to read health wonk review are here.
Jason’s given us a quick synopsis of the best of the wonks sorted by topic.
Oct
2
Insight, analysis & opinion from Joe Paduda
Year: 2008
Oct
1
If you’ve been wondering why your company is paying so much for high-powered pain medications, here’s why.
Cephalon, manufacturer of Actiq and Fentora, has:
“agreed to plead guilty to promoting off label use of its painkiller Actiq–which was widely used for purposes outside of its original FDA approval–as well as narcolepsy pill Provigil and epilepsy treatment Gabitril. Cephalon has admitted that it had been marketing Actiq, a highly addictive narcotic lollipop produced to treat certain cancer patients, for off-label uses including migraines, sickle-cell pain crises and injuries.[emphasis added] (Fierce Healthcare)
Cephalon is the poster child for everything that is wrong with medicine in this country. They make me-too drugs; reformulate drugs to extend the patent life (fentora); aggressively market their drugs to docs who have no business prescribing them for purposes the drugs were never approved, nor are appropriate for; bribe docs to promote their drugs; and charge unbelievably high prices. Then, when the drugs do go off patent, they manipulate the price of the brand (doubling it in the case of Actiq), raising it and thereby creating a very high price for the generic. Oh, and their drugs have awful side effects – Actiq, which rots patients’ teeth is but one example.
In my work with workers comp insurers, TPAs, and self-insured employers, I see a lot of data on prescription drugs. Actiq and Fentora are almost always in the top five in terms of drug spend – (a month of Actiq easily runs $2500). Why is Actiq a big part of workers comp, you ask, because it is only FDA approved for breakthrough cancer pain, a medical condition that for all intents and purposes does not exist in workers comp? Because Cephalon has been pushing the drug to general practice docs.
In fact, only 1% of Actiq scripts were written by oncologists during the first half of 2006. So who’s dispensing the drugs?
Physical medicine and rehabilitation specialists were the second highest-dispensing specialty, accounting for 16 percent of scripts during the first six months of 2006, when oncologists and pain specialists accounted for less than 3 percent.
Cephalon will have to pay a $425 million fine, and (here’s the good part), publish the names of physicians it has paid to promote/research its drugs. The fine resulted from acase brought after a Cephalon employee refused to promote Actiq and Fentora to general practice docs, a decision that led to his termination by the company. That’s not chump change, but that shouldn’t be the end of Cephalon’s penance.
I’m hoping, really hoping, that payers will evaluate the settlement and perhaps (selectively) use the physician list to determine if they should disqualify docs from their networks, flag them in their published physician ratings, and carefully scrutinize their practice patterns.
Thanks to FierceHealthcare for the heads up on the settlement.
Oct
1
There is no chance McCain-style health reform will happen.
None.
The hammer blows of crushing budget deficits and the complete failure of a deregulated financial system have ended the free-market, individual insurance movement’s chance of becoming reality. The death of the McCain model was inevitable, but the economic and political realities have saved us from the burden of tearing it apart through public discussion.
As hard as it is to believe, the plan, which would have covered fewer Americans, would have cost much more than rival plans that actually insured more of us. The Joint Committee on Taxation estimated the plan would cost $3.6 trillion over ten years (a mere $205 billion in 2009). (for the details click here) Cost-prohibitive to start, the plan is now so obviously unaffordable that McCain himself couldn’t rationalize its cost.
The McCain health reform plan’s other fatal flaw was its reliance on a deregulated individual insurance market. As Daniel Libit noted on Politico.com today, “In a 2003 interview with CNN, John McCain avowed, “I am a deregulator. I believe in deregulation.” Herein lay the fundamental problem with McCain’s proposal – its reliance on the free market to operate counter to its interests. Somehow the Senator believed that the ‘free market’ would figure out a way to cover people with heart disease, asthma, cancer, hypertension, and skin cancer (that would be McCain) at a price they could actually afford to pay.
Expect to see a lot less trumpeting of the wonders of the free market; even the folks at Cato have been quiet these days; perhaps they are stocking up on food and water as they prepare to hunker down and try to survive their own version of nuclear winter.
