Request By:
Jon W. Ackerson, Esq.
3400 First National Tower
Louisville, Kentucky 40202
Opinion
Opinion By: Robert F. Stephens, Esq., Attorney General; Mark F. Armstrong, Esq., Assistant Attorney General
We are in receipt of your letter in which you ask our opinion of whether a legal entity 1 which will offer dental services through arrangements with individual dental practitioners may qualify as a health maintenance organization (hereinafter, "HMO") under KRS Chapter 304.38 as defined in KRS 304.38-030(4) 2 and (5). 3
KRS 304.38-030 is sufficiently broad that a literal reading of its provisions will permit the creation of a single service HMO. However, the broad application of KRS 304.38-030 is restricted by KRS 304.38-020(3) which provides:
"It is the intent of this subtitle to complement the federal health maintenance organization act of 1973, as amended, (PL 93-222) and nothing in this subtitle is intended to be in conflict with the federal statutes and regulations promulgated thereunder."
It is our judgment that KRS 304.38-030 is sufficiently ambiguous to permit one of two interpretations: One, that a single service HMO is permitted; or Two, that the HMO must offer more than one service. When a statute is general in its terms, and not clear and definite in its scope, the courts will give it the construction which will effectuate its intent, Acme Drilling Co. v. Gorman Oil Syndicate, 198 Ky. 576, 249 S.W. 1003, 1004 (1923). To this end, of course, the court will look to the entire act and not merely a portion of it, cf. George v. Scent, Ky., 346 S.W.2d 784, 789 (1961). Accordingly, the proper interpretation of KRS 304.38-030(4) and (5) is that which is in harmony with the intent expressed in KRS 304.38-020(3), Daviess County v. Snyder, Ky., 556 S.W.2d 688, 691 (1977).
Thus, the question to be answered is whether KRS 304.38-030(4) and (5) may be interpreted to apply to a legal entity which otherwise qualifies as an HMO but which will offer only a single health service without creating a conflict with the expressed intent in KRS 304.38-020(3) that nothing in KRS Chapter 304.38 is to conflict with applicable federal law. The applicable federal law is the Health Maintenance Organization Act of 1973 4 (codified primarily in 42 U.S.C.A. § 300e etseq. ) and the Health Maintenance Organization Amendments of 1976 5 (codified primarily at 42 U.S.C.A. § 300e etseq. (Supp. 1977)). The 1976 Amendments are relevant to our discussion here only insofar as their legislative history, discussed infra, sheds light on the structure Congress intended HMO's to have under the 1973 Act.
The 1973 Act defines an HMO, in part, as ". . . a legal entity which provides basic and supplemental health services to its members in the manner prescribed by . . . this section." 42 U.S.C.A. § 300e. Under the 1973 Act, an HMO is required to provide to its members basic health services, 42 U.S.C.A. § 300e(b)(1), and to make available to its members at their option supplemental health services, 42 U.S.C.A. § 300e(b)(2). The term, "basic health services, " is defined in 42 U.S.C.A. § 300e-1(1) and consists of eight health services including physician services which may be rendered by a dentist, 42 U.S.C.A. § 300e-1(1)(A), and preventive dental services, 42 U.S.C.A. § 300e-1(1)(H). The term, "supplemental health services, " is defined in 42 U.S.C.A. § 300e-1(2) and consists of six health services including dental service not included by the HMO as a basic health service, 42 U.S.C.A. § 300e-1(2)(B).
Thus, the question is further narrowed to one of whether a federal HMO may offer only one health service of the basic or supplemental health services. We are of the opinion that a federal HMO cannot offer only one health service but is required to offer all of the basic health services and under the 1973 Act was required to make available all the supplemental health services. 6 Our conclusion is based upon (1) a statutory construction of the 1973 Act and (2) its legislative history.
First, in the 1973 Act, the HMO was required to provide its health services through one of three alternative and mutually exclusive categories of health providers 7: Through health professionals on the HMO's staff or through a medical group or through an individual practice association. A medical group is defined, in part, as a partnership or association of licensed health professionals, the majority of whom are licensed to practice medicine or osteopathy, 42 U.S.C.A. § 300e-1(4). An individual practice association is defined, in part, as a partnership, corporation, association or other legal entity which has entered into a services arrangement with health professionals the majority of whom are licensed to practice medicine or osteopathy, 42 U.S.C.A. § 300e-1(5).
