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4 Delivery Systems Adult and childhood immunizations are delivered through fairly dis- tinct systems. This chapter begins by describing those systems and then reviews the specific tasks involved in providing immunizations and the mechanisms for provider reimbursement. The final section addresses barriers to achieving a well-functioning immunization delivery system. DELIVERY OF ADULT AND CHILDHOOD VACCINES Privately insured adult patients receive immunizations through pri- vate providers or frequently, in the case of influenza vaccine, at work or other non-medical sites. As noted earlier, however, the immunization safety net for adults is far more limited than that for children. In some states, counties bear the principal responsibility for adult immunization in the public sector (Freed and Cowan, 2002~. Local health departments purchase influenza vaccine with local or county funds. In some areas, such as Los Angeles and Houston, local health departments receive state fund- ing for adult vaccination. Vaccines commonly provided to adults include viral influenza, hepa- titis A and B. pneumococcal polysaccharide, and the 23-valent meningo- coccal vaccine. Many states also provide a significant amount of tetanus vaccine to the adult population. As the U.S. population ages, many states are expecting increased demand for influenza and meningococcal vac- cines. Moreover, any changes in the recommendations of the Advisory Committee on Immunization Practices (ACIP) for viral influenza vaccine will have a significant impact on adult immunization budgets. 91

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92 FINANCING VACCINES IN THE 21ST CENTURY Some states are experiencing a significant increase in the use of hepa- titis A and B vaccines with new programs targeting specific at-risk popu- lations. Other states with large numbers of migrants also believe they will see an increase in demand for adult immunization services. In addition, the recent downturn in the economy will likely result in fewer adults hav- ing health insurance; and as a consequence, larger numbers will seek care (including immunizations) at public clinics (Freed and Cowan, 2002~. Childhood immunizations are provided to the public through two main venues: private office-based providers and public health clinics. Before the implementation of the Vaccines for Children (VFC) program, private providers generally immunized privately insured individuals, and public clinics immunized safety net populations. As discussed earlier, one of the goals of the VFC program was to increase the proportion of chil- dren who receive vaccines in their medical home. Almost overnight, VFC expanded the number of publicly certified immunization providers from about 3,000 public immunization sites to more than 40,000 public and pri- vate provider sites (IOM, 2000a; see also Chapter 2~. Over the past several years, the proportion of children receiving pub- licly purchased vaccine in the offices of private physicians has increased markedly. The shift in delivery of childhood vaccines from the public to the private sector has been documented extensively. For example, be- tween 1994 and 1998, the National Immunization Survey reported a de- crease from 24 to 17 percent in the proportion of families who received all immunization from public clinics (Fairbrother and Haidery,2002~. In some states, the shift was even more pronounced. In Washington State, for ex- ample, the public sector accounted for 80 percent of vaccine delivery and the private sector for 20 percent in 1994; by 1999 these figures had re- versed. Before VFC, the public sector delivered 70 percent of the state's immunizations; but by 1999 that number had dropped to just 35 percent (Fairbrother et al., 2000~. Other states, such as Minnesota and Pennsylva- nia, also reported reduced doses delivered in the public sector (Zimmerman et al., 2001), while some states, such as Maine and New ler- sey, reported that virtually all their immunizations 90 percent took place in the private sector (Fairbrother et al., 2000~. Not surprisingly given these trends, physicians (Zimmerman et al., 1997) and nurse practitioners (Zimmerman et al., 2000) participating in national surveys revealed that they were referring fewer children to public clinics and were vaccinating more in their own offices. Table 4-1 provides estimates from state immu- nization programs of the proportion of publicly purchased vaccines administered in the private sector. While both public clinics and private providers have proven to be effective at providing immunizations to the public, both are currently under stress. Public clinics remain an important safety net for those without access

