Jun

We’ve got a long way to go, baby… ranking the US health care system

Posted by Joe Paduda on Thursday, June 24th, 2010 | Comments

Why do we need health reform? Don’t we have the best health care system in the world?
No. Not even close.
According to a study released yesterday by the Commonwealth Fund, “Compared with six other nations–Australia, Canada, Germany, the Netherlands, New Zealand, and the United Kingdom–the U.S. health care system ranks last or next-to-last on five dimensions of a high performance health system: quality, access, efficiency, equity, and healthy lives.” [emphasis added].
The report goes on to note “Newly enacted health reform legislation in the U.S. will start to address these problems by extending coverage to those without and helping to close gaps in coverage–leading to improved disease management, care coordination, and better outcomes over time.”
While there’s no question there are some very, very good hospitals, physicians, and other providers in the US, this isn’t about individual providers – it measures the entire ‘system’.
The report was based on surveys of patients and primary care providers and data on outcomes from previous Commonwealth Fund research.
While the report notes a major failing of our system is a failure to provide coverage for all Americans, even when access issues are not considered, we still rank below the other countries on most measures. This is particularly valid when considering cost, the only area where we rank far above the other six countries.

The top-ranked country overall is the Netherlands, followed by the oft-decried Brits. But the most troubling finding is not a shortcoming on one of the various measures of quality or cost; the US ranks lowest in living long, healthy, productive lives.
“The U.S. ranks last overall with poor scores on all three indicators of long, healthy, and productive lives. The U.S. and U.K. had much higher death rates in 2003 from conditions amenable to medical care than some of the other countries, e.g., rates 25 percent to 50 percent higher than Canada and Australia. ”
What does this mean for you?
The newly-enacted reform bill will help improve access, quality, technology usage, and other metrics.
But we’re still going to be – far and away – the most cost-inefficient system in the world.

Jun

Utilization review – A payer’s ethical responsibility

Posted by Joe Paduda on Tuesