Welcome to the "No-Care Zone"

By Claudia Wallis

In Washington, a doctor is summoned from his dinner by a hospital nurse who tells him that one of his patients, a 72-year-old woman suffering from respiratory failure, has exhausted her allotment of Medicare funding. The further cost of her care must come out of the hospital's own pocket, says the nurse. Could he discharge the woman that evening?

In Knoxville, a 70-year-old woman with diabetes, gallstones and signs of congestive heart failure decides after a week in the hospital not to have gallbladder surgery. The hospital insists that she be sent home, despite her frail condition. "It was a mistake," says Dr. Bergein Over-holt. "Within twelve hours she was back in the hospital in a prestroke condition. It was touch and go to save her."

At hospitals across the U.S., similar tales of callous and even life-threatening treatment apparently stemming from changes in the Medicare system seem to be cropping up with disturbing frequency. To concerned doctors and health-care groups, they reflect a growing gap in the American health-care system. Carroll Estes, director of the Institute for Health and Aging at the University of California, San Francisco, calls it the "no-care zone."

In January, Estes' institute released the results of a three-year study concluding that Medicare patients are being released "sicker and quicker" from the nation's hospitals. The study, which examined medical care in 32 communities in eight states, found that the newly ousted patients, still in need of treatment, often have nowhere else to turn for help.

The problem began three years ago, after a major reform of Medicare. Under its earlier provisions, the plan, which covers the health-care costs of citizens who are over age 65 or disabled, paid for all "reasonable" hospital expenses. By the late '70s, however, this blank-check approach had led to a dizzying 17% annual increase in Medicare's hospitalization costs and warnings that the system would be bankrupt by 1990.

To forestall disaster, the rules were changed in 1983. A patient's ailment is now assigned to one of 470 diagnosis-related groups, which categorize treatment for everything from appendicitis to viral meningitis. Each DRG carries a fixed reimbursement rate based on the cost of treating the average patient. If a hospital can treat a patient for less than the DRG rate, it can keep the change; if the patient's care exceeds the ceiling, the hospital absorbs the loss. In theory, hospitals will lose money on complicated cases and save on simpler ones, and Medicare costs will be brought under control.

In financial terms, the DRG system appears to be working. It has helped limit the annual increase in hospital costs to 5% and reduced the average hospital stay for Medicare patients from 9.5 days in 1983 to 7.5 days last year. Many private insurers have introduced DRG systems of their own. Says Jack Owen, executive vice president of the American Hospital Association: "The DRGs have created efficiency and economy."

But they have had a less salutary effect on many patients. The Washington-based American Association of Retired Persons has received hundreds of letters from patients who claim they were kicked out of hospitals prematurely. "Some still had high temperatures, draining wounds, and were feeling terrible," says Barbara Herzog, director of AARP's health-care campaign. "Many had no one to care for them properly at home and could not get admission into a nursing home."

A study last year by the U.S. Senate Special Committee on Aging uncovered other problems. The committee found that some hospitals post lists of "bad doctors," who allow hospitalized patients to exceed the DRG ceiling, and of "good doctors," who boost hospital profits by discharging their patients quickly. Physicians reported they were under pressure not to admit complicated cases that might prove costly to treat. And, at seven hospitals operated by the Paracelsus Health Care Corp. of Pasadena, Calif., doctors receive bonuses if costs are kept within DRG range. This practice is now under federal investigation.

Health and Human Services Secretary Otis Bowen insists that Medicare beneficiaries "continue to receive the best-quality care available." While HHS has received 4,700 complaints about Medicare abuse related to DRGs, he says, there is no evidence of "any systematic increase in premature discharges." Nonetheless, Bowen last month announced that upon admission to a hospital, Medicare patients will soon receive a statement explaining their rights, including the right to appeal a discharge decision.

Even critics of Medicare policies concede that it often makes sense to release patients from $300-a-day hospitals and transfer them to $65-a-day nursing homes or even less costly home care. But, says Dr. T. Reginald Harris, president of the American Society of Internal Medicine, these cheaper alternatives are not always available, and Medicare skimps on paying for them. Meanwhile, he notes, hospitals say, "It's not our problem."

Republican Senator John Heinz of Pennsylvania is planning to introduce a bill in Congress that would compel hospitals to arrange suitable follow-up care for discharged patients and make local Medicare watchdog agencies responsible for supervising such arrangements. A report to be released later this month by Harvard's Center for Health Policy and Management proposes a more radical solution: revising the Medicare system so it pays for extended nursing-home stays, home care and other outpatient care. Such reform, which could cost $50 billion a year, seems unlikely to win congressional favor in an era of cost cutting. But until something is done to meet the needs of patients evicted from their hospital beds, large numbers will continue to fall into the perilous no care zone. --By Claudia Wallis. Reported by Patricia Delaney/Washington

With reporting by Patricia Delaney/Washington