Year: 2008

Jun
4

Two can play that game

Posted by Joe Paduda on Wednesday, June 4th, 2008 | Comments

Providers are now rating payers. And in the ratings game, Aetna looks to be doing better than other big health plans.
There are several ‘payer rating’ sources now available, each with their own approach. One of the more intriguing is published by the Verden Group. The VG tracks the policy changes that payers make on a daily basis, alerting providers “to any administrative and clinical policy, procedure and reimbursement changes occurring in the networks in which you participate, at the time these changes are occurring.” Think of VG’s service as a ‘policy aggregator’ that ‘pushes’ notice of policy changes out to specific providers (providers that sign up for their Alert service).
From a broader perspective, this business model is a classic example of niche identification. Providers are forced to proactively monitor the websites of the networks in which they participate for changes in areas such as prior authorization procedures, mailing addresses, credentialing requirements and processes, claims submission and approval, benefit design, and communications standards and protocols. VG removes the burden from providers – albeit for a fee.
A side benefit of all this monitoring and data collection is VG’s quarterly Managed Care Company Ratings report. The Report analyzes each major health plan’s impact on providers in the areas of cost of compliance, timeliness of notification of policy changes, volume of changes, and ease and clarity of communication. VG then weights these areas and the result is an aggregate rating.
In contrast, athenahealth’s payer rating system, PayerView(sm) is designed to evaluate the “ease of doing business with a payer.” Compared to Verden, PayerView appears to cover a broader spectrum of the provider-payer relationship, and is more financially oriented, although it does consider administrative performance and medical policy complexity (similar to Verden). athenahealth acts as a billing agent for their provider clients, and thus has extensive, hands-on knowledge of the gritty business of submitting bills and getting paid (or not).
(observation – while athenahealth’s information depth is certainly impressive, it is not very accessible – they do a poor job of explaining acronyms and use jargon extensively with little explanation)
I’ll let interested readers puzzle thru athenahealth’s PayerView on their own. The good news for Aetna is they come out on top – paying claims quicker and more accurately than other health plans. The health plan also reduced its denial rate by 10.6%, and remained the fastest paying health plan. Aetna was closely followed by CIGNA.
Aetna looks pretty good to the folks at Verden too, scoring at the top of the 18 payer list in cost to provider (changes that added admin expense, altered reimbursement, increased admin time and/or complexity) and clarity of communication.
One of their lower-weighted areas is notification period – the time between initial posting of a policy change and that change’s effective date. If there’s one thing that drives providers nuts it is the denial of a claim or procedure because the provider did not follow a process that no one told them about.
HealthNet ranked worst in this area followed closely by GreatWest. But most health plans were only marginally better.
This reflects poorly on health plans; providers will likely (and justifiably) assume this is due to a lack of concern about these issues on the part of management.
What does this mean for you?
Health plans that understand the importance of the provider – and do more than just talk about it – are going to do better than their rivals that don’t value providers.
Thanks to fiercehealthcare for the initial heads-up.

