APPENDIX I

Responses by American Medical Association to questions submitted by the Subcommittee on Health on Health Maintenance Organizations

(This material was received too late to be included in the main body of this publication and in the interest of economy is entered as an appendix.) 1-A. Please define the term Health Maintenance Organization? While there are popular concepts concerning the "health maintenance organization" there is no clear definition outside of proposed legislation, and there is no common definition in the various bills. The generally recognized elements of a definition of an "HMO" would be an organization or agency, under grant from or contract with the Secretary which agrees to meet prescribed requirements, and which assumes responsibility for providing both institutional and professional health services to a specific population on the basis of a fixed prepaid dollar amount per person. The "HMO” should not be equated with existing organizations.

1-B. What is the appropriate size of an HMO? How many physicians and other paramedical personnel should it have to assure economic success?

HMO's are still in the experimental stage. The question as to "appropriate size" is unanswerable, since the size of the HMO is clearly related to the size of the area served, population density, availability of other resources, enrolled population, and type of services provided. The question concerning the number of physicians and allied health personnel needed for "economic success" brings into clear relief some of the basic problems in the HMO concept. If each such entity is required to have the capacity to provide comprehensive care, it must have available members of all major specialties in sufficient number to meet the needs of its enrolled population. Yet, if the HMO is located in a thinly-populated area, maintaining this broad range of specialized personnel necessary for comprehensive care may be incompatible with economic success. Economic success is also a function of managerial skill and other factors, including utilization. 1-C. What geographic area should it serve?

The geographic area to be served is dependent upon population distribution. Large enrollment populations could be achieved within a small territory and impacted urban areas, but an HMO might have to encompass a large area in locales having a low population density. 1-D, E. What should the physician-patient ratio be? What should be the ratio of hospital beds to enrollees?

It is impossible to estimate any ideal physician-patient ratio since the relative health care needs of the enrollees will vary widely across the country. It should be noted also that the requirements for manpower will be directly related to the extent of the services to be provided by the organization and the utilization rate within the enroll

ment group. The optimum ratio of hospital beds to enrollees is also impossible to determine.

1-F. G and II. What are the average planning costs? What are the average start-up costs? What are the time requirements for planning and start-up?

The Department of HEW and the Office of Economic Opportunity have issued planning and feasibility study grants to a number of HMO projects. The experience derived from these projects may provide empirical data regarding planning and start-up costs. The project grants may also provide some insight into the time requirements for the establishment of a viable prepaid group practice.

1-I. What provisions should be møde for monitoring and information systems in setting up an HMO? What should be the requirements, for example, regarding compatible medical information 818temx among the components of an IIMO, and between HMO's? What requirements concerning the gathering of utilization and demographic data, to assist management and planning, should be imposed? There is no apparent reason why the collection and dissemination of data should be different within the HMO framework from alternative systems of health care delivery. Steps have been taken, for instance, to provide a system of compatible medical information, notably the AMA's Current Procedural Terminology. Data obtained through the use of universal data gathering systems would be useful in planning and management in all practice settings.

1-J. What should be the range of services offered by an HMO?

If the purpose of an "IIMO" is to keep the individual enrollee healthy, and the individual is not to obtain services elsewhere, then the institution must provide the full range of care necessary for the individual's needs.

1-K. What is meant by preventive services in an HMO and what measures should be taken to assure they are provided?

"Preventive services" must be clearly defined since there is an existing ambiguity as to the meaning of preventing medicine. Truly preventive services, aside from immunization, are basically such measures as improved sanitation, adequate nutrition and improved health education systems. The term "preventive" has improperly been used interchangeably with "early detection." A distinction must be drawn between the two terms so that the public is not misled. Such programs as immunization and checkup (providing early detection) may properly be a part of comprehensive services.

1-L. How can quality care be assured in HMO's?