Thus, an HMO rendering a single health service such as dentistry could be doing so through a medical group or individual practice association the majority of the members of which are not trained or licensed to render the single service. This is an anomalous result which we decline to reach. Further, the anomaly reached in this regard compels the conclusion that the staff of the HMO should not be treated differently. That is, we do not believe that the staff of an HMO could be composed entirely of dentists. While this conclusion is only weakly supported by construction of the statutes, the proposition is affirmatively demonstrated by the legislative history of the Act, infra.
Second, the legislative history of the 1973 Act and the 1976 Amendments conclusively demonstrates that a federal HMO was intended to provide all of the basic health services and to make available all of the supplemental health services. 8 In S. Rep. 93-129, 1st Sess. (1973), the Senate Labor and Public Welfare Committee, the committee in which the 1973 Act originated, 9 stated one of the advantages of an HMO to be:
". . . [T]he HMO organizes medical resources in a way that is more convenient for patients and more responsive to their needs. Rather than forcing the patient to find his way through a maze of separate services and specialists, the HMO makes a full range of services available through a single organization. And the organization of health resources in an HMO provides substantial economic and professional advantages to participating physicians as well, in the form of significant reductions in the cost of medical practice; increased professional support from colleagues within the HMO; a more regular work schedule; greater opportunities for continuing education and reduced financial risks in entering medical practice. " 2 United States Code Congressional and Administrative News 1973, at 3034 (hereinafter cited as "U.S. Cong. & Adm. News '73").
Thus, the Senate Committee was of the view that:
"Health Maintenance organizations assure the consumer of health services access to a wide range of necessary health services HMO's, if effectively designed, largely eliminate many of the problems presented by the prevalent fragmented solo practice model. Too often, in the existing system of medical practice patients must seek uncoordinated care from various specialists who may be scattered over a wide geographic area, necessitating a number of time-consuming visits to more than one doctor." 2 U.S. Cong. & Adm. News '73, at 3040.
Accordingly, the Senate bill required HMO's by definition to deliver a wide range of health services:
"In a health maintenance organization, as defined in title I of S. 14, a wide range of health care services, delivered by physicians and other health professionals working as an integrated team, may be given at a single site.
"The sharing of common facilities by many types of providers, encouraged by S. 14, not only greatly increases convenience for consumers and providers alike, but has other important spin-off advantages.
"First, a multispecialty group practice arrangement encourages the centralization of many types of health care services in one location. This greatly increases the ease with which care can be obtained by the consumer and delivered by the provider. Moreover, a multispecialty group practice arrangement facilitates the development of expeditions referral patterns, and the integration of many types of health care personnel, both physician and nonphysician, into the health care team.
"In addition, a group practice arrangement encourages ongoing peer review, and a process of continuous evaluation of decisions which it is difficult or impossible to duplicate in a solo practice setting.
"The centralization of many types of services has another major advantage. It makes possible the compilation of a single unit medical record for each HMO enrollee. The existence of a single medical record, which can be used by all health care personnel involved in the diagnosis and treatment of an HMO enrollee greatly facilitates an understanding of the particular patient's problems by each provider involved in the care of the patient, and expedites accurate diagnosis and effective treatment." 2 U.S. Cong. & Adm. News '73, at 3041.
The report was specific on this point:
"In general, the Committee detailed a rather comprehensive package of mandated benefits for HMOs and Health Service Organizations to emphasize the desirable impact a HMO-HSO structure could have upon the appropriate provisions of services, on the containment of costs and on assurance of quality.
"In so doing, the Committee has required that a Federally subsidized HMO or HSO provide what the Committee believes is a basic package of benefits, consistent with existing health insurance patterns." 2 U.S. Cong. & Adm. News '73, at 3042, see also at 3042-45.
The committee stressed that the federal HMO's were to provided a wide range of services:
"One of the advantages of an organized system of health care delivery is that the enrollee has the assurance that the health maintenance organization or health service organization will guarantee a broad range of health care services to him. In exchange for his capitation payment, the enrollee has every right to expect that he will obtain services in an appropriate and convenient way when he requires them. For that reason, health maintenance organizations and health service organizations, in order to qualify for funds under this act, must assume responsibility for the provision of services to its enrollee 24 hours a day, 7 days a week, and for the appropriate emergencies. In addition, it must arrange for the provision of necessary services when an enrollee is not in the geographic area of the HMO." 2 U.S. Cong. & Adm. News '73, at 3046.