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DELIVERY SYSTEMS 93 TABLE 4-1 Proportion of Publicly Purchased Vaccines Administered in the Private Sector 90% Alaska Alabama Colorado California Connecticut Arkansas Florida Georgia Delaware Hawaii District of Idaho New Mexico Massachusetts Maryland Columbia Indiana North Carolina Minnesota New Hampshire Illinois Iowa South Carolina Oregon New Yorka Kentucky Michigan Utah Rhode Island Pennsylvania Louisiana Mississippi Wyoming Virginia Vermont Montana North Dakota Washington Nevada Ohio Oklahoma South Dakota Tennessee West Virginia Texas Wisconsin aDoes not include New York City. NOTE: Based on estimates provided by state immunization program officials. Estimates not available for Maine and Nebraska. SOURCE: Freed and Cowan, 2002. to immunizations through the private sector. But the capacity of the pub- lic sector is finite, and its ability to absorb spillover from the private sector is limited. Community health centers, including federally qualified health centers (FQHCs),~ are fiscally stressed; and their capacity to serve their client base including their capacity to provide immunizations has been threatened in recent years (IOM, 2002d). A recent report of the National Association of County and City Health Officials (NACCHO, 2003) notes that just under 75 percent of city and county health agencies provide direct . . . . mmun~zahon services. Furthermore, underinsured patients can receive VFC vaccines only in FQHCs. As of 2001, there were 1,200 FQHCs operating 3,000 delivery sites, serving 10 million people each year (GAO, 2001~. But in some states, access to these centers is limited. For example, Oklahoma has only 5 FQHCs operating 18 sites throughout the state. Public delivery systems already struggle to address the flow of refer- rals from the private delivery system. Should the private provider ar- iThe term community health center (CHC) refers to nonprofit health clinics that provide primary medical care to underserved populations. They include both health centers that do and do not receive Section 330 grants from the Bureau of Primary Health Care. In 1992, an alternative term federally qualified health center (FQHC) was established. This term refers to CHCs eligible to receive Medicare payment (IOM, 2002d).

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94 FINANCING VACCINES IN THE 21ST CENTURY rangements that support the safety net immunization function break down, it may not be possible for public clinics to compensate. Tensions between the two systems are emerging. For example, Michigan officials, responding to increased referrals from private providers experiencing vaccine shortages, directed local health departments to cease providing immunizations to underinsured children (Wendland-Bowyer and Askari, 2002~. While the public delivery system may be far from the breaking point, it is clearly under stress; and even gradual erosion of the system could lead to gaps in immunization. Alternative approaches for administering vaccines may be useful in increasing immunization rates. The issue of using alternative settings is addressed in a recent IOM report (IOM, 2000a), which highlights the enor- mous expansion of access as a result of the VFC program and the result- ing shift in immunization settings from public clinics to private provid- ers. The evidence on the impact of this shift on immunization rates (reviewed in Chapter 3) is inconclusive. With neither a strong evidence base to suggest an alternative delivery structure nor a specific charge to address these issues, however, this committee did not consider alterna- tives to the current delivery system for immunizations. THE WORK OF IMMUNIZING The immunization of children and adults involves a number of clini- cal and administrative tasks.2 Almost all of these tasks have expanded significantly in recent years as a result of the increasing number of vac- cines and the complexity of the recommended schedule, the increasing cost of vaccines,3 and the recent shortages of both childhood and adult vaccines. A review of the various tasks associated with providing immu- nizations is presented below. Purchasing Vaccines While many clinicians receive vaccines at no cost through the VFC- program, most clinicians (in non-universal purchase states) purchase ad- ditional stocks for both private and public patients who do not qualify for 2A more detailed list of tasks associated with providing immunization is contained in the report of a recent IOM workshop (IOM, 2003a). 30ther incidental costs have increased as well. A recent ruling by the Occupational Safety and Health Administration that "safe sharps" (retractable needles) be used for the adminis- tration of childhood vaccines rather than the current nonretractable needles will add an estimated $14 million annually to the administrative costs associated with immunization (AAP, 2001b).