Jun
3

The confusion in Florida

Posted by Joe Paduda on Tuesday, June 3rd, 2008 | Comments

I received a few calls and emails yesterday from workers comp payers asking for clarification about my post on the potential (highly inflationary) changes to the Florida outpatient work comp fee schedule. Evidently there is some confusion out there about the linkage of Medicare to the WC fee schedule, with several entities contending that Florida is actually linking WC reimbursement to Medicare reimbursement.
Kinda sorta but not exactly.
The three member panel (regulatory entity responsible for the FL WC FS) is looking at the difference between Medicare charges and reimbursement, and basing their calculations on that differential.
The proposed change to the FS would link the “usual and customary” payment standard for outpatient hospital claims contained in Fl. St. § 440.13(12) to the ratio between what Florida hospitals charge Medicare and what Medicare actually pays. The net result would be a dramatic increase in the reimbursement for outpatient services billed by hospitals.
Here’s some detail; apologies for the density of the subject, but you wanted details.
The change proposed by the FL Dept of Financial Services (DFS) is to link what Medicare pays hospitals, as defined by the Ambulatory Payment Classifications (APC) payment rate, adjusted to mark up the Medicare APC payment on a hospital’s charge to roughly equate with what DFS thinks are the average charges billed by FL hospitals for that ‘group’ or APCs.
FL is putting APCs into two APC groups – surgical and ‘other hospital outpatient’. DFS’ calculation is that the average mark up – on which payment would be made – is 302% for surgery and 467% of Medicare payment for other hospital outpatient APCs
Thus, per regulation, 60% of the 302% would be paid for surgeries and 75% for other hospital outpatient.
There are a few issues with the methodology, data sources, and assumptions used by DFS, issues that have been raised in past meetings of the panel.
But the real problem is simple – WC costs are going to be substantially higher if this goes through. First, this methodology will increase costs – today – by 181% for surgeries and 330% for other hospital outpatient services.
Second, the annual inflation rate for charges in FL is 14%. So today’s high costs will be tomorrow’s even higher costs and the day after will bring really really high costs…
Third, the location of services will likely change dramatically to the higher cost hospital location. Thus procedures which were being done in offices will now be billed – at the much higher rates – by hospitals.
Fourth surgeries which were done on an outpatient basis will likely shift to inpatient to take advantage of the much higher reimbursement.
What does this mean for you?
The next meeting of the three member panel is June 19. Unless you want to pay a lot more for medical care in Florida, make your voice heard.

Jun
2

What’s coming in Florida

Posted by Joe Paduda on Monday, June 2nd, 2008 | Comments

I’m mystified, perplexed, confused, confounded, and appalled.
There’s just no other logical reaction to the goings-on in the Sunshine State, where several workers comp payers are actually supporting a major increase in reimbursement for outpatient facilities – an increase that is wildly inflationary and completely unnecessary.
I’ve reported on this impending disaster a couple times over the past month, a disaster that the payers are bringing on them selves. Comp reimbursement in Florida is under the control of the ‘three member panel‘, a triumvirate that is attempting to come up with a clear definition of ‘usual and customary’ – the criteria by which facilities are reimbursed under workers comp.
Here’s a brief video metaphor of the last hearing…
The panel is looking to specifically and clearly define U&C in an effort to eliminate the ongoing legal battles between payers and hospitals over what exactly is ‘usual’ and ‘customary’. The benchmark that the panel seems committed to is the amount hospitals charge Medicare. Not get paid by Medicare, but charge Medicare. According to testimony at one of the panel’s recent hearings, hospitals mark up their Medicare costs by 715% – they charge Medicare seven times more than it costs the hospital to provide the service.
If the proposed regulation is adopted, workers comp’s ‘usual and customary’ would be based on that 715% mark up. Running the numbers, this would result in workers comp payers paying Florida hospitals (and perhaps ASCs) 472% of what Medicare pays for outpatient services – one of the highest rates in the nation.
And this will increase Florida WC costs by about 20%. (the calculations and basis thereof are too lengthy to go into here, email me at infoAThealthstrategyassocDOTcom if you want the gory details)
Yet payers are supporting this change. Why? Do they want to increase policyholders’ costs? Jack up their loss ratios? Are they feeling particularly charitable (always easy when spending policyholders’ money)?
Or is it because they are sitting in the back of the train, relaxing while it hurtles down the tracks, blindly confident in their ability to determine its destination?
In private conversations, they say because it will make it easier to deal with the issue, establish a firm basis for reimbursement, eliminate the hassle, end the litigation.
If that’s the case, why not just set the amount at “whatever the billed amount is, you have to pay it”? That would be even simpler, eliminate the complex calculation needed under the proposed system – and have the same result.
Payers are being incredibly short sighted. Lazy even. And here’s where that train is heading.
464px-Train_wreck_at_Montparnasse_1895.png
What does this mean for you?
(Many) employers in Florida are being ill-served by their insurers and TPAs. Send this post to your broker and ask them to find out what your work comp carrier’s position on this is and why, and what they are doing to protect your interests.
Or you can just hang out in the club car, trusting that someone will get control of this impending disaster before too late.

