are affected by CMS' SCHIP limits.

But because CMS announced in August that it would delay enforcement of its directive indefinitely, New Jersey District Judge Joel Pisano concluded Nov. 17 that the state's lawsuit was premature.

If the agency eventually decides to take action against New Jersey for noncompliance, the state has several remedies. Those options include negotiating with CMS or seeking legal recourse in court at that time, Pisano wrote.

The impact that the ruling could have on a separate, similar lawsuit filed by several other states remains unclear. That case remains pending in New York district court.

A fresh start

Despite the legal setback, New Jersey and other states are anticipating changes under the incoming administration that would allow them to continue planned expansions of child health coverage.

"Since we sued to assure our most vulnerable remain eligible to receive SCHIP benefits, the Bush administration backed off," said Corzine spokesman Robert Corrales. "We look forward to the fresh ideas and approaches of the incoming administration of President-elect Obama."

New Jersey's SCHIP had earlier approval to expand coverage to families earning up to 350% of the federal poverty level.

CMS also had made the announcement that it would delay enforcement of the federal funding limits after California said it would not comply with what it considered a violation of state law. The Bush administration gave no indication that it had made its decision based on that challenge or on pressure from other quarters.

Physicians also await SCHIP improvements soon after Obama takes office. The program is set to expire March 31, 2009, and congressional Democrats aim to expand the size of the program at the same time that they reauthorize it.

Children remain "one of the most underinsured, underserved groups in the community," said Michael L. Segarra, MD, president of the AAP's New Jersey chapter.

Expansions halted

The threat of the CMS directive had forced a number of states to halt planned SCHIP expansions or rely on state funds alone to augment their programs, said Rachel Klein, deputy director of health policy for the advocacy group Families USA. Her organization supported the state lawsuits, which Klein agreed have been successful in keeping the federal directive at bay thus far.

But in the meantime, many states already offering coverage beyond 250% of the federal poverty level have yet to roll back these expansions. "That's an indication states are hopeful for quick action" to lift the limits in 2009, Klein said. Families USA has filed comments asking the Obama administration immediately to rescind the CMS directive.

Other states have legislation ready to move that would grow their uninsured programs under SCHIP in the coming year.

CMS spokesman Jeff Nelligan said the agency was pleased with the New Jersey federal court decision, which allows the administration "to move forward with its goal of placing the poor and uninsured first in line to receive health care."

Despite the enforcement delay on the directive, CMS has been working with states to get them in compliance voluntarily. By the time the new policy took effect, the agency was indicating that more than half of the roughly 17 affected states already may have been in line with the requirements.

Nelligan declined to say whether the agency eventually intends to enforce the rules.

As HIPAA continues to raise hurdles for defendants in medical liability cases, courts in Georgia and Michigan addressed the role of the statute.

The courts interpreted to what extent, if any, the Health Insurance Portability and Accountability Act prevents a defendant physician's attorney from informally interviewing a plaintiff's prior or subsequent treating doctor in the course of litigation. The plaintiffs in the two cases sought to prevent any discussions regarding their medical histories, saying that would violate the federal privacy statute.

In a Nov. 3 ruling, the Georgia Supreme Court found that HIPAA preempted a state law allowing such oral communications without first notifying the patient. Justices unanimously said the federal regulation "affords patients more control over their medical records," and defendants must comply with the stronger privacy regulations. That means they may have those discussions, but only after obtaining patient authorization, a court order or other legal instruction.

The defendant physician in the case is asking the high court to reconsider its decision.

Protection or sword?

"What this comes down to is a fairness issue," said Donald Palmisano Jr., general counsel to the Medical Assn. of Georgia. The organization filed a friend-of-the-court brief in the case. Rather than invoking HIPAA to protect patients' privacy, "plaintiffs are using HIPAA as a sword to keep the defense from accessing crucial evidence in a claim," while plaintiffs have unfettered access to their treating physicians, Palmisano said.

While HIPAA affords patients certain confidentiality, it was not intended to interfere with judicial procedures, Palmisano said. Such procedures were left up to state law. In Georgia, as in many states, plaintiffs waive any privacy rights related to their medical conditions at issue in a case, he noted.

In Georgia, plaintiffs waive any privacy rights related to the medical conditions at issue.