A primary method of assuring quality care in HMO's would be to bring them within the community patern of peer review, both on institutional and professional services. Patients and third parties should be provided with the full measure of comparison between IIMO's and other delivery systems. Accordingly, HMO's should not be compared simply with other HMO's.

2-A. Is there a place for profit-making IIMO`s?

As previously indicated, the whole concept of HMO's is, as yet, insufficiently defined for precise answers to many questions. There seems no inherent reason why HMO's could not be formed as profitmaking organizations; however, it is a basic principle of medical ethics that a physician's services should not be exploited to make a profit for a third party. It would, therefore, be essential that the HMO format

be such that any profit not be produced through restriction on services.

1. If so, how can under-utilization of services be prevented, and how can high quality be assured?

The essence of the HMO concept is that a single fixed amount shall cover all services rendered by the HMO. There is, therefore, a fiscal pressure on all HMO's, whether profit-making or not-for-profit, to control services rendered so as to remain within the prepaid funding. It is essential to maintain community peer review to measure HMO care against services provided in the community generally.

2. What types of qualifications should professionals participating in HMO's be required to have what requirements for continuing education should be established?

The Association does not believe that professionals participating in HMO's should be legally required to meet standards different from those required of members of the profession generally; requirements for continuing education, for example, are being explored by various professional groups already, and IIMO professionals should be required to meet the same standards as are met by community physicians outside the HMO. This does not deny the possibility of an individual HMO itself establishing additional obligations for professional members-but there is no evidence, as yet, that HMO practice requires different professional training than non-HMO practice.

2-B. In providing for capital costs, what do you see as being the relative advantages and disadvantages of grants versus guaranteed loans versus subsidized loans? What is the approximate mix among these three for profit-making HMO's? For non-profit HMO's?

It is the Association's general position that the federal government should not be in the position of subsidizing one particular form of medical practice in competition with all other forms. Such subsidy is not only inequitable but will distort the whole picture of system effectiveness. We would suggest that the grant mechanism be used only for experimental programs or, within the context of Hill-Burton, for facility needs as defined by the state. Loans and loan guarantees should be used primarily for establishing needed services and facilities in disadvantaged areas, where ordinary funding might not be available.

2-C. Through which mechanisms do you believe IIMO enrollees who are not now covered by health insurance would be able to participate in HMO's? Would everyone be able to belong to an HMO under existing circumstances?

Most pending legislation calls for open enrollment in HMO's, on first-come first-served basis, which would provide the opportunity for those who wish to enroll; those who could not pay might be enrolled through Medicaid. Under existing circumstances, of course, HMO's do not exist to enroll everyone. Prepaid organizations which do exist do not, generally, enroll everyone who applies from the community served.

2-D. How can the operating costs in HMO's be off-set? What guarantees currently exist that IIMO's, once initiated, will be able to continue operation?

Presumably, operating costs and capital costs should both be met from income. No more guarantees for the continued existence of HMO's exist than for other forms of health care delivery. Nor should special guarantees be provided.

2-E. Are copayments and deductibles or "service charges" desirable in HMO's?

Coinsurance, deductibles and service charges are, in fact, in use in some HMO-type programs, as a means of controlling demand on services. A direct charge to the patient, in addition to the prepaid capitation payment for enrollment, each time he uses a certain service will obviously restrict demand for that service. There may be, however, a philosophic question of any direct charges by the HMO as envisioned by its current sponsors. If the intent of the HMO is to provide unrestricted access to the health care delivery system for all those enrolled and achieve economies through "health maintenance," with reliance upon the fixed prepayment as an incentive to professional and institutional providers of care to control utilization, such added payments by patients may discourage use of the services, and thereby eliminate the promised economics and defeat the intent.

3-A. Should federally subsidized or sponsored Health Maintenance Organizations be required to community rate?

It would seem that, particularly for HMO's which are federally subsidized or sponsored, community rating should be required, whether in an experimental or an ongoing program, as is suggested by the "open enrollment" provision in proposed legislation. Only on a community-rating basis can the claimed merits of the HMO over other forms of health care delivery be accurately judged.

