Medicare Change Stirs Concern for the Elderly : New System Succeeds in Cutting Costs but Critics Charge Treatment of Older Patients Has Slipped

Fred Finnigan, who spent his working years as a helmsman on a Great Lakes freighter and then went west to Ventura County to retire, entered Westlake Community Hospital with heart-attack symptoms last June. Doctors soon discovered that he had lung cancer.

Between July and December, when he died at 79, Finnigan checked into the hospital three more times for visits of two to four weeks. Each time he was discharged, despite recurrent bouts of hemorrhaging, incontinence and, ultimately, hallucinations. “He was shuffled in and out of the hospital so many times it was pathetic,” said his stepdaughter, Carol Bowen--”because of that Medicare ruling.”

“That Medicare ruling” is no minor technicality. It is a revolutionary change in the nation’s health care system for the elderly, a whole web of new federal regulations designed to limit the amount of money the government spends on caring for the 30 million older Americans covered by the Medicare program.

A year and a half after the launching of the new effort, which puts intense pressure on hospitals and doctors to alter their traditional ways of dealing with patients, there is little doubt that it is helping to hold down costs. There is substantial concern, however, that it may also be cutting into the quality of health care for many elderly patients--especially those who are physically frail and have a variety of ailments simultaneously.

System Helping Some

Health care professionals interviewed by The Times on the new system--doctors, nurses, hospital administrators, health analysts and federal officials--generally agreed that it works well for patients in basically sound condition who need treatment for only one ailment and are strong enough to recover quickly. They credit the system with forcing long-overdue improvements in hospital efficiency and note that early discharge from the hospitals can often speed recovery.

Fears are growing, however, that many older and sicker patients are being rushed through hospital treatment and sent home under questionable circumstances. For the 15% to 20% of elderly patients with multiple medical problems, the new approach “is a disaster,” said Dr. Robert L. Kane, a professor of geriatric medicine at UCLA.

And when the General Accounting Office, the investigative arm of Congress, conducted a survey of hospital practices in six states, it concluded that patients are being sent home “after shorter lengths of stay and in a poorer state of health.” Sen. John Heinz (R-Pa.), chairman of the Senate Aging Committee, who asked for the GAO study, charges that many hospitals are wrongly telling patients that they have to leave.

Effect of New Rules

Specifically, if you are 65 or older, Medicare’s new rules mean that:

--A stay in the hospital will probably be shorter than it would have been two years ago.

--You are likely to be treated by a reduced nursing staff.

--You may be sent home before you feel completely recovered.

--If you need extra time to recover, perhaps with intravenous feeding or similar medical support, the chances are greater that you will spend such time in your own home or in a nursing home rather than in a hospital bed.

--For some procedures, including some kinds of surgery, you probably will not be treated in a hospital at all.

These changes in the way hospitals treat the elderly stem largely from a radical shift, enacted by Congress in 1983, in the way the government treats hospitals. Until 1983, hospitals made their own decisions on treatment of elderly patients, established their own charges and then simply billed the government’s Medicare program. Now, the government pays hospitals a fixed sum, set in advance, for the treatment of each ailment covered by Medicare.

Obvious Incentives

If a hospital treats a patient for less than the government fee, it can keep the difference. If it spends more, the hospital must swallow the loss. The incentives are obvious: The less a hospital spends, the more it profits. And the fact that more and more of the nation’s hospitals are privately owned, for-profit institutions is likely to intensify the impact of the new approach.

“We must be vigilant to assure that cost containment does not become care containment,” warns California Rep. Edward R. Roybal (D-Los Angeles), chairman of the House Aging Committee. “If we concentrate solely on cost cutting . . . both quality and access to care will certainly suffer.”

In February, Roybal conducted a hearing that documented the plight of a 67-year-old Oklahoma man whom a hospital allegedly tried to send home in his pajamas during a rainstorm eight days after open-heart surgery.

Daughter Intervenes

The committee also heard testimony about a 72-year-old Minnesota woman who was going to be discharged abruptly two weeks after a severe heart attack until her daughter, a nurse at the hospital, intervened.

Carol Bowen, whose stepfather was discharged from Westlake Community Hospital four times before dying, felt the impact first-hand.