At least we didn’t have to describe in detail how McCain’s plan was awfully similar to Bush’s last feeble attempt at health reform, one that a GOP Congress couldn’t bring itself to consider.
If there is a silver lining to the credit market disaster, one of its threads is the demise of McCain’s ill-conceived and deeply flawed attempt at health policy.
Sep
29
I didn’t know whether to laugh or cry, or (more likely) become violently ill after reading this.
Here’s an excerpt from Katie Couric’s interview of Gov. Sarah Palin.
COURIC: Why isn’t it better, Governor Palin, to spend $700 billion helping middle-class families who are struggling with health care, housing, gas and groceries; allow them to spend more and put more money into the economy instead of helping these big financial institutions that played a role in creating this mess?
PALIN: That’s why I say I, like every American I’m speaking with, were ill about this position that we have been put in where it is the taxpayers looking to bail out. But ultimately, what the bailout does is help those who are concerned about the health-care reform that is needed to help shore up our economy [emphasis added], helping the–it’s got to be all about job creation, too, shoring up our economy and putting it back on the right track. So health-care reform and reducing taxes and reining in spending has got to accompany tax reductions and tax relief for Americans. And trade, we’ve got to see trade as opportunity, not as a competitive, scary thing. But one in five jobs being created in the trade sector today, we’ve got to look at that as more opportunity. All those things under the umbrella of job creation. This bailout is a part of that.
I kid you not.
Sep
29
Hurricanes, both meteorological and financial, may well bring an end to what has been one of the softest of markets.
Gustav, Ike, and their to-be-named seasonal relatives have hammered the reinsurance markets, with Lloyd’s of London recently announcing losses totaling $12 – $18 billion for the season’s first two major storms. Lloyd’s also suffered from a dramatic reduction (>60%) in investment earnings, even though the vast majority of the syndicates’ funds are invested in government securities. The combination of storms and poor investment returns cut Lloyd’s members’ earnings in half.
The role Lloyd‘s plays in the international insurance market is a bit obscure to those not immersed in the P&C world. P&C insurance companies write policies for fire, auto, oil wells, pipelines, environmental liability, airplanes, and just about every other physical and financial risk you can think of (and many you can’t, such as credit default swaps). They don’t want all the risk themselves, so they pay part of the premium they collect to other insurance companies, called reinsurers, to take part of the risk off their hands.
When reinsurers raise rates, primary insurers are forced to do the same. That’s likely to happen; Lloyd’s (which is actually a group of individuals and companies and not a single entity) members will certainly want a better return on their capital than they are receiving today. That and the potential for higher losses from future storms will cause them to raise premiums and be more cautious about the risk they take – both measures that will force primary insurers to follow suit.
While reinsurer rates and coverage terms are key, they are not the only factor likely to turn the market. The demise of AIG and write-downs at other insurance companies with exposure to the credit markets make it critical that insurers raise more funds to bolster declining capital. The best way to do that is to charge new customers more, and sock away some of that additional cash (hopefully in investments that mere humans can actually understand).
The other technique is to reduce their exposure by being more careful about the risks that they do write.
Expect workers comp premiums to rise, along with property rates. Premiums for longer tail lines, like WC, liability, environmental impairment will likely increase further faster than sort-tail lines, but we can expect insurance rates to increase across the board.
The P&C market has been soft for several years. Those days look to be over.
Sep
26
At the behest of readers and clients, I’ve been working to get some answers from Aetna on what exactly the ‘restructuring’ of their workers comp business division means for customers and prospects. I’m not having much luck.
I’d note that many AWCA customers learned of the restructuring of AWCA from my post earlier this week. That’s not to blow my own horn (well, perhaps a modest toot) but rather to point out that Aetna did not make any external announcement – and still has not made any public statement – about the changes. Nor has any there been any attempt on the part of the new management to reach out to (at least some and perhaps all of) the largest users of AWCA. AWCA Account management staff has been calling their customers, but beyond the “it’s business as usual, I’m your contact”, they don’t have much to report.
Here’s the text of a recent email from an Aetna communications staffer in response to a blog post re the changes. The author is Dr. Dan Bernstein, the head of the New Product Businesses unit. (Bernstein graduated from medical school but never practiced medicine)
“We would like to take the opportunity to clarify a few of the points you made in today’s posting [referring to this post]. We want your readers to understand that the New Product Businesses network and operations areas have not been merged with Aetna’s Group Health network and operations organizations. We have brought together the network and operations teams for the Cofinity, AWCA and Aetna Signature Administrators businesses under two leaders because these businesses all serve business partners, including other Insurers, TPAs and Bill Review companies, that are outside of Aetna’s traditional business channels. [ok, but the markets are completely different, with different providers, different ‘quality’ measures, different buyers, different reimbursement methodologies] Importantly, the network and operations functions described are still separate for AWCA.
[sources indicate the comp network staff now report up to an exec in Maine, sales reports to Denver, operations staff to personnel in the PPOM business (now called Cofinity) in Michigan, and account management to a different person in Maine; Bernstein is located in Maine as well]
The changes we announced this week will help us maximize our resources to create better value for our customers. We see these changes as benefiting our customers by allowing us to concentrate on building our network, providing consistently superior customer service and offering our customers innovative solutions to address their business needs.”
This left me, and others, looking for just a bit more depth and detail. So, I emailed the quite-helpful PR staffer; here’s the ‘conversation’:
Paduda question
Does he [Bernstein] mean there are staff dedicated to WC within each unit? If so, what is their relationship with the larger Aetna provider relations units? Do they work together? Who decides on negotiation strategy and tactics? If not, how does Aetna leverage it’s group health buying power to benefit WC customers?
Aetna response
The AWCA Operations and Network teams are still distinct, dedicated units. They simply report up to new managers, alongside other similar units.
The AWCA Network team has always worked collaboratively with the larger Aetna provider contracting teams, and will continue to do so. The negotiation strategy is jointly developed. The combined size and strength of the relationship with providers across all businesses benefits all customers, including Workers Comp customers.
Paduda question
How will this change affect the network development process? Florida has been an ongoing challenge for awca; is the new structure going to help Aetna address FL?
Aetna response
We are always striving to improve the network development process and strategy. The new leadership team is focused on both strategic and process improvements for our network activities.
So, no answer to the Florida question, nor any sense for how this change will affect network development. A good bit of corporate-speak, and no specifics. I tried one more time to get more specific answers, and got this back: “at this point, we can’t share additional information.”
Either they haven’t thought this through (my bet), or they have and haven’t finished telling the affected parties (doubtful), or they just don’t want to tell me (possible). If the latter is the case, they aren’t telling some of their biggest customers, either.
Here’s a bit of background. Despite the conjecture of several, myself included, that Aetna would get out of this business, Aetna has stuck by its work comp unit for five years (to date). Reports indicate the business has been financially successful, profitable, and achieving success defined as “aspiring to be a rounding error” at mother Aetna (remember Aetna’s annual revenues exceed $24 billion). This success has occurred despite the unit being bounced around the org structure at Aetna, with former AWCA president Pat Scullion reporting up to (at least) five bosses over the last four years.
I’m from Missouri on this. Many health plans/insurers that got into work comp (United Healthcare in FL, with Focus and MetraComp, Travelers with Conservco, UNUM with Genex) got out. Some, such as UPMC, Wellpoint and Horizon, have done pretty well. The ones that have succeeded have almost always had WC as a separate business unit with P&L responsibility reporting up to a ‘special products’ department (that likely had dental, vision, etc). They also had a strong executive sponsor, someone who could, and would, go to bat for the WC network development staff when the group health folks (understandably) started to cave on WC rates to get a better discount for their group health business.
But that’s not the most important reason to have a separate WC division. The most important reason is simple – WC is so fundamentally different from group health that the network development/provider relations, operations, compliance/legal, customer service, and sales staff will find themselves spending most of their time explaining WC basics to their support staff/management/peers – first dollar every dollar coverage; treatment is limited to procedures related to the disabling condition; focus on return to work; and the primacy of fee schedules, that they won’t have much time to resolve issues related to California cascading rules for PT, Florida limits on chiro visits, pre-cert requirements in MA and NY, MPN access requirements in California, EDI requirements in Texas and the gazillion other small but critical-for-compliance comp rules.
The ones who should be the most nervous/interested in this have “Coventry Workers Comp” on their business cards. Coventry has essentially turned network development and management in more than a few states over to AWCA. If Aetna decides to get out of the comp network business (again, I doubt this will happen), Coventry is going to have to scramble.
Aetna’s a good company. Even good companies make mistakes, and they’ve made a few here. This has not been handled well; from here it looks like AWCA management was ousted in a cost-cutting move, replaced by folks who don’t know much, if anything, about workers comp, or about managing a transition.
What does this mean for you?
Be careful and have a Plan B.
Sep
26
Last week’s post on Connecticut hospitals’ temper tantrum elicited no public comments but quite a few private ones. Several payers were rather upset that their bill repricing/network vendors have not been applying the laws correctly, resulting in higher payments than the law requires.
The issue of ‘fiduciary responsibility’ and liability therefore came up a time or two…
One person familiar with the State employee workers comp program confirmed that the State is paying Yale-New Haven and its affiliated hospitals billed charges (or something close to), while paying other facilities about 30-35% less than billed charges. That corrects my misstatement in last week’s post that implied the state was paying facilities their billed charges. That said, the state is still paying (somewhat) more than it legally must. Like most states CT is in a bit of a budget crunch, with the Governor and legislature looking for cuts to make up a $300 million deficit.
Workers comp costs for State employees are around $80 million a year; that doesn’t include municipalities and school boards which are covered through the towns (there are over 110 towns in CT).
Sep
24
The short answer is – it got combined with other sorta-kinda related businesses and put under one boss – Dan Fishbein, MD, in the “New Product Businesses” unit.
According to an Aetna Communications staffer;
“AWCA is part of the New Product Businesses area, which also includes the Cofinity, Aetna Signature Administrators, Pet Insurance and Worksite Health businesses. The former PPOM business, is part of Cofinity. All 5 businesses (including AWCA and Cofinity) now have a common reporting structure in the New Product Businesses area.
These changes will help Aetna identify and successfully execute strategies for new distribution channels, business models, partnerships and products and generate substantial growth for the company. The AWCA business is an important part of this strategy.”
Up until Monday, AWCA (Aetna Work Comp Access) was a separate business unit, with its own leader (Pat Scullion), operations head (Shawn Fisher) and sales leader (Tom Shivers). AWCA also had a network management function, account management, and other support housed within the unit. In the new structure, network management and operations for work comp will be handled by two units also responsible for Aetna’s group health TPA and PPO businesses headed up by Mark Granzier. Here’s how Aetna’s internal announcement put it “All network functions in these businesses will be realigned to Mark. This will enable us to have a single area focused on contracting and provider relations, and to leverage these resources efficiently across our businesses.”
Sounds good in an announcement, and here’s hoping Aetna figures this out. Unfortunately, other companies’ attempts to integrate work comp functions with group health haven’t fared so well, as the contracting staff usually doesn’t ‘get’ work comp; work comp is usually a relatively small part of the overall business; and network negotiators tend to use WC as a bargaining chip, giving away discounts there to get a better group health discount. This can be particularly problematic for hospital and facility contracts, where work comp is a big profit maker for hospitals (while generating higher loss costs for payers).
This isn’t idle speculation. It’s based on personal experience within the old Travelers, MetraHealth, and UnitedHealthcare. I’ve also been privy to hospital negotiations – from the provider side – and watched the big networks cave on comp to get a slightly better deal on the group side.
Sales and account management will be the responsibility of Michael Ciarrocchi who has been named the General Manager for the three businesses. There is no real need for a de facto sales force for AWCA, as the network is being sold (pretty much exclusively) through Coventry. There is a big need for upgraded customer service, as there continue to be issues related to data quality (inaccurate provider data, particularly in Pennsylvania) and AWCA’s historical responsiveness has been less than stellar.
