The Reagan administration, in a nationwide effort to trim the health care bureaucracy, is giving the ax to three of the four watchdog groups in the Washington area that try to hold down medical expenses.
The Department of Health and Human Services is moving to terminate 46 of the country's 187 medical peer-review groups, including those in the District of Columbia and Montgomery and Prince George's counties. Officials with the D.C. and Prince George's groups have challenged the decision, but if they lose the appeal their federal funding could be cut off by the end of this month. Only Northern Virginia's medical review group got a passing grade from the government.
Since the administration wants to abolish all of the review groups, known as Professional Standards Review Organizations (PSROs), over the next two years, the effort to kill the three local groups offers a preview of the heated debate over how well PSROs have been able to contain medical costs.
A growing number of PSROs -- groups of doctors and nurses that are largely funded by the federal government -- have been looking over the shoulder of hospitals, nursing homes and individual physicians since the early 1970s. Proponents say they have more than paid for their $144 million cost each year by denying payments for wasteful or unnecessary health care practices, and that this has helped keep a rein on Medicare and Medicaid expenses for poor and elderly patients.
Reagan officials view the PSROs as a costly layer of bureaucracy that has produced only meager results. Laura Genero, a spokeswoman for HHS, said the department plans instead to encourage greater competition in the health field.
"No one could prove conclusively that PSROs are saving money," she said. "We didn't seem to be getting anything out of this federal investment."
After a recent nationwide evaluation, HHS decided to eliminate those PSROs that failed to achieve a minimum score. The results were particularly surprising in the case of the National Capital Medical Foundation, the District of Columbia's PSRO, which had cultivated an aggressive reputation by holding frequent press briefings at its modern suite of offices on L Street NW.
HHS gave the D.C. foundation a failing grade, ranking it 116th among the 187 PSROs. For one thing, the foundation was considered relatively expensive to operate, charging$21,500 a year to review care at each hospital, far more than the national median of $11,000 to $14,000.
The evaluation also found that the D.C. group rarely denied Medicare or Medicaid payments to medical providers or warned them to eliminate wasteful practices. The bottom line, HHS said, was that the foundation had little impact on health costs or the quality of medical care in the city.
Dr. William R. Felts, president of the foundation, strongly disputed the findings. "The foundation has done a good job, and we've been in the forefront of many areas," he said. "There would be a temporary void if we were wiped out."
Felts said the foundation significantly has reduced the amount of time that some patients stay in the hospital. He said the group has underscored the shortage of nursing home beds in D.C. by focusing on elderly patients who stay in expensive hospitals because they have nowhere else to go.
The foundation was one of the first in the country to devise a list of 49 minor surgical procedures for which Medicare and Medicaid would not pay unless they were done on an outpatient basis, Felts said.
Although Felts said the foundation might continue as a private operation if it loses its federal funding, city officials say they are determined to keep reviewing the care of local Medicaid patients -- even if they have to hire someone else and pick up more of the cost.
Dr. Lewis Biben, president of the D.C. Medical Society, said local physicians could run a more efficient review group without being hindered by cumbersome federal regulations. "The foundation had some administrative problems, and that created a good deal of animosity among doctors," he said.
The HHS review found that the Prince George's Foundation for Medical Care, which ranked 148th of 187, rarely penalized doctors and did not address such problems as unnecessary weekend admissions to hospitals. In fact, the foundation was rated zero of a possible 650 points for reducing hospital use.
David Brown, director of the Prince George's group, said the foundation has made progress without penalizing medical providers. He said the group would stay in business no matter what happens by contracting directly with local facilities.
"In the first six months of 1981," Brown said, "we've achieved more than a 10 percent reduction in the number of hospital admissions and the length of hospital stays among Medicaid patients. But we're not going to play the game of saying we saved so much money by denying so many hospital days. It doesn't work that way."
The Montgomery County Medical Care Foundation also was quite expensive, charging $32,000 a year to review each hospital. HHS said the foundation, which ranked 125th, never criticized any doctors for wasteful practices and had almost no effect on hospital use.
The foundation, which has lost most of its staff, recently was taken over by the Montgomery County Medical Society. Harold Frye, executive director of the Medical Society, said the county's doctors took over the group "so we could keep local control over these medical decisions."
Frye said the Medical Society is doing only about 10 percent of the previous number of reviews, in part by selling its service to 16 Montgomery nursing homes. He said it is still reviewing Medicaid patients in county hospitals as a subcontractor for the Delmarva PSRO, a procedure that enables HHS to keep picking up most of the tab.
The embattled review groups are fighting back through their own lobbying arm, the American Association of PSROs, based in Potomac. "It'd be a tremendous loss for the public if this little program went down the tubes," said Lyla Hernandez, the group's director.
If that happens, most hospitals would again be required to do their own reviews of Medicare and Medicaid patients. "PSROs were created because that system didn't work," Hernandez said. "You're asking someone to cut down on utilization when full beds are what make money, to reduce lab tests when that's what brings in money."