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DELIVERY SYSTEMS 95 VFC. As a result of the increased cost and growing number of vaccines in recent years (see Chapter 1), these purchases have become a sizable in- vestment, typically tens of thousands of dollars for a busy pediatric prac- tice. Providers frequently must price shop by contacting multiple vaccine distributors. Recent shortages have increased the complexity of this task. For providers in capitation arrangements, expensive new vaccines and expanded eligibility have resulted in a significant cost burden on provid- ers until new contracts can be negotiated. In California, this situation led to litigation (IOM, 2003a). Delays in public funding and managed care contracts for new vac- cines have also caused significant problems in physicians' offices (Freed et al., 2002a; see also Chapter 3~. These problems have been especially acute in recent years as the cost of the recommended vaccine schedule has risen to the nearly $600 per child at undiscounted prices that most physi- cians must pay (CDC, 2003d,e). The introduction into the schedule of pneumococcal conjugate vaccine at $58 per dose (or $232 for the recom- mended four-dose series) adds to the total cost, exacerbating an already difficult situation. Pediatricians often provide a vaccine as soon as it is recommended by ACIP and the American Academy of Pediatrics (AAP), even though details of funding have not been worked out (Davis et al., 2002~. This approach has worked with the introduction of the less-expen- sive vaccines of the past because many payors were reimbursed for the vaccines after the fact, and pediatricians were able to absorb the residual costs. With expensive new vaccines and substantial delays in public fund- ing (as in the case of pneumococcal conjugate vaccine), however, pediatri- cians have had difficulty absorbing these costs. The AAP has received reports from pediatricians who owe significant amounts of money for pneumococcal conjugate vaccines that they pur- chased anticipating eventual third-party reimbursement (Fairbrother and Haidery, 2002~. Many found that the reimbursement they received did not adequately cover the price of the vaccine or that third-party payors were not providing reimbursement at all. The AAP has also received re- ports from physicians who had to take out lines of credit to meet payroll costs and remain open because of the loss of income they experienced in providing this vaccine. And the AAP has learned of physicians who, be- cause of cost considerations, are contemplating referring children to a public clinic rather than providing the vaccine in the children's medical home. Beyond problems of paying for vaccine, pediatricians are faced with an interim period during which some children are covered for the vaccine but not others, and the physician must either provide differential service depending on children's insurance status or find a way to pay for those

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96 FINANCING VACCINES IN THE 21ST CENTURY children not covered. The problems this situation engenders go beyond those associated with bookkeeping. Managing Inventories In states without universal purchase programs, private providers who participate in VFC must maintain two separate stocks of vaccines for their patients one for children eligible for state-purchased vaccines and one for those patients for whom they purchase vaccines in the private market- place. Shortages or budgetary delays may deplete the public or private stocks of vaccine. Many states do not reimburse providers who use their stock of privately purchased vaccine for a child eligible for a state or fed- eral government vaccine program. However, at least 14 states do allow trading of vaccine stock to replenish any privately purchased vaccine used in place of publicly purchased vaccine (or vice versa). Regulation and documentation of vaccine tracking range from highly structured to very informal. Determining Immunization Status Fragmented delivery and provider referrals make determination of immunization status difficult, even in states with registries (see also Chap- ter 3~. This is because safety net patients may move seasonally or relocate frequently, may go to different providers for regular care and for immu- nization, and are unlikely to maintain good records of their immunization status. This situation, which is exacerbated by the increasing complexity of the immunization schedule itself, results in both under- and overimmunization (Feikema et al., 2000~. Determining Eligibility Given the many different forms of coverage for vaccines, providers must determine which payor will cover an immunization. If a patient has private insurance, it may or may not cover immunizations. For patients without private coverage, the provider must determine eligibility for pub- lic programs, such as Medicaid, the State Children's Health Insurance Pro- gram (SCHIP), VFC, Medicare, or other state public assistance programs. Complicating this task is the frequent movement of patients in and out of eligibility. It may be impossible to determine private underinsurance sta- tus in advance without contacting the insurer. Furthermore, an insurer may provide coverage for immunization but exclude certain vaccines.

