Sunday, June 15, 2014

DRGs and HENRY MAYO NEWHALL HOSPITAL: was there malfeasance by the hospital's Board of Directions or the Medical Executive Committee?

THE EFFECT OF Diagnostic Related Groups (DRGs) and Nurse Practitioners (NPs) on hospital policy and Economic Credentials and Corporate Income

When the DRGs were originally thrust upon the unwitting medical profession in 1982, the purpose was to determine how much Medicare would be obliged to pay hospitals for "products" where "products" became the new word for services, e.g., an appendectomy became a "product" instead of a service or an operation. Application of DRGs has since widened and may be used for non-Medicare patients. Some healthcare pundits find DRGs effective for controlling Medicare costs and hospital costs in particular. An early challenge occurred when Hillary Clinton's father was admitted to hospital and was allowed more than the DRG-allotted time for his hospital stay and more advanced diagnostic studies than the DRGs recommended. Most physicians, this one among them, favored the doctors' decisions in favor of the patient and the hospital's willingness to set the DRGs aside.

Now enters Henry Mayo Newhall Hospital in Santa Clarita which has just determined that Nurse Practitioners (NPs) can have admitting privileges. We will discuss how the two  problems have common ground, namely, cost and reimbursement control. Keep in mind that only one year ago a California Senate Bill (SB 491) to give advanced recognition to NPs failed passage.

Here's the story according to our correspondent, Gene Uzawa Dorio, MD, from his guest commentaries in the SCV Beacon. Doctor Dorio is at the time of this writing, to the best of my knowledge, a member of the hospital's Medical Executive Committee (MEC).

For the last three years, the hospital administration has sought to allow NPs to practice at the hospital. The NPs will be employees of the hospital. That means that the hospital  administration will be able to influence admission and discharge decisions. That there is a likely financial relationship is obvious, for instance, it's why physicians are not allowed to own pharmacies and refer their patients to them. When the effect of the DRGs became of concern to the hospital management, statistics were developed. If a heart attack patient with a DRG of 4 days stayed more than 4 days in the hospital then the additional days were an extra "cost" to the hospital and would not be reimbursed under the DRGs. Doctors whose patients stayed longer than the DRG designations became a liability. The name of the game was how to control these doctors. Doctor Dorio said in his piece on the subject that "every primary care admitting physician was given a total dollar amount ... claiming now the MD was responsible for this 'lost' money." So how did the hospital's BOD bring about change?

The hospital had received an NP application for practice privileges which the MEC rejected when it was determined by the MEC that the hospital had withheld information which Dr. Dorio's editorial asserted showed "the candidate was not qualified to care for hospitalized patients." In any case, the MEC decision not to accept the NP's application was set aside by the BOD which granted practice privileges to the NP in question. That is how matters stand now. While broad-based legislation to grant practice privileges may have failed, one hospital, on its own, has managed to install an NP in precisely the role that the hospital's own MEC found incompatible with the applicant's education and training. Stay tuned: we don't think this issue is finished.

Editor's confession:  I have  testified in Congress on the issue of economic credentials for physicians, see references below. My opinion in the Henry Mayo Newhall Hospital case is that the hospital's BOD wants to wrest control over medical decisions and their economic impact on the hospital from the Medical Executive Committee in particular and from the physicians in general.


"Why is Private Practice on the Way to Obsolescence?" (, 6/10/13)

"Medical Red-Lining, Economic Credentials for Physicians," San Francisco Examiner, 1/12/96

The Congressional Record,  Vol.  144,  # 118, with  comments by former Representative Tom Campbell, R-CA, 09/09/98

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