3-B. How can the problems of inequity generated by experience rating be avoided? What will keep HMO's from "skimming" the lowrish members of the population?

As indicated above, we would suggest community, rather than experience rating for HMO's. In this connection, we would suggest also careful examination of the proposed benefits and any forms of copayment by enrollees offered by HMO's, to assure that the program is not designed to discourage enrollment by high-risk groups, even when the program purports to be community-wide. Areawide open enrollment is necessary.

4-A. How can rural areas adn urban ghettos be served by HMO's? Rural areas and urban ghettos are similar insofar as they both are medically underserved areas. Their problems, however, are different: the urban ghetto is likely to have large population concentrations and a potential for adequate back-up facilities and services, even though these may be currently somewhat inaccessible to the ghetto population, while the rural area will have sparse, scattered population and use of back-up facilities will present major problems of transportation and communication. Different patterns of HMO's will most probably have to be designed to fit specific community needs; again this is one of the problem areas where there is little experimental data as yet. 4-B. How can IIMO's be attracted to such areas?

To attract HMO's to such areas will require both adequate population bases for health care services and incentives to retain qualified professional and subprofessional staff. In the urban areas, these may well include security for HMO staff and patients, opportunities for continuing education, opportunity to practice quality medical care, an appropriate environment, and adequate financial remuneration. In the rural setting, most of these same incentives (except perhaps security) will apply, plus opportunities for professional staff to have some free time for professional meetings and leisure activity, and educational and cultural opportunities for their families.

4-C. How can problems of communication and transportation be dealt with in rural areas?

In some rural states, the light population density is such that an HMO pattern does not seem feasible except as a central organization, serving a large geographic area (perhaps an entire state) with less sophisticated outpatient satellites providing primary care and screening. This pattern would require a fairly sophisticated and expensive communication system between satellites and the central office, to provide back-up and consultation to the satellites, and prompt referral for services the satellite cannot render, and also effective health education for more effective use of the system by patients. Transportation will also be a major concern, to assure rapid patient access to services the satellite cannot give-in many cases, the HMO's own transportation system, since public transportation systems are virtually nonexistent in many rural areas. It would seem the rural HMO's would also make major use of allied health personnel, in the team concept, to make its services available to the entire rural population.

4-D. In a rural area, how can one assure a high enough population density or a large enough population base to justify the establishment of an HMO?

The question assumes that an HMO should be formed to cover all areas. It should be recognized that an HMO may not be feasible if it has to cover a large area with a sparse population.

4-E. In a ghetto, how can HMO's exclusively for the poor be avoided?

In many urban ghettos, development of HMO's not exclusively for the poor may be difficult or impossible. The only methods feasible would seem to be dropping the concept of open enrollment, and establishing required participation of various economic levels in the HMO, or to define the geographic area to be served so as to include nonghetto areas. In the former instance, there would be diminution of patient freedom of choice and a departure from established medical service patterns; in the latter, it might be necessary to establish very large population bases to include both ghetto and non-ghetto areas. Further, both create problems as to the location of facilities-outside the ghetto makes it inconvenient for ghetto residents, inside creates problems of access for non-ghetto members.

On the other hand, while an HMO serving the poor only could be interpreted as maintaining two standards of care, it should be possible to maintain high quality care in such an HMO. It would, however, require a special financial base and would probably require almost total governmental support, since it would be serving a low-income high-risk population.

5-A. Is it appropriate for an HMO to simply be an umbrella which subcontracts the actual provision of various types of services to other individuals or organizations or should it be required to provide its own services directly?

The Association has encouraged variation and experimentation in HMO development and one variation that should be tested is the "umbrella" approach suggested. This approach might enhance physician participation in HMO's since it permits more independence and autonomy for the physician component of an HMO.

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