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DELIVERY SYSTEMS 97 Counseling Counseling parents has become considerably more difficult in light of an organized and vocal vaccine "backlash" that has created heightened concern about the safety of childhood vaccines. Many adults also have concerns about the safety of influenza vaccination (CDC, l999b). Administering Vaccines The additional work involved in administering a vaccine during a routine patient visit has been documented through time and motion studies (Fontanesi et al., 2001; LeBaron et al., 1999~. LeBaron found, for example, that administration of vaccines incurs an additional 3.5 minutes of clinical time, which results in an estimated 32.3 million person-hours required to immunize a cohort of children born during a 1-year period with the 4:3:3:1 schedule. Recording and Reporting Immunization There has been an increase in requirements for reporting immuniza- tions to health plans, employers, state registries, and indicators used by regulatory/accreditation bodies (e.g., the National Committee for Quality Assurance's [NCQA] Health Plan Employer Data and Information Set [HEDIS]~. Rask et al. (2000) estimates that the costs of reporting to immu- nization registries alone range from $0.24 per immunization if fully auto- mated to $3.24 in a manual system. The annual cost for a provider to par- ticipate in a registry can be nearly $25,000. On the other hand, studies have also shown that participating in registries can result in substantial efficiencies for clinicians. A study by All Kids Count showed that average costs to retrieve, use, update, and refile medical records are, on average, three times higher than those for participating in a registry (National Vaccine Advisory Committee [NVAC], 1999~. Registries can streamline immunizations for clinicians by simplifying reminder/recall campaigns, eliminating vaccine wastage due to duplicate immunizations, and stan- dardizing reports and school certificates (Home et al., 2000~. Issuing Reminders and Recalls Recent vaccine shortages have resulted in many patients being turned away. It has then become necessary to undertake expensive recall efforts once vaccine supplies have been replenished.

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98 FINANCING VACCINES IN THE 21ST CENTURY PROVIDER REIMBURSEMENT As noted earlier, providers are reimbursed for both vaccines and ad- ~inistration fees. This reimbursement occurs in several ways (see Table t-2~: VFC vaccines are received free, and administration fees are paid Or by the state Medicaid program. For vaccines purchased for public-sector patients who do not qualify for VFC (e.g., Medicaid recipients aged 18-21), providers receive vaccine reimbursement and an administrative fee from the program that Provides coverage (e.g., Medicaid or SCHIP). Provider fees for uninsured ndividuals are paid through state public health funds, possibly supported fly Section 317 or federal block grant funding. FABLE 4-2 Provider Payment for Vaccines and Administration Fees insurance Vaccine Administrative Cost status Reimbursement Paid By Fees Sharing? IFC-eligible Free VFC National Permitted to average= $7.10 charge copayment 2nd+ shots= or balance $6.85 bill, up to a given amount Medicare Based on Centers for Relative value Permitted to Medicare fee-for- Medicare and unit (RVU) rate charge service costindex Medicaid is $7.72 (average) copayment; Services no balance (CMS) billing Other public If VFC, vaccine is State health State discretion, Depends on free; otherwise, department based onAWP or state price set by state Medicare RVU based on average wholsesale price (AWP) 'rivately Set by each plan Private health Set by each plan Yes limited nsured plan by state laws SOURCE: Personal communication, A. Shefer, CDC, July 12, 2002.

