Attracting and retaining doctors has been an ongoing challenge for the state because of high malpractice premiums, low reimbursement rates and a shortage of nurses and support staff, said Larry Matheis, executive director of the Nevada State Medical Association.

The challenges are changing the way doctors practice medicine when they do come to Nevada, he said.

As head of the more than 1,400-member organization, Matheis speaks on behalf of physicians on those and many other issues before the state Legislature, government officials and community groups. Matheis took the helm of the Nevada State Medical Association in October 1998 after two years as the state health administrator of the Nevada State Health Division.

Matheis met with In Business Las Vegas to discuss solutions to Nevada's many health care challenges.

Large and small businesses have been complaining that health care costs are out of control. What can businesses do to contain their costs?

They can expect, realistically, that health care costs are directly related to the number of people who are insured and the services they need and use. Our health care costs are going up because a growing number of people need those health care services. Health care costs are driven by specific conditions that people have and have in growing numbers -- obesity-related illnesses like diabetes need to be treated. Those treatments individually are among the most expensive or collectively are among the most expensive and the most rapidly growing. The top 20 conditions that account for the vast majority of the costs in the country are conditions that are each growing at significantly faster rates than the population. As long as we have a coverage system, which employers and unions are a major source of providing coverage, they're going to be seeing increases in costs proportionate to the increases (in the number of people with coverage needing services for those conditions). It means that we may have to take a step back and look at why these conditions are growing in the kinds of numbers they are. Many insurers these days have decreased the emphasis on preventive health care partially because the cost of providing the other services has increased. We're going to have to do something about the underlying conditions that cause people to use expensive medical care services. The idea that we can just reduce the costs of those services is absurd. We're going to have to look hard at the health status of our population -- that means here in Las Vegas we need to look very realistically at what conditions cause people to use the medical care system and which of those conditions can be prevented. Some of these can be prevented by behavior changes, some by medical intervention. Whatever it is, the numbers are going to increasingly convince people that you can't control costs only by looking at the use end of it. Underpaying for that use is just going to create new crises and frustrations.

Does the physician community believe employers have a moral obligation to provide health care to their employees?

Physicians break down about the same as the rest of the public. Everybody agrees that people should be covered for their health care needs and disagree about whose responsibility it is to pay for that and how to organize that. Over the coming months and years, that's the hottest political issue in the health care system.

Let's talk about medical malpractice. How have the medical malpractice reforms approved last year by Nevada voters affected the physicians' community?

So far it has affected them positively in terms of the psychological effect. They feel that we're on the road to recovery from the crisis that lasted a little over three years. At the practical level, we won't be seeing measurable improvements in premium rates for some time because we know almost all of the doctors who have practiced here for at least three years will have the potential for claims being filed under three sets of laws, and the insurance premiums are going to be set based on the potential risk that they might have to pay out under the old laws, whether a case may be brought under the new laws and the constitutional challenges to the various laws. Premiums are going to be the last indicator that the crisis is totally behind us. What we would hope to see is that rates will stabilize -- there's still some increases that were really ones that have been in the pipeline for awhile -- that new companies choose to come into Nevada or return to Nevada, and that new physicians coming in under the new law will come in paying slightly higher rates than the national average but will not see those increase anything like the national average. On premiums that's the best we can hope for.

We've already seen the psychological risk also impacting the reputation of Nevada, especially Southern Nevada. The number of physicians now moving into the state is just about on par with where we were before we went into crisis. We had a net increase each year of between 150 and 200 physicians. That's kept us pretty low because of the rate of growth of the population. We then went into two years where we had virtually no net gain of physicians. The national reputation of Nevada was that we were in such a bad crisis that physicians wouldn't take the risk of moving in. For the first time in 2002, of the new physicians moving into the state, almost 70 percent moved into counties other than Clark. Last year has come back to the usual: 70 percent that move into Nevada come into Clark County. The number is back up to between 150 and 200 (doctors). I hope that t he other bad effects of the liability crisis are also going to be minimized over time: The changes in practice behavior; the doctors who gave up doing any high-risk procedures; the obstetrician who just specializes in gynecology. I hope that we see with each quarter that more physicians will go back to practicing the way they did (and) that their fear of litigation reduces and we have a health care system fully functioning as it should.