In its analysis of each section of the bill, the report stated the definition of an HMO, see 42 U.S.C.A. § 300e(b), means an entity which:
"(a) Provides uniform comprehensive health services for all its enrollees (or subscribers), in return for fixed and uniform payments made on a periodic basis (without regard to the frequency, extent, or kind of service actually furnished). A basic range of services is to be delivered directly through the staff and supporting resources of the health maintenance organization or through a medical group (or groups)." 2 U.S. Cong. & Adm. News '73, at 3089, see also 3091.
That the HMO contemplated by S. 14 was to provide a wide range of health services was accepted in the Minority report, see 2 U.S. Cong. & Adm. News '73, at 3117-19. This concept was not disturbed by the substitute bill of Committee of Conference, see 2 U.S. Cong. & Adm. News '73, at 3121-22, which merely deleted certain services which the Senate bill required HMO's to provide, see 2 U.S. Cong. & Adm. News '73, at 3123. Indeed, S. Conf. Rep. No. 93-621, 1st Sess. (1973) was specific on this point:
"The Senate bill provided that an HMO must demonstrate to the satisfaction of the Secretary ability to assure that appropriate comprehensive health services are available and accessible to all its enrollees promptly and in a manner which assures continuity.
"The House amendment provided that an HMO must, within its service area, make basic and supplemental health services available andaccessible to each of its members promptly, as appropriate, and in a manner which assures continuity; and such services shall be provided to any member when he is outside such area, or he shall be reimbursed for his expenses in securing such services outside such area, if it is medically necessary that the services be rendered before he can return to such area.
"The conference substitute requires basic health services (and supplemental health services in the case of members who have contracted for such services) to be, within the HMO service area, available and accessible to each HMO member in a manner which assures continuity. Basic and supplemental health services must, when medically necessary, be available and accessible twenty-four hours a day and seven days a week. An HMO member must be reimbursed by the HMO for his expenses incurred in securing basic or supplemental health services from providers other than the HMO if it is medically necessary that such services be rendered before they could be provided by the HMO." 2 U.S. Cong. & Adm. News '73, at 3128-29.
The foregoing conclusively demonstrates that the HMO created and defined in the '73 Act could not be a single service HMO but was to be a multiservice entity. This concept was not changed by the Health Maintenance Organization Amendments of 1976.
These amendments were in response to the slow development of HMO's under the '73 Act, see 4 U.S. Cong. & Adm. News '76, at 4313-14. The House Interestate and Foreign Commerce Committee in its report, H.R. Rep. No. 94-518, 2d Sess. (1975), felt this was in part the result of overly strict requirements of the '73 Act, see 4 U.S. Cong. & Adm. News '76, at 4319-20.
Accordingly, the proposed amendments changed the requirement that HMO's make available supplemental health services, see 42 U.S.C.A. § 300e-1(2):
"H.R. 9019 would amend the requirements that HMO's have the capacity to offer supplemental health services to members who desire to purchase them so that the provision of supplemental health services becomes optional with the HMO. The amendments also make it possible for HMO's to include supplemental health services in the basic benefits package which their members are required to buy. These amendments are intended to relieve the HMO's of the costly requirement that they have the capacity to deliver services which may never in fact be purchased by any members and to make it possible for HMO's to simplify their marketing of benefits by allowing the sale in communities where it is feasible of a single package of benefits which includes one or more of the supplemental health services. This will make it possible for HMO's to avoid having to sell completely different packages of benefits to each group with which they do business and to avoid having to fill basic and supplemental health services separately for those groups which do purchase supplemental health services. " 4 U.S. Cong. & Adm. News '76, at 4322. 10
The proposed amendments transferred certain services from the category of basic health services, 42 U.S.C.A. § 300e-1(1), to supplemental health services, 42 U.S.C.A. § 300e-1(2):
"H.R. 9019 revises the existing required benefits by making alcohol and addiction services into supplemental health services, dropping from the preventive health services the requirement for preventive dental care for children, and adding requirements that preventive health services include immunizations, well-child care from birth, periodic health evaluations for adults, and ear examinations to determine the need for hearing correction. These amendments are generally intended to strengthen the preventive orientation of the HMO by adding explicit requirements for the delivery of well established preventive health services and to make the cost of delivering the basic health services competitive with the usual cost experience of private insurance companies with which the HMO's compete." 4 U.S. Cong. & Adm. News '76, at 4323. 11
While these amendments narrowed the number of health services which an HMO is required to offer, see 42 U.S.C.A. § 300e-1(1) and (2) (Supp. 1977), they did not reach the ultimate point of permitting a single service HMO, compare "Dissenting Views of David E. Satterfield, III," 12 4 U.S. Cong. & Adm. News '76, 4350-51, and "Supplemental Views to H.R. 9019 by the Honorable Tim Lee Carter." 13 The changes made to H.R. 9019 by the Committee of Conference did not permit the creation of a single service HMO, see 4 U.S. Cong. & Adm. News '76, at 4355-56, 4360.