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DELIVERY SYSTEMS 99 Under Medicare, preventive immunizations are limited to adult influenza, pneumococcal vaccines, and hepatitis B and are covered by Medicare Part B. Private insurance either reimburses the vaccine cost plus the ad- ministration fee or includes these costs in a capitation amount that is paid to the provider. None of these mechanisms guarantees that the amount reimbursed for the purchase of a vaccine will cover its actual cost. Vaccine reimburse- ments are usually based on a statewide or national average price bench- mark, such as the average wholesale price. Providers hope that the vac- cine reimbursement and administration fee, combined, will at least cover the price of the vaccine (Glazner et al., 2001~. In certain cases, private pro- viders can bill patients (both private and public) for some percentage of the difference between their usual charge and the amount reimbursed. Provider administration fees for immunization vary widely from state to state. Each state determines its fees based on Current Procedural Ter- minology (CPT) codes 90471 and 90472 for the first and each subse- quent vaccine administration, respectively. According to the 2001 Medic- aid Reimbursement Survey, state fees range from $2.00 to $13.33 for CPT 90471 and $1.15 to $13.33 for CPT 90472 and average $7.10 and $6.85, re- spectively (AAP, 2002~. SCHIP fees are either included in a capitation rate or reimbursed in a manner similar to that for Medicaid. Medicare administration fees to providers are used as a benchmark for Medicaid and private insurers in setting fees. CMS fees are based on three measures of the resources that go into the service (measured in terms of relative value units [RVUs]) physician work, practice costs, and mal- practice. Because adult vaccination occurs within the context of other medical activity, CMS concludes that it entails no incremental "work" over and above the office visit, and therefore sets the physician work compo- nent to zero. The result is a calculated fee of $7.72. The American College of Physicians-American Society of Internal Medicine (ACP-ASIM) conducted a survey as part of their Adult Immu- nization Initiative and found that 85 percent of general internal medicine physicians believe reimbursement for immunization is inadequate and is a barrier to their practice's ability to provide immunization services (American College of Physicians-American Society of Internal Medicine [ACP-ASIM], 2002~. Moreover, the AAP and other organizations recently asked CMS to consider the higher burden on physicians imposed by pedi- atric to adult immunization. CMS responded by doubling the fee from $3.98 per vaccine in 2002 (AAP, 2001a; ACP-ASIM, 2001; American Acad- emy of Family Physicians, 2001~. In addition, 63 percent of all private and

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100 FINANCING VACCINES IN THE 21ST CENTURY public payors, including Medicaid, have adopted components of the Medicare Resource-Based Relative Value Scale (RBRVS) to determine fees. New combination vaccines, such as GlaxoSmithKline's new diphtheria- tetanus-acellular pertussis (DTaP)-inactivated poliovirus (IPV)-hepatitis B vaccine, may result in lower administrative costs. However, they will also likely be more expensive to purchase. The net effect will not be known until experience with new combinations can be evaluated. Several studies have demonstrated that financial incentives, includ- ing administration fees, play a role in immunization rates (Fairbrother et al., 1999; Szilagyi et al., 2000a,b; Wood and Halfon, 1996; Zimmerman et al., 2000, 2001~. Cohen and Cunningham (1995) found a strong positive relationship between fees and preventive care measures. Other studies have looked at the connection between fees and referrals. New York State reformed its immunization system in 1994 by requiring first-dollar (i.e., no copayment) coverage of immunization and substantially increasing vaccine administration fees for providers. The proportion of private physicians who reported that they referred some or all children to public clinics for immunization decreased from 51 percent in 1993 to 18 percent in 1997 (Szilagyi et al., 2000a). This shift was reflected in coverage rates: in the inner city of New York in private offices seeing the poorest children, immunization rates for diphtheria-tetanus-whole-cell pertussis (DTP), polio, and measles-mumps-rubella (MMR) rose from 18 to 42 percent (Fairbrother et al., 1997~. BARRIERS TO A WELL-FUNCTIONING IMMUNIZATION DELIVERY SYSTEM Three principal barriers to a well-functioning immunization delivery system can be identified: excessive provider burden, inadequate and un- certain provider reimbursement, and high rates of referral to public clin- ics among private physicians. Each of these barriers is reviewed below. Excessive Provider Burden The burdens associated with providing vaccines to both public and private patients are substantial and growing. Some of these burdens, such as the addition of vaccines to the schedule and the increased costs of vac- cines, are unavoidable; but some burdens are due to systematic problems that could be addressed. These include the difficulty of determining eligi- bility and the risk to providers of doing so incorrectly, problems in deter- mining immunization status, and the need to segregate vaccine invento- ries by payor.