The reform measures were passed in hopes that malpractice premiums would stabilize or decrease. Do doctors remain confident that their rates will stabilize or drop and what is likely to be the overall economic impact of the reforms?

Physicians overall do believe that the reforms will stabilize the market. Over time, that we will repeat the California experience -- and the experience of the five other states that have adopted similar reforms over the years. It's less about the dramatic rate reductions than about the rate of increases being much less than the national average. California has had the lowest premium rate increases in the last 25 years. That's entirely because those reforms have made how much liability costs would be far more predictable. We think that's what we'll have, too. The economic consequences of that will be that physicians and physicians' practices will be able to figure into the administrative costs (their) expectations that won't be jarringly wrong and they'll be able to set their charges in a more stable manner. Ultimately, they'll be able then to deal with the risky procedures, the riskier patients with the conditions that are most likely to lead to unfortunate outcomes or additional care. They'll be able to afford to take those on. The added risk of doing that won't mean the premiums will be unaffordable. For the insurers, the employers and for patients it will mean cost savings in that they will be able to get the specialty care and the services they need here rather than them having to wait a prohibitively long time or having to travel to get them done.

Doctors admit they have resorted to defensive medicine such as administering extra tests and cutting back procedures before recommending treatment. Is that practice here to stay in Nevada or will doctors alter their practice methods once the malpractice concerns subside? How much does defensive medicine add to health care costs?

It's a national issue more than a Nevada issue. While driven largely by liability, it's not fully by liability. This is the area where once the pressure of the risk of lawsuits is reduced to some more bearable number, then the procedures that are ordered, the tests that are done can really be put into the best practices kind of thinking. Services should be done, because there is a clinical need for it; because there is a scientific expectation that you're going to find information that you need. It shouldn't be driven either by fear of lawsuits or because it seems like a good idea. Over time, I think it's going to mean not only that defensive medicine will be reduced but there will be a significant improvement in outcomes because we are moving toward outcome-based medicine. The more of these extraneous concerns and worries you remove from the doctors and nurses, the more they are going to be able to apply those principles and the better it will be for patients. It's a highly disputed number. Presumably it's something in the order of 2 (percent) to 4 percent.

We've talked about outcome-based medicine and quality initiatives. There have been reports that physicians would quit doing certain procedures if there was more transparency and more reporting. How are doctors grappling with this since more agencies including Medicare and the Joint Commission of Accreditation of Healthcare Organizations are reporting quality to help patients make better decisions?

There's fear of reporting like there's fear of being sued. It's an extension of the same fear to report that when something didn't go right might open someone up to a lawsuit rather than opening up how can we do it better. We're going to work through this. The growing appreciation of how many times our health care system failed to perform at the level we can perform at is driving a growing number of physicians, a growing number of hospitals to want to improve. The system needs to be improved so that every patient and every patient encounter is working optimally. It will still fail occasionally, but if it fails as it does now because we haven't adopted certain changes that can have immediate benefit than we will have failed. There's a growing awareness and commitment to incorporating new technology and new ways of looking at old technology, looking at a pat ient encounter as a challenge (and) to making sure that that encounter is the best it can be. It's a quality-control mission and quality-improvement mission that has frankly been too long delayed because of things like the litigation battle, the concern of embarrassment, concern of a licensing action. All of those concerns are real. They all have to be dealt with but none of them are a satisfactory reason not to go ahead and have improved the system. We've participated -- along with the Nevada Hospital Association and the Nevada Nurses Association -- in creating the voluntary Nevada Center for Patient Safety. It's the idea of looking at things that have been proven to work elsewhere in the country and adapting them into Nevada. There's a project that we've had going on for about a year to stop the use of certain abbreviations because they've created measurable problems.

Lawyers have argued that much of the malpractice in this state could be avoided if physicians would better police the industry and regulators would better regulate the industry. Are bad doctors contributing to the malpractice problem and do you think doctors and the Nevada State Board of Medical Examiners are doing enough to weed out offenders?

