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Kaiser Plan Shows Bonuses for Keeping Costs Low

September 26, 1995

SACRAMENTO, Calif. (AP) _ Doctors in the nation’s largest health maintenance organization are offered financial bonuses to write fewer prescriptions and reduce hospital stays, documents show.

The Kaiser Permanente business plan for Southern California was obtained by Consumers for Quality Care, a Los Angeles-based watchdog group.

``The business plan exposes an anatomy of managed care in which even nonprofit HMOs like Kaiser are driven by profit at the expense of quality,″ said Harvey Rosenfield, executive director the consumer group.

Kaiser covers 6.6 million people nationwide, with 4.6 million in California alone, and has $11 billion in annual revenues. A spokeswoman says the business plan is good for those patients.

``Everything in it is evidence of good medicine,″ said Kathleen Barco, spokeswoman for Kaiser’s Southern California operations. The HMO says that it, like all other health care organizations, is trying to manage costs to make health care affordable.

In addition to the Southern California documents, the consumer group obtained a memo from a December 1994 Kaiser board meeting. In it, Dr. Juan Ordonez wrote that hospitalization rates were being reduced, and that additional reductions were needed to control costs.

Kaiser’s Northern California operations in 1994 decreased hospital days per 1,000 members by 11 percent among people younger than 64, and by 14 percent among those older than 64.

The company seeks to reduce its hospitalization rate from 232 days per 1,000 members in 1994 to 164 days per 1,000 in 1997, the documents show.

Other highlights of the memo include:

_ An estimated 42 percent of hospital admissions surveyed were thought to be avoidable, and in 57 percent of the cases the length of stay was unnecessarily prolonged.

_ The board decided that year-end bonuses to doctors would be tied to performance, with half awarded for staying within budgets and half tied to patient satisfaction surveys. Up to $3,600 in yearly bonuses would be paid to doctors who keep patients out of hospitals and prescribe less expensive drugs.

_ Lower-skilled workers should be used to cut labor costs and reduce staff in surgical and primary care specialities.

The Medical Board of California does not prohibit linking doctors’ income to efficiency or economic measures, but a bill pending before Gov. Pete Wilson would prohibit HMOs from compensating employees based on the number of medical claims denied or cost of services denied.

Rosenfield said his organization plans to ask legislators to ban the bonuses, require full disclosure of medical treatment options to patients, limit profiteering in the medical industry and impose standards for doctor and nursing staffing levels at hospitals.

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