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DELIVERY SYSTEMS 10 Inadequate and Uncertain Provider Reimbursement Current provider reimbursement does not reflect the increasing bur- den of immunization. Provider reimbursements for vaccine and adminis- tration fees often barely cover the costs of vaccine purchase. In many cases, providers lose money on immunization (Glazner et al., 2001~. When con- fronted with inadequate compensation, providers may choose to immu- nize anyway and absorb the losses; or they may refer patients to public clinics (see below) (Fairbrother et al., 1996; Santoli et al., 1998; Szilagyi and Rodewald, 1996~. While it is not clear how high provider fees should be, the evidence suggests that in the long run, inadequate compensation may compromise the viability of the private provider system for immuni- zation. In some cases, providers also face uncertainty about receiving pay- ment for vaccines. This occurs, for example, when providers directly pur- chase vaccines for VFC patients because of delays in the federal contract, when shortages deplete stockpiles of VFC vaccines, or when reimburse- ment rates are not clearly established in advance (Freed et al., 2002a). High Rates of Referral to Public Clinics That physicians refer substantial numbers of children to public clinics is well documented, even when the children are eligible for free VFC vac- cines (Lieu et al., 1994b; Zimmerman et al., 1997~. The referral of large numbers of patients even those who have private health insurance ben- efits for immunizations from private providers to public health clinics indicates problems with the public-private system. Before VFC, many providers routinely referred patients to public clinics for immunizations rather than risk uncertain payment. After VFC, referrals declined dramati- cally as free vaccines became available to immunize a large proportion of the non-private patient population. However, while referrals were re- duced by VFC, they were not eliminated. For example, Zimmerman et al. (1997) found that provider referrals within a practice varied according to insurance coverage (see Table 4-3~. In 1995, 44 percent of physicians re- ceiving free VFC vaccines remained likely to refer an uninsured child to a clinic. More surprising, 8 percent would even refer a child with insurance that covered vaccines. Lieu et al. (1994b) surveyed parents using public clinics for immunization. Her study revealed that, although 24 percent of those seeking immunizations at public clinics had private insurance and 34 percent had Medicaid, most in this group named cost as the main bar- rier to immunizations by office-based primary care providers. Among providers' reasons for referring patients with privately in- sured immunization benefits to public health clinics are difficulty in de-

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DELIVERY SYSTEMS 105 termining eligibility, high costs of stocking vaccine inventories, and low payment rates for administering vaccines (as discussed above). It is ap- parent that the ability or willingness of a patient to pay for a vaccine may be less important than a provider's interest in supplying it, although both may be related to insurance status. Providers may, for example, choose to stock insufficient supplies and then marshal their limited supplies for their fully insured patients. Referrals to public clinics can result in missed or delayed immuniza- tions (Lumen et al., 2002) and thereby seriously affect overall immuni- zation rates (Fairbrother et al., 1996; Santoli et al., 1998; Szilagyi and Rodewald, 1996~. Referrals can also result in fragmentation of care that increases the burden on parents, reduces continuity of care by introduc- ing multiple providers, and distributes patient immunization records across multiple settings. FINDINGS Private office-based providers administer the majority of publicly funded immunizations. The administrative burden associated with immunizing children is . . ncreasmg. Provider reimbursement does not adequately reflect the increasing burden of immunization and creates uncertainty about payment. Variations and delays in both public and private insurance cover- age for vaccinations creates uncertainty about provider payment. Private providers refer patients to the public sector in large num- bers in response to inadequate reimbursement and excessive administra- tive burdens. Public clinics may provide insufficient access and capacity to main- tain a reliable safety net for children and adults who are uninsured for immunization or referred from the private sector for other reasons.

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