“I can see where the hospital is coming from,” she said. “I don’t want to hurt Westlake Hospital. I can see where Medicare is coming from. But it’s very unfortunate that older people with serious illnesses are getting the short end of the stick. The program is supposed to be there for them in the first place.”

Westlake Community Hospital declined to comment on Finnigan’s case specifically. Judith Brown, a hospital official, said of the Medicare changes in a written statement: “The aim is not to shortchange the public, but rather to enhance health care so that patients are receiving the most for their money. . . . No patient is discharged from this facility until they are no longer in need of acute hospital care.”

Death Rates Cited

And that, according to the federal official who oversees Medicare, is how the new system is working nationwide. Dismissing criticisms as “anecdotal,” Carolyne K. Davis, head of the Health Care Financing Administration, said death rates have not increased among elderly patients, nor has the government detected an increased number of return trips to hospitals.

“We’re very concerned to make certain that the quality of care doesn’t go down--and it’s not going down,” she said. “If anything, it’s improved.”

At the heart of the new system is a list of 467 categories of ailment plus an “all-other” category. Every hospitalized Medicare patient is pigeonholed into one of the 468 slots, which are known in Medicare jargon as diagnosis-related groups.

For each category, Medicare pays hospitals a fixed amount that may differ from one region of the country to another according to local labor costs and other variables.

Hospitals receive extra money for “outliers”--patients who stay far beyond the expected time for their particular ailment. But the extra payment does not even begin until the patient has been in the hospital twice as long as the average duration for the diagnosis.

For example, the average treatment for some ailment might take 10 days. The hospital must absorb all the costs, without any government help, if the patient stays from 11 to 19 days. Not until the 20th day will Medicare again help out--and this extra payment will be only 60% of the usual rate.

Also, because hospitals receive their principal--though not their entire--reimbursement for treating the ailment for which the patient was admitted, treatment for secondary ailments largely comes out of the hospitals’ own pockets.

“The frail elderly--those with multiple medical problems and with more serious illnesses--will probably become revenue losers to many hospitals and thereby become undesirable patients,” Louis Krieger, a New York official of the American Assn. of Retired Persons, recently told a congressional committee.

Doctors’ ultimate power over discharge, hospitals’ fear of possible malpractice suits and the possibility of getting a bad reputation all work to check corner-cutting, but the General Accounting Office, in its February report, presented a catalogue of dubious discharges.

An 86-year-old Atlantic City man, blind and diabetic, had an open wound requiring daily dressing changes but was discharged soon after his hospital’s costs exceeded its reimbursement from Medicare for his gall bladder operation. “Daughter was furious that father, who was so sick, was sent home and could not be readmitted,” said a report from a social worker.

A Philadelphia patient was admitted for coronary artery disease and discharged 12 days later even though he developed pneumonia in the hospital and needed two months to recover. The local visiting nurses who cared for him “believe that his recovery at home would have been much quicker if he had stayed in the hospital long enough” to be cured of his pneumonia, according to a social worker’s review.

‘Happening in Most Places’

Here in Washington, Val Halamandaris said his family nicknamed his father “Boomerang” because he was hospitalized seven times in six months for his black lung disease. “I overheard the hospital staff doctor saying, ‘We’ve got to get rid of this guy--we’re losing our shirt on him,’ ” Halamandaris said in an interview.

According to Lila M. Maples, geriatric program director at Long Beach Community Hospital, a 69-year-old man was sent home with an undiagnosed seizure disorder and was discovered semi-comatose two days later by his nephew. Also, a 71-year-old woman, suffering from acute gastritis and bronchitis, was sent home after 14 days with fluid-filled lungs, still so weak that she could not raise her head.

“Long Beach happens to be one of the best hospitals around,” Maples said. “So, if it’s happening here, you know it’s happening in most places.” She questions whether it makes sense for Medicare to reimburse hospitals according to the average cost of caring for each ailment.

“You simply cannot lump all old people together,” she said. “No two fractured hips are alike--even if the fractures are identical--because of the differences in people’s health and ability to heal.”

There is general agreement, however, that the new strategy saves money. Medicare patients are typically staying a day less in the hospital, and the cost of in-patient hospital care under Medicare rose only 3.8% last year, far lower than the 10% average annual growth rate from 1973 to 1982.