May
30

Back pain treatment – myths and reality

Posted by Joe Paduda on Friday, May 30th, 2008 | Comments

Most back pain cases resolve themselves within a month. At least, that’s what many believe.
And, like much of what we accept without investigation, it is wrong.
Turns out most back pain patients stop going to their doctor within a month – but their symptoms persist. Fully three-quarters of them still have symptoms a year after the initial onset of pain. This isn’t ‘new news’, in fact it was reported in the British Medical Journal a decade ago.
This wasn’t one of those “publish and forget” articles. The British have been focused on the diagnosis and treatment of back pain for years, and in subsequent years several studies analyzed different types of treatment, complicating factors, and the prevalence of back pain.
A 2003 study reported that although the condition may have been resolved within a few weeks, it looks like once you’ve had low back pain, there is a pretty good chance the symptoms will reappear. Seventy-three percent of patients will experience a recurrence, a figure essentially identical to that noted above.
One of the more interesting analyses indicated that rapid diagnosis and referral to a physiotherapist (PT) produced good results, as “More than 70% of patients required only a single [PT] clinic visit and <5% were referred on to specialist orthopaedic or back pain rehabilitation services." Another examined the tendency of some patients to ‘catastrophize’ their condition – exaggerate it and make it seem worse than it appeared from objective findings. Unsurprisingly, the results showed that a high level of pain catastrophizing or kinesiophobia (fear of movement) increased the individual’s risk of future chronic low back pain – and disability. This held true regardless of whether the study subjects had low back pain at baseline and still existed after correction for severity of back pain at baseline. The patients with those characteristics, who did not have pain at the time of the study were significantly more likely to experience pain.
So…what does work?
There is little evidence that invasive surgery produces better results (for most patients) than other forms of treatment.
From the BMJ:
“A number of interventions, including facet joint, epidural, trigger point, and sclerosant injections, have not clearly been shown to be effective. No sound evidence is available for the efficacy of spinal stenosis surgery. Surgical discectomy may be considered for selected patients with sciatica due to lumbar disc prolapse that do not respond to initial conservative management. The role of fusion surgery for chronic low back pain is under debate. Recent randomised clinical trials comparing fusion surgery with conservative treatment showed conflicting results. Recommendations that fusion surgery should be applied in carefully selected patients are difficult to follow because no clear and validated criteria exist to identify these patients in advance.”
But there is evidence that more conservative treatments do produce results – the BMJ (again) :
“That exercise and intensive multidisciplinary pain treatment programmes are effective for chronic low back pain is supported by strong evidence. Some evidence supports the effectiveness of (cognitive) behaviour therapy, analgesics, antidepressants, nonsteroidal anti-inflammatory drugs, and back schools and spinal manipulation.”
Extensive citations are available here.
What does this mean for you?
I reported yesterday on the explosive growth of spinal surgery using implanted devices. Undoubtedly this type of care is highly beneficial – for some patients. What we don’t really know is which patients should be getting implants and who would be better off with conservative treatment.
Clearly, there is strong evidence that more patients would benefit from conservative treatment, leading one to suspect that the growth of invasive surgery is not driven by best practice.

May
29

Why are there so many spinal implants?