Henry D. Green Jr., the defense attorney in the case, said the state law also satisfied the federal requirements by giving plaintiffs a chance to object to any requests. Absent a dispute, the treating doctor would be authorized to release the information.

But the high court concluded that wasn't enough, saying patients' privacy rights must come first. Georgia law "facilitates and streamlines the litigation process; it was not designed to protect a patient's private health information in the course of oral communication," the opinion states.

An attorney for the plaintiff did not return calls for comment.

Sorting out the confusion

In a similar case in Michigan, the defendant physician had obtained a protective order, as outlined under the federal HIPAA statute, to speak with the plaintiff's other treating doctors.

But the plaintiff argued in court documents that the written medical records were sufficient. If more information were needed, the defendant could formally depose the plaintiff's physicians, the plaintiff said.

The Court of Appeals of Michigan unanimously disagreed in a Nov. 18 decision. While HIPAA supersedes state law with more stringent privacy protections -- which the defendant followed -- it does not forbid informal conversations. Those discussions can help keep litigation costs down and allow the parties to investigate what information could be useful at trial, judges said.

The plaintiff is appealing the decision to the state Supreme Court, but her attorney declined to comment further. The high court will decide whether to accept the case.

When it comes to litigation, "there is still a lot of confusion about what HIPAA covers and doesn't cover," forcing the issue into the courts, said Daniel J. Schulte, counsel to the Michigan State Medical Society. That group was not involved in the case.

Federal vs. state rules

The federal privacy regulations typically override weaker state laws that fail to give plaintiffs adequate notice and opportunity to contest disclosures about their private health information, whether orally or in writing, Schulte said. Whether such data are relevant to a lawsuit, however, ultimately would be up to a court to decide.

HIPAA is less clear on verbal communications, often prompting plaintiffs to raise the issue, said Julie McCann O'Connor, who represented the defendant in the Michigan case. Nevertheless, the recent decision clarifies that such information is not off-limits to the defense.

That may require the extra step of pursuing a court order. But the physician or other covered entity in possession of a patient's protected health records ultimately is the one responsible for maintaining that confidentiality, McCann O'Connor noted.

As a result, defendants must take reasonable steps to ensure compliance with HIPAA to overcome any potential reluctance by the plaintiff's physician to discuss the patient's treatment.

Washington -- Physicians, hospitals and others in the health care system may never report medical errors exactly the way airline pilots report close calls. Still, health professionals could learn from having their mistakes pooled into confidential databases and analyzed, patient safety experts say.

Final regulations implementing the Patient Safety and Quality Improvement Act of 2005 lay the groundwork for voluntary, confidential, privileged reporting of safety information to groups called patient safety organizations. The rule, released in November, takes effect on Jan. 19, 2009. PSOs now have standards for becoming certified, combining safety data into larger databases and finding error trends.

PSOs are certified by the Agency for Healthcare Research and Quality, part of the Dept. of Health and Human Services, which released the rule. They will serve a valuable analytical role that wasn't previously available beyond the state level, said William B. Munier, MD, director of AHRQ's Center for Quality Improvement and Patient Safety. "We have essentially freed up physicians to use a powerful tool to make care of higher quality and safer for their patients."

The act covers all patient safety deliberations, analyses and peer reviews reported to PSOs, among other data. The privilege provision, which keeps the information from being obtained through legal discovery, does not apply to medical records, billing or other records normally kept outside safety reporting systems. The act does not affect state medical error reporting requirements.

The American Medical Association welcomed the final rule and will keep working on implementing the law, which the Association backed, said President-elect J. James Rohack, MD. "We are pleased that the final rule takes into consideration several of the key points raised by AMA and its partners on the proposed rule."

The AMA had expressed concern that physicians' deliberations and analyses shared with PSOs would not be protected adequately under the proposed rule, issued in February. The final rule expanded the definition of patient safety work product to include such information normally reported to PSOs before this information is fully compiled.

20 patient safety organizations around the U.S. were certified as of November 2008.

"We've been very careful in the way we've addressed confidentiality," Dr. Munier said.

The Office for Civil Rights, another HHS division, will enforce the confidentiality protections on patient safety work product.