The Legislature has taken a big move on this. They listened to the lawyers' defense. We've adopted the most sweeping changes in licensing oversight and in the oversight of the insurance industry in the country. The Board of Medical Examiners, the Board of Osteopathic Medicine, have been totally restructured and revised over the last two legislative sessions. We'll see how much of the concerns that were expressed are real. No one has ever disputed that a relatively few cases drove us into the crisis. In some cases, they were clearly resulting from the quality of care, other times they weren't. But a relatively few number of cases in small states do drive insurance rates. At this point, we may have too much oversight, but we'll see. We've taken the position not to oppose those reforms but to try to work with the state regulators to implement them and accomplish what everyone intended, which was (to make) all the information that the patient and a patient's family needs to know about a physician will be available to them.

Hospitals say many emergency room patients do not have life-threatening conditions and could be treated in a doctor's office. What, if anything, are doctors doing to assist hospitals with their overcrowded emergency rooms?

Given the way our system has gone, living in a community where one in three or one in four people who live here don't have insurance coverage or don't qualify for public insurance, for them, they don't have regular physicians. They don't have a regular place they can go for nonemergency care, for primary care. They've chosen the emergency department as the most readily available and obvious place to access the system. There's a lot going on to try to set up alternative ways to access care. The physician's office, it's not really the ideal setting for people dropping in, especially if they're uninsured and compensation might not be there. We have a developing system of primary care for the uninsured and for those who are lower income. Nevada Health Centers, working with Clark County, has developed a series of primary care centers. A number of physicians are volunteering their time to work with them. We've just changed the law to make it very clear that specialists who are providing free care to the patients of the clinics and UMC can be seen without facing liability costs. You have to remove barriers to physicians being able to provide free care. One of those barriers is that their (malpractice) insurance rates would go up. The growth of the network of primary care clinics has helped but it's going to be an ongoing challenge just as we had to have significant legislation and funding to be able to move mentally ill patients out of emergency departments.

We may have to have a similar major initiative aimed at having alternative sites for people who don't have insurance coverage who need primary care or need urgent care so that they don't have to go to the emergency department. Emergency departments are the most expensive entry point into the health care system.

How are physicians helping with the growing number of uninsured patients and do they typically work with patients for payments?

Yes, many physicians are and many physicians can't afford to. Primary care physicians (and) internists are making major efforts working with the various clinics that exist. It gets harder for specialists to be able to do that. We have challenges but I think we can only deal with them marginally until we deal with the overall issue of finding coverage for people. We should not have a third to a quarter of our population with no coverage. We shouldn't have people who are using significant services -- delivering babies, going into trauma care, having chronic conditions -- and having no coverage and the doctor having to make due with prescription drug samples because he knows the patient can't afford to pay for a prescription. Those are very difficult situations that are driven not by the failure of the health care system but by the failure of the health care coverage system. It's a challenge that we have repeatedly failed to address effectively.

Some local doctors have criticized insurers and managed-care plans for their reimbursement rates and slow payment schedules. What is the relationship between local doctors and health plans? What, if anything, do you think needs to be done to improve that relationship?

There are problems with payment models and the bureaucratic process of getting paid and getting coverage and getting information about the patient on whether or not procedures will be approved. We've done an awful lot of work with the state Legislature, with the state Insurance Division to work out rules to make these situations less confrontations and more norms. Nevada has adopted, over the past few years, a series of managed-care reforms that are among the best in the country. They address everything from how quickly a claim should be paid, the process to follow if it hasn't been paid in a timely way to issues of when you do or do not need prior authorizations. Those are the problems that created this tension between doctors and the managed-care organizations.

The situation has improved. Are there problems? Yes, and those have to do with payment amounts, which are not something we can regulate by law. They are driven by market factors and other things. Those are continuing contentions. We've tried to remove as many of the procedural difficulties -- which really were at the source of a lot of the hard feelings -- and over time that may improve the situation. Doctors want to provide care for patients -- and insurers, managed-care plans, government insurers all are resistant to paying for everything that a doctor may think a patient needs or that the patient thinks they need. They've had a disproportionate amount of power and they've been able to decide who the patients will see, what services the patients will get and what, if anything, the doctor or the hospital will be paid. The steps we've taken have begun to rebalance the system.