The foregoing discussion demonstrates to our satisfaction that under the 1973 Act and the 1976 Amendments, there could not be a single service HMO. Rather, the federal HMO is required to provide all the basic health services, 42 U.S.C.A. § 300e-1(1) (Supp. 1977). Accordingly, we are of the opinion that KRS 304.38-030(4) and (5) may not be interpreted to apply to a legal entity which otherwise qualifies as an HMO but which will offer only a single health service. In other words, a single service HMO may not be created pursuant to KRS Chapter 304.38 and KRS Chapter 304.38 does not apply to a legal entity which provides only a single health service. A contrary interpretation would conflict with KRS 304.38-020(3) which, in effect, demands that HMO's created under the state law meet the criteria of federal HMO's.
Footnotes
Footnotes
1 The specific nature of this legal entity is described as follows:
"The company will operate in the following manner. The company will contact individuals and groups and offer to them a number of dental services, such as teeth cleaning, x-rays, exams and diagnoses, local anesthetics, along with other more complex and expensive dental services, such as crowns and bridge work and oral surgery. The subscriber to this plan pays a fixed, predetermined per capita yearly premium. In exchange for his per capita fixed prepayment, he [or his family] receives a series of dental services, such as previously outlined, at either no cost or at a reduced, predetermined fixed fee to be paid directly to the dentist. The dentists who are participating in this plan and providing these services are individual practitioners who offer their services from their offices. There is no clinic established from which these dental services would be provided; instead, the members of the plan select a particular dentist from a list furnished to them of dentists participating in this plan." Letter from Jon Ackerson to Robert F. Stephens, p. 1, August 7, 1978.
2 KRS 304.030(4) provides: "'Health care services' means any services included in the furnishing to any individual of medical, optometric or dental care, or hospitalization or incident to the furnishing of such care or hospitalization, as well as the furnishing to any person of any and all other services and goods for the purpose of preventing, alleviating, curing, or healing human illness, physical disability or injury."
3 KRS 304.030(5) provides: "'Health maintenance organization' means any person who undertakes to provide, directly or through arrangements with others, health care services to individuals voluntarily enrolled with such an organization on a per capita or a predetermined, fixed prepayment basis.
4 Hereinafter sometimes referred to as "1973 Act."
5 Hereinafter sometimes referred to as "1976 Amendments."
6 In the 1976 Amendments, the federal HMO is no longer required to make available to its members all of the supplemental health services, compare 42 U.S.C.A. § 300e(b) (Supp. 1977) with 42 U.S.C.A. § 300(b).
7 The 1976 Amendments permit an HMO to utilize the services of staff, medical groups and individual practice associations in any desired combination, 42 U.S.C.A. § 300e(b)(3) (Supp. 1977).
8 See n. 6, supra.
9 The genesis of the 1973 Act was in S. 14 which did not survive in its original form. The differences between S. 14 and the 1973 Act did not vitiate the committee's concept of HMO's. Thus, the committee's comments retain their pertinence to the issue here, see 2 U.S. Cong. & Adm. News '73, at 3121 et seq.
10 See also 4 U.S. Cong. & Adm. News '76, at 4326-28, analysis of the section of the house bill, H.R. 9019, containing the amendment to the definition of supplemental health services.
11 See also 4 U.S. Cong. & Adm. News '76, at 4333-34, analysis of the section of the house bill, H.R. 9019, containing the amendment to the definition of basic health services.
12 Member, House of Representatives (Dem., Va.).
13 Member, House of Representatives, (Rep., Ky.).