The Reagan Administration is counting on the new way of paying hospitals to play a major role in saving $70 billion in Medicare spending during this decade and postponing until 1998 the day when Medicare could go bankrupt.

And insurers and public officials, keenly aware of the cost-saving possibilities, view the new approach as a technique for containing expenses for hospital patients under the age of 65.

Already, Blue Cross and Blue Shield plans are applying the Medicare principles of fixed payments per ailment to beneficiaries under age 65 in Kansas, Oklahoma, Arizona and Nebraska, according to the Blue Cross and Blue Shield Assn. They have launched limited pilot programs in Florida, Michigan and Oregon, with Kansas City set to follow this year, and Blue Cross of California plans to try the approach in as many as 45 hospitals next year.

To make sure that Medicare’s new system works as intended, Congress set up peer review organizations--private companies under contract to the federal government--in every state. The PROs, staffed by doctors, nurses and other health care professionals, can review all hospital cases. And they wield a potent financial weapon--the ability to deny Medicare payments on grounds that a procedure or operation was unjustified.

Their goal is nothing less than to change how--and where--medicine is practiced, especially surgery, which is one of the most costly elements in medical treatment.

Unnecessary Treatment

Federal officials believe that PRO pressures over the next two years will cause doctors to decide that treatment is unnecessary in 700,000 cases. Another 600,000 patients will be treated in doctors’ offices or clinics rather than hospitals. About 38,000 operations will be avoided. All these changes will save 6,000 lives, the government believes.

California’s PRO, California Medical Review Inc., has a two-year, $27-million contract that began last October. It intends to shift some operations--including cataract operations, knee arthroscopies and lymph node biopsies--from hospitals to doctors’ offices, and it wants to reduce the total number of other operations. For example, it requires doctors to get advance approval for coronary bypass operations and gall bladder removals.

“There’s a great deal of cost containment that can be done while quality is preserved. . . . Our belief is that quality care is also efficient care,” said Margaret A. Shea, assistant to the executive director of California Medical Review Inc.

On the other hand, Dr. Clarence Avery, president of the California Medical Assn., charges that “this is the first step in the rationing of health care in this country--and it’s being directed primarily toward the elderly.”

“And it’s likely to become more onerous as the number of old people increases,” added the head of the CMA, which tried unsuccessfully to get the review contract for the state.

Avery, a surgeon in San Leandro, cites his own recent treatment of an 85-year-old with diabetes, “a little, old, feeble man” who lives alone. Deciding that it would be “inhumane” to perform hernia repair surgery on this man and to send him right home, Avery instead kept him in the hospital for a night. He says that California Medical Review has questioned whether the hospital should be paid for its costs.

“It’s a mess,” said Daphne Krause, executive director of the Minneapolis Age and Opportunity Center, a home health care agency. “They’re sending patients home with open wounds, for heaven’s sake.”

Medicare administrator Davis, on the other hand, insists that technological advances have made home care appropriate for the first time for a wide variety of patients, even those hooked to intravenous tubes.

The dispute over the Medicare revolution will continue to rage.

“From a purely cost perspective, it’s the only way to go,” said Neal L. Maslan, a vice president of American Medical International Inc., a Los Angeles-based hospital chain. “The question is whether you want it to apply to your family.”

MEDICAL GLOSSARYMEDICARE: Approved in 1965, this is the federal government’s giant program of health insurance for the elderly, providing some 30 million beneficiaries coverage for both hospital stays and doctors visits. PROSPECTIVE PAYMENT SYSTEM: The new approach in which federal reimbursement to hospitals for treating Medicare patients is determined by standards set in advance rather than by actual costs claimed after the fact by the hospital. DIAGNOSIS--RELATED GROUP: Commonly referred to as DRG, this is a category of ailment that determines how much the federal government will pay a hospital for treating a Medicare patient. Medicare officials set reimbursement rates, which temporarily have regional variations for 467 categories of ailments and a catch-all 468th. OUTLIER: A Medicare patient who remains in the hospital longer than the average envisioned for his illness. When patients reach outlier status, Medicare only partially reimburses hospitals for inappropriate admissions and procedures.

PEER REVIEW ORGANIZATION: A state-based group empowered by federal officials to oversee the quality of hospital care under Medicare and deny federal payments to hospitals for inappropriate admissions and procedures.

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