Tension has mounted between some Las Vegas Valley doctors and the University of Pittsburgh, which hopes to build an academic medical center in downtown Las Vegas. What are your thoughts on that and would the medical center enhance the local health care industry?

The opening discussions were not as well thought through as they should have been or perhaps they were not as inclusive as they should have been. The University of Pittsburgh School of Medicine is an excellent academic center and it runs a number of hospitals and clinics that have a very good reputation. The University of Nevada School of Medicine has made significant improvements. There's been talk about development of an academic medical center by the University of Nevada School of Medicine, by Mayor (Oscar) Goodman and by various others over the years. It would bring, if not new services, a new approach to research and delivering services. That might be a very good thing. It has to naturally fit what we are, who we are, what health care system we have, what the needs are of the health care system and what the strengths are of the health care system. I don't think everybody has really begun to sit down and go through all of that and look at what specific areas of needs aren't being met, what specific areas are being well met that could use some backup (and) what areas are being well met. The early phase of a discussion shouldn't be done with any preconceptions. If anything, concern expressed by a number of physicians is that there seemed to be a lot of preconceptions that may or may not be true. There is a natural resentment that any community feels when someone from the outside comes and says we can do it better. That doesn't mean you don't listen. That doesn't mean that you don't look at the way you're doing things. This didn't start because there's a need for an academic medical center. This started because there's a number of acres of unused land in the center of Las Vegas and they're trying to find a use for it. Looking at improving availability of medical services in the community is something that might be nice to put on a vacant lot and is not a bad thing to look at, but initiating that without the full participation of the medical community, the hospital community, the university community was probably unwise.

Nevada is seeing an increase in the number of physicians licensed in the state, but the numbers are failing to keep pace with the population growth. What is being done to attract physicians and retain them?

Since the passage of the (malpractice) reform we've now seen the net increase of physicians approaching the levels they were through the '90s. We hope to see that continue but that's still not going to be enough to keep up with the population growth. Hospitals, major physicians' practices and specialty groups are all very actively trying to recruit physicians and are facing many problems. There are very few of the specialists we need who really are available. There are fewer being produced than the projected need for the coming years. The potential for a physician shortage is very real nationwide, and communities like ours, where growth is a huge factor, have a double problem. We not only have to replace the physicians as they retire, we have to find new ones in fairly large numbers. It's being worked on but we're dipping into a small pool and we have to f ind ways to make better use of those specialists we are able to recruit as well as finding ways to attract young physicians. That's part of why the growth in the (University of Nevada) School of Medicine is important. In effect, our nurse shortage is a restraint on our ability to recruit physicians. The shortage of pharmacists and all of the other professionals in the health care system often discourage physicians from coming here. They rely on having that backup to whom they pass off patients and health care treatment. Many physicians, given the choice between two equally attractive communities, would rather go to the one where they have that backup.

What types of doctors are most underrepresented and what is being done to attract those specialties?

There are shortages almost all across the board but there's a general agreement that we are most short in the pediatrics specialties, especially the pediatrics subspecialties. We have very few pediatrics specialists and they work incredibly hard. We've always had difficulty in having pediatricians and pediatric specialists and that's partially because they're not as well compensated as many other specialties. Our Medicaid program is not as large as Medicaid programs in other states. Many children are treated on Medicaid and Nevada Check Up. Although there have been some efforts at improving payment, they're not excellent payers. We also have significant shortages at the other end of the age scale with specialists serving seniors -- everything from heart and thoracic surgeons to neurologists (and) kidney specialists. It's a wide range of specialists that are needed. We're last or just about last in the country in every one of these categories because of the number of those specialists to the population.

Medicare and Medicaid reimbursements have been criticized as being insufficient. What are doctors doing to cope with the rates they receive?