Posted by Joe Paduda on Thursday, May 29th, 2008 | Comments

Disclaimer – This is the kind of post that makes one want to take a shower after reading. My apologies to readers without convenient access to bathing facilities.
One of the fastest growing segments of the surgical industry is the spinal implant business. In what may be the most comprehensive review of the problem, the Orange County Register reported:
“About 70 percent of U.S. adults — or 153 million people — have lower back pain, according to Millennium Research Group. Of those, about 15 million require medical treatment, and most eventually get spinal implants.” My take is that is a wildly overstated estimate; one survey reported that the total world market for devices was $4.2 billion; note this study used 2006 data. Another indicated the market was $5 billion in 2005, and predicted growth to $20 billion by 2015. Stryker, one of the major manufacturers, expects growth of 16% per year in the spinal implant market. Yet another report(note opens .pdf) indicated the 2007 worldwide market was $7 billion, with the US accounting for $5.4 billion of that total.
And boy is it profitable. One manufacturer (Allez Spine) sold screws to an implant device company for $79.31 each – screws that were then sold to hospitals for $1000 each (who then marked them up even more when billing insurers).
sidexray.gif
Yep, there are $480 worth of screws in this xray (wholesale), $6000 retail, and probably $9-12,000 to the insurer/patient. And that doesn’t include the other parts…
Medtronic, one of the larger device companies with about 45% market share in the US and the same worldwide, reported sales of $869 million for spinal implants last quarter, driven in part by a big jump in sales of its Kyphon technology. The $869 million represents growth of 35% from the same quarter last year.
The Kyphon story is an ugly one, and points to one potentially significant problem in the spine surgery industry – the focus on devices as a tool to maximize reimbursement.
Kyphon (the company) was acquired by Medtronic in 2005. The company settled a lawsuit filed by the Feds, agreeing to pay $75 million in fines. Kyphon agreed to stop providing inappropriate advice on reimbursement to providers, advice that resulted in hospitals filing inflated claims with Medicare for a spine procedure with the otherworldly name of kyphoplasty.
The details of the case, as reported by the New York Times, are revealing.
Kyphon “persuaded hospitals to keep people overnight for a simple outpatient procedure [bold added] to repair small fissures of the spine. Medicare then reimbursed the hospitals much more generously than it otherwise would have for the procedure, which was developed as a noninvasive approach that could usually be done in about an hour.
By marketing its products this way, Kyphon was able to artificially drive up demand among hospitals, bolstering its revenue and driving up its stock price. Medtronic subsequently bought the company, its competitor, for $3.9 billion, greatly enriching Kyphon’s senior executives. ”
Margins for Kyphon’s devices approached 90%, due in large part to the high price the company charged, a price that hospitals offset by extending hospital stays (as advised by Kyphon’s sales reps and reimbursement experts), thus generating higher bills and much higher revenue.
Another major contributor to the rapid increase in spinal implant surgeries may be the growth of device companies that have spine surgeons as stockholders. The OCR article reported that physician-owned companies are now under investigation by HHS’ Office of the Inspector General (OIG). In testimony before the Senate Special Committee on Aging, Gregory E. Demske, Assistant Inspector General for Legal Affairs at the OIG said:
“These financial relationships [between device manufacturers and physicians] can benefit patients and Federal health care programs by promoting innovation and improving patient care. However, these relationships also can create conflicts of interest that must be effectively managed to safeguard patients and ensure the integrity of the health care system…during the years 2002 through 2006, four manufacturers (which controlled almost 75 percent of the hip and knee replacement market) paid physician consultants over $800 million [bold added] under the terms of roughly 6,500 consulting agreements. Although many of these payments were for legitimate services, others were not. The Government has found that sometimes industry payments to physicians are not related to the actual contributions of the physicians, but instead are kickbacks designed to influence the physicians’ medical decisionmaking [bold added]. These abusive practices are sometimes disguised as consulting contracts, royalty agreements, or gifts.”
All this growth may well be based on a focus on surgical treatment that is just not supported by research. Some studies indicate surgery is not the best treatment for a substantial number of patients. According to the OCR article (source above);
a “2005 study of patients with back pain published in the journal of the British Medical Association concluded: “No clear evidence emerged that primary spinal fusion surgery was any more beneficial than intensive rehabilitation.”
“You look at the number of procedures and the rate of growth and it seems to far outstrip the number of patients who need this,” said Dr. Steven J. Atlas, a back specialist and Assistant Professor of Medicine at Harvard Medical School.”
And that old nemesis, provider practice pattern variation, is nowhere as obvious as with back surgeries. Looking at Medicare data, the back surgery rate in Fort Myers, Florida was 5 times higher than in Miami. Same population demographics, same state, but different providers.
Perhaps the best explanation for the considerable growth in the use of implants and spine surgery is the lack of evidence either for or against these procedures. There are some reports that indicate positive or negative outcomes, but nothing definitive has been published that could be used by payers and providers to judge the appropriateness of surgery for most patients with back injuries or degenerative conditions.