The AMA also worried that the proposed rule would not adequately prevent conflicts of interest for PSOs. But, the final rule clarified that an agent or entity of a health care regulatory agency could not also be a PSO, nor can health insurers, health care accreditation or licensing entities. Any of these, however, can be the parent organization of a PSO.

The need for voluntary participation will be an obstacle for PSOs trying to gather comprehensive data on medical errors and patient safety, said Bruce Bagley, MD, medical director for quality improvement for the American Academy of Family Physicians. But the AAFP supports the act.

Quality improvement is the one incentive physicians have to report to PSOs, Dr. Munier said. But first doctors will need to wait for AHRQ to develop practice-level reporting standards. So far, the agency has released the first standards for hospitals reporting to PSOs, but it won't likely issue them for ambulatory care for at least two years, he added.

The patient safety act provides no federal funding for PSOs, but some of them still should be able to prosper, said Diane Pinakiewicz, president of the National Patient Safety Foundation. The organizations' financial success will be tied to the value of their research, she said. "There is a huge business case for intervening and preventing errors."

Focused on hospitals

At press time, AHRQ had certified 20 PSOs around the country, with varied missions.

The California Hospital Patient Safety Organization, created by the California Hospital Assn., has two key functions, said Executive Director Rory Jaffe, MD, an anesthesiologist. The PSO plans to report safety information to hospitals, such as when a drug is recalled but a hospital still receives a shipment of it.

Although it is not focused on peer review, the California PSO also would prompt hospitals to talk to each other about how to improve safety, quality and reliability, Dr. Jaffe said. "We need to start thinking about how people make errors, and even physicians make errors. We're just human."

The Patient Safety Group in Boston, a 4-year-old private firm offering Web-based health quality tracking services, has encountered attorneys who advise their clients not to share patient safety and medical error information with outside groups. But Jay King, the PSO's executive director, said he hopes to overcome those barriers now that his company can offer confidentiality and privilege. It plans to offer an event reporting system for hospitals and, eventually, physician practices.

The future of the Florida Patient Safety Organization is less clear, said its attorney, Chet Barclay. The PSO was created by legislators in 2004, but it no longer gets state funding. PSOs are particularly important in Florida, because a 2004 constitutional amendment retroactively places adverse events data in the public record.

Much like the National Transportation Safety Board, the PSO plans to offer accident and event investigation -- but for hospitals, group practices and others, Barclay said.

Washington -- Physician organizations and Louisiana Gov. Bobby Jindal agree that a medical-home model could help Medicaid provide better value to patients with low incomes or disabilities. But they disagree on whether managed care organizations should be the ones overseeing those homes.

On Nov. 14, Jindal released a concept paper for Louisiana Health First, his proposal to transform the state's Medicaid program from a disjointed fee-for-service system largely dependent on hospital charity care to a program in which enrollees have their care coordinated by a primary care physician. The proposal also would expand Medicaid to cover approximately 85,000 additional children, parents and caregivers and calls for the construction of a new academic medical center in New Orleans.

The Louisiana Chapter of the American Academy of Pediatrics opposes an option in the plan to allow private, for-profit managed care organizations to run the Coordinated Care Networks that would contract with physicians to provide medical homes. Managed care organizations have no track record using the medical-home model for Medicaid enrollees, said Steven B. Spedale, MD, chair of the chapter's Medicaid policy committee.

"We have great concerns ... because we think the care for the children is going to be sacrificed" to satisfy profit margins, he said. About 700,000 of the state's 1.1 million Medicaid enrollees are children, said the state Dept. of Health and Hospitals.

The chapter also is concerned that managed care organizations could try to squeeze savings from Medicaid by limiting physician pay, Dr. Spedale said. Medicaid fees in Louisiana are between 90% and 120% of Medicare rates, he said.

Now that more details of the governor's plan have been released, the Louisiana State Medical Society isn't as skeptical as it once was, said President Roger D. Smith, MD. The society shares the goals of improving continuity of care, increasing access to care and keeping Medicaid program costs manageable. Still, the LSMS would prefer that nonprofit entities run the Coordinated Care Networks.

The Louisiana Academy of Family Physicians supports the plan's principles but suggested that the state should define in more detail the concept of a patient-centered medical home, said James Campbell, MD, the academy's president. The state also should bolster the primary care physician work force by recruiting more family physicians, he said.