Many of them are no longer seeing Medicare and Medicaid patients. The situation, especially for Medicare, has been such a frustrating one. It is driven by the fact that Congress wrote a formula into federal law on payments for physicians' services, and the formula was badly flawed. It made since in 1996, but it doesn't make any sense now. Congress added new services to Medicare beneficiaries. For the first time they are able to get check-ups before they go into the Medicare program. But the formula reduces how much physicians get paid when there are more services used. In January, if Congress doesn't fix the formula, physicians will see about a 5 percent decrease. Many physicians are receiving less payment for Medicare today than they did 10 years ago for the same services. We're especially vulnerable to that. We have the fastest-growing senior population, which means we have the fastest-growing Medicare population in the country. While here in the Las Vegas Valley, most Medicare patients are able to find doctors who will take them as new patients, in the rest of the state that's not true anymore and it won't be true here much longer. It tends to affect the specialties more than the primary care physicians.

Medicaid has been a particularly frustrating experience over the last two years. The state changed the entire management of the Medicaid program and the system failed so physicians weren't paid for the Medicaid services they provided for a period of -- in many cases -- 12 to 18 months. We worked with the Division of Health Care Financing and Policy in the state and with First Health Services, which was the contractor responsible for paying claims, on a weekly basis going through every claim made by doctors, everyone who was denied, identifying what in their system failed. It took a little over a year before physicians got paid regularly on new claims and got paid most of the backlog. We're talking about millions of claims that had to be done. This affected hospitals, it affected others, but it was particularly bad for physicians. The reason we worked with the state on this was so that physicians had hope at the end of this they would be made whole, the system would be working and they wouldn't have to leave it.

Doctors say their costs are eating up much of their compensation. What are the average salaries for Nevada doctors in primary care and in obstetrics? Are doctors overpaid?

Probably 20 (percent) to 25 percent are salaried. That is they work for HMOs, other managed-care organizations (and) for hospitals. Most are independent contractors and bill based on nationally established codes. Each payer has a different way of paying for them. It varies widely by specialty as to what they actually earn. For most physician practices, what the physician charges is what the practice makes. The front office staff, the back office staff, the nurses are all paid for out of whatever the physician is able to bill for. Nationally, there's an annual review of physician payments by region. The last three years have shown about a 1 (percent) to 2 percent increase each year, which is a significantly low increase given how much of the national income goes into health care expenses. Individual physicians are not seeing payment increases. Partially tha t's because their overhead has gone up for things like the liability insurance, which for many of them has become the hardest part of their overhead to make. The range from the national review is that for primary care physicians in the Nevada, Utah, Arizona region (compensation) tends to be -- give or take $10,000 -- about $100,000 a year. It goes up from there for the various super specialties and those would be neurosurgery, trauma surgery, which are at $500,000 to $1 million. Proportionately, they have the most significant costs. It ranges widely and the compensation levels here are far below the Northeast and the West Coast. Partially that's driven by the fact that managed care is a quite dominant payer in this area.

National studies say an increasing number of doctors are going to group practices. Why is that and what are the benefits and drawbacks to being in a group practice?

Group practices are growing. We still have very small group practices here in Nevada, compared to what goes on nationally. They tend to be either midsize or large specialty practices. That is all the radiologists, or a number of radiologists, get together. There are some multispecialty group practices as well where they can provide full services and the patient can see someone in an interrelated specialty in the same setting. The reasons for it are quite natural. They get to share overhead. They get economies of scale. They have an easier process of dealing with managed-care and insurance billing issues. They're able to afford computers and computer software. They're able to pool their resources and get administrative assistants and nursing assistants. All of those reasons are pushing for that. On the downside, it means that with the problems with compensa tion and levels of payment, as the group develops, individuals have to see more patients (and) work harder in order to make the group venture work.

How are Nevada physicians affected by the nursing shortage?

It's severe for a lot of reasons. So much of the more complicated care is provided in hospitals and in nursing homes and the physician relies on the nursing staff to be there when the physicians aren't and to carry out the orders and directives to make sure the patient is getting the appropriate care at the appropriate time. Where you have too few nurses, they're stretched very thin and their ability to monitor every patient as appropriate becomes harder. In some specialty care, that monitoring is a key part of making sure that the outcome is the desired one. It has made it difficult to recruit physicians.