May
28

Why employers must be involved in health insurance

Posted by Joe Paduda on Wednesday, May 28th, 2008 | Comments

Productivity.
Lost in the great debate about the role of the employer, the individual, and the government in health care reform is the critical link between health insurance, care, and productivity.
Years ago when I was responsible for the Travelers’ utilization review account management function I met with Bruce Bradley, who was then the head of employee benefits at telecom giant GTE. I was going thru the data, reporting on how well Travelers had done reducing this and cutting that, when he stopped me and asked about the ER and inpatient admissions rate for children with asthma. I didn’t have the data, and asked why he wanted to know.
Bradley proceeded to educate me on GTE’s workforce and their functions. To summarize, they had a lot of employees who were single parents or one parent in a dual-income family. Many of their employees worked in line maintenance, directory assistance, and other blue- and pink-collar jobs.
And when one of these workers was out of work, caring for a child experiencing an acute asthmatic attack, the lines didn’t get fixed and calls didn’t get answered. Bradley wanted to know what the Travelers was doing about this. Truth was, we weren’t doing anything.
GTE is long gone, swallowed up in the telecom mergers in the nineties. But Bradley’s point is as true now as it was then – keeping workers, and their families, healthy and productive is the primary objective of health insurance.

I’ll grant that few policy wonks look at it from this perspective. Perhaps that’s because they didn’t have the pinned-to-the-wall-like-a-butterfly-in-a-display-case experience I went thru. But because they don’t consider the impact of health insurance on employer productivity, they miss the reason employers offer health insurance in the first place – to attract, and keep, good workers.
If employers are removed from the process of vetting and selecting health insurance vendors, individuals would be responsible for choosing their carrier. Insurance companies would ‘win’ based on how cheaply they could provide insurance to individuals and families, and the less care delivered, the lower the premiums. I don’t see what would prevent those vendors from suggesting each and every injured or ill worker or dependent tried bed rest and over the counter drugs for two weeks, then an x-ray or basic lab test, and only then would they get to see a diagnostician.
What does this mean for you?
Health care reform based on an individual market would work against employers’ desires and needs, and over the long term, against the nation’s best interests.

May
27

Today’s SAT question

Posted by Joe Paduda on Tuesday, May 27th, 2008 | Comments

Medicare is to Workers Comp as:
a) Mars is to deck stain
b) surgery is to literature
c) a jelly sandwich is to Colorado
d) all of the above
e) none of the above
If you chose (d), congratulations, you understand there few similarities between the two systems, other than both involve paying health care providers to deliver care.
Beyond that, Medicare and Work Comp are, as the Brits say, chalk and cheese. Yet many regulators and legislators still try to base reimbursement under workers comp to Medicare’s RBRVS system (resource based relative value scale). The latest effort is in California, where a recent study by the Lewin Group has come under fire from providers in the Golden State. Critics contend Lewin’s analysis does not accurately assess the inherent differences between the two systems or the way providers deliver care, and bill for that care, and therefore the study’s conclusion is inappropriate.
I think the critics are right. As I’ve noted before, the additional paperwork, different procedures, complex and dynamic treatment rules and approval process, additional communications requirement, and different demographics make work comp a very different animal from Medicare.
I’ll have more on this later, as the reports and analysis require more time than I’ve got right now.
But there are two more (very) current examples of the problems inherent in linking WC reimbursement to governmental programs. Both involve drugs, and in both cases WC drug costs are linked to Medicaid. The states are NY and CA. In both cases, the FS will also drop in July; to AWP-16.25% in NY for brand and an across-the-board cut of 10% (below the current very low rates) in California.
There are already myriad examples of claimants unable to fill comp scripts in New York today, and that is at the current, slightly more generous FS. There have been fewer reports of this issue in CA, but the new rate reduction has pharmacy chains screaming.
As well they should. Here’s how Workers comp and Medicaid are different
1. Unlike Medicaid, there are no copays, restrictive formularies, or other cost- and utilization containment measures in WC. Thus all cost containment efforts in WC for drugs involves Drug Utilization Review processes that can involve pharmacists and clinicians reviewing scripts for appropriateness, medical necessity, potential conflicts and adverse outcomes, and relatedness to the WC medical condition.
2. PBMs pay pharmacies more for WC drugs than for Medicaid drugs; a typical brand discount is AWP-12%, generic is MAC or -25-35%. The Medicaid FS is substantially lower, at AWP-15+% for brand and FUL (>-40%)for generics.
3. Unlike Medicaid, to the extent they exist at all, rebates are much lower in WC. In NY, Medicaid rebates are a minimum of 11% of the Average Manufacturer’s Price per unit. The rebate revenue significantly reduces states’ costs for drugs. As these rebates are much lower or nonexistent in WC, PBMs do not have rebate dollars to offset their drug costs.
Sure, it is easy for lazy insurers, regulators, legislators, and employers to think they are doing something positive by cutting the price they pay for drugs.
It is also a big mistake.

May
23

Insurance execs perspective on McCain

Posted by Joe Paduda on Friday, May 23rd, 2008 | Comments

Bob Laszewski posts today on the Center for American Progress’ report on the additional costs inherent in Sen McCain’s health care plan.
Bob – one of the most insightful people in the industry – notes:
“It’s interesting that when I am out in the country meeting with insurance execs in their conference rooms–people who do understand the market–it never fails that they all just roll their eyes at the lack of sophistication when we discuss McCain’s market-based solution–specifically his individual health insurance product ideas.”
And this demographic – well compensated executives – is one that you would think would be in favor of McCain.
I’d echo Bob’s observation. Industry insiders may disagree with Obama’s platform, but most agree that it is fairly well thought thru. In contrast, McCain’s is superficial – by that I mean a few microns thick superficial.

May
22

More controversy on drug pricing

Posted by Joe Paduda on Thursday, May 22nd, 2008 | Comments

It’s minutiae time again!
That is, if pricing in a $216 billion industry is minutiae.
Readers interested in pharmaceutical pricing may recall the court case 18 months ago wherein pharma pricing publisher First Databank was accused of intentionally inflating drug prices. (FDB’s version of AWP results in prices that are about 5% higher than those provided by the other sources.)
There’s a new lawsuit alleging drug distributor McKesson illegally manipulated brand name drug pricing by increasing the spread between WAC (wholesale acquisition cost) and AWP (average wholesale price) – a practice that increased the prices paid by insurers, consumers, and employers.
The suit was filed by the City of San Francisco in US District Court in Boston – the same court that heard the 2006 case.
The 2006 case involved FDB’s selection of McKesson as the sole source of drug pricing data. FDB’s AWP was based on the actual price that McKesson paid for the drug, plus a margin. For years the typical margin was 20%; six years ago McKesson changed the margin to 25% to make it ‘simpler to administer pricing internally’. (this is the same allegation referenced in the most recent suit)
The price increase also earned McKesson points with its customers, retail pharmacies, who saw an immediate increase in profitability – profits on Lipitor immediately jumped three-fold after the 2002 increase. As part of the settlement in the 2006 case, FDB agreed to stop publishing prices two years after the finalization of the settlement.
Surprise! The settlement is not yet final, thus FDB continues to publish its version of AWP, the version that inflates payer drug costs by 5%.
Both suits, along with a number of other legal actions, have been filed by the Prescription Access Litigation Project, a Boston-based group funded by several foundations and charitable organizations.
The PAL folks are tenacious, well-funded, and allied with, among other heavy hitters, AARP. While tiny, their ability to win cases, highlight possible illegal activity and focus attention on their cause is impressive.
What does this mean for you?
At a time when more Americans than ever are taking drugs regularly, every penny matters. Watch PAL and their progress carefully – their work will likely have a significant impact on pharmaceutical pricing methodologies.
Thanks to California HealthLine for the tip.