Health plans respond

Gil Dupré, CEO of the Louisiana Assn. of Health Plans, which represents 12 of the largest plans in the state, said physicians shouldn't worry about Medicaid pay under managed care. "Nobody's going to be asked to agree to rates that they don't think are adequate," he said.

Plans have a track record for appropriately managing care for people with private insurance, especially those who have chronic illnesses, which saves money and improves quality, Dupré said.

He said the state's program can't afford to continue as it stands. "What we've been doing in Louisiana is not working. It's very expensive and it's producing some of the worst health outcomes in any state."

Louisiana was 20th in overall Medicaid spending in 2006, Jindal's office said, and fourth for federal payments to hospitals caring for an above-average number of poor or uninsured patients in fiscal 2008, said the Health and Human Services Dept. But the state was 48th on the performance of its child health system, said a May report from the Commonwealth Fund.

Time is tight

Louisiana Health First requires federal approval of a Medicaid waiver, but the state Legislature will need to approve the proposed waiver before it is submitted to HHS. Any waiver would become entangled in unresolved federal funding issues. HHS contends that the state improperly spent $771 million in Medicaid funding in the last decade, which the state disputes.

The state also is seeking $492 million in assistance from the Federal Emergency Management Agency because of hurricane damage to Charity Hospital in New Orleans. The money would help build an academic medical center in the city. Federal rules require FEMA to pay the replacement cost of a facility more than 50% damaged by a natural disaster, but the agency argues that it is not responsible for the full amount because of state neglect before the hurricane.

Jindal hopes to ask the Bush administration to approve the waiver before the president leaves office, but the governor doesn't have a deadline for submitting the waiver to HHS, said Tony Keck, MPH, chief of staff for Louisiana Dept. of Health and Hospitals Secretary Alan Levine.

Dr. Spedale said Medicaid reform of this magnitude should not be rushed. Jindal and Levine should seek consensus among doctors and others who care for Medicaid enrollees before pursuing a federal waiver, Dr. Spedale said. Instead, the Jindal administration asked federal officials what types of reforms they might approve and started pursuing one of those approaches, he said.

But a physician panel has been meeting weekly to provide guidance on Medicaid reform to Levine and his staff, said Sybil Richard, deputy secretary for the Dept. of Health and Hospitals. "This is far from over and far from a completed design."

The Centers for Medicare & Medicaid Services in November released a guide for physicians who plan to pursue Medicare e-prescribing incentives that start in 2009. Here's what CMS says doctors should do.

Step 1: Obtain an eligible system

Physicians must have or acquire a qualified electronic prescribing system that can:

• Generate a complete medication list with available data from pharmacies and benefit managers.
• Select medications and transmit prescriptions electronically (not via fax) following applicable federal standards, after warning the prescriber of any possible safety issues associated with the drug orders.
• Provide information on lower-cost, therapeutically appropriate alternatives.
• Provide drug plan information, such as formularies, patient eligibility and authorization requirements.

Step 2: Report the appropriate measures

Starting with applicable services rendered on or after Jan. 1, 2009, physicians must report the appropriate combination of CPT codes and special G-codes on Medicare claims. For example, a doctor might bill code 99213 for a mid-level patient checkup and also report code G8443 if the visit resulted in an electronic drug order.

Code G8445 applies for visits during which no prescriptions were ordered. G8446 applies when the drug orders could not be made electronically because of pharmacy limitations, federal or state restrictions, or patient preference.

Step 3: Qualify for a bonus

Physicians must submit all claims including e-prescribing codes no later than two months after the end of 2009.

To be eligible for the bonus, the services a doctor provided that can be linked to an e-prescribing measure must make up at least 10% of his or her Medicare charges for the year. In addition, the physician must report the appropriate G-codes for at least 50% of the cases in which they apply.

If CMS determines a physician qualified, he or she will receive a 2% bonus on all 2009 Medicare pay. Bonuses will be paid in 2010.

For more information

"Medicare's Practical Guide to the E-prescribing Incentive Program" is available online in pdf (www.cms.hhs.gov/partnerships/downloads/11399.pdf).

A separate "Clinician's Guide to Electronic Prescribing," produced in collaboration between CMS, the American Medical Association and other organizations, also is available online (www.ehealthinitiative.org/erx/clinicians.mspx).