Reporting will be handled by a unit headed by Mike Kane that will service all the businesses (the three mentioned above, plus Aetna’s Pet Insurance and Worksite/Direct2you units). I’m not sure how this benefits AWCA’s customers. Although a common reporting platform would likely be beneficial, there is little other synergy. AWCA customers access network discounts via electronic feeds, and there is no ‘outcomes’ data to be aggregated or mined as the payments, claim records, and bill detail data are housed on customers’ systems.
From a business management perspective, it’s understandable that Aetna decided to cut costs and reduce overhead on a (relatively tiny) business unit that essentially serves one customer with one product. Remember this is a company with annual revenues of $25 billion; it is unlikely AWCA’s revenues were more than two-tenths of a percent of that total.
Work comp just isn’t material.
I’d note that Aetna is perhaps the only big managed care firm that is positioned well for the long term. Their investments have been smart (PPOM, Schaller Anderson), their initiatives in transparency and consumerism are well thought out and (mostly) well done, they have solid people who strive to do the right thing (other health plans also have a lot of good people; Aetna’s workforce seems to have more of them), and they are willing to admit mistakes and work hard to rectify them.
That said, many big work comp payers are relying on Aetna to help them manage their medical expenses. And this move makes many of those payers very nervous.
Click below for the full text of Aetna’s internal announcement on AWCA.
Continue reading What happened to Aetna’s work comp division?
Sep
23
FactCheck is one of my favorite all-time ‘helpers’. They do a lot of the digging and checking so we can know what’s right and what’s BS. And most of the time they get it right.
Yesterday they didn’t.
FC took Obama to task for an ad that, according to Igor from Think Progress; “improperly conflated banking deregulation with McCain’s plan to allow health insurers to sell plans across state lines.” Igor claims that deregulating one is same/same as deregulating the other; McCain has been an ardent advocate of deregulation for years, and it is no big leap to think that he’ll do much to deregulate the health insurance business. As he’s already said, himself, repeatedly.
I’d go a bit further than Igor did.
In the McCain plan, what’s to stop a health plan from canceling coverage when they find out you have a bad case of the horribles? Answer – nothing, as long as the state where the insurer is licensed is OK with it. While McCain may say that won’t happen, who’s to say it won’t? States will fight to be the domicile of choice for health insurers, knowing that the lowest cost and lightest regulation makes for lots of fees (see Delaware for corporations…)
McCain says (in the Contingencies article) that he wants to do something (exactly what is undefined) to protect Americans with pre-existing conditions. This desire to ‘protect’ Americans with pre-ex will require the government to either force insurers to cover them (hmmmm, is that a ‘regulation’?) or use high risk pools, a notoriously under-funded and inadequately managed method that has never worked well.
I emailed FactCheck on their smackdown of Obama, protesting what I consider to be a very narrow view of the logic behind the ‘offending’ ad. Haven’t heard back yet…
Sep
23
Aetna is restructuring Aetna Workers Comp Access, Aetna’s workers comp network subsidiary. Sources indicate AWCA’s president,Pat Scullion, sales boss Tom Shivers, and operations head Shawn Fisher were terminated yesterday in what insiders are calling ‘a complete surprise to them’.
AWCA has become the de facto network for Coventry Health’s workers comp division, replacing Coventry’s own proprietary network in many states. Since the finalization of the Coventry-Aetna deal over a year ago, new customers could only access AWCA through Coventry. This may have contributed to Aetna’s decision to terminate the sub’s leadership as AWCA Is essentially a service provider to Coventry. Aetna does have a workers comp PBM, but sources indicate it has a rather modest customer list.
Although the picture is not yet clear, more details should be forthcoming as meetings are being held today at Aetna’s Hartford home office with the (now senior) AWCA staff. It is likely that the sub will not remain separate, instead report up through the existing health plan structure.
For more background on AWCA enter AWCA in the search box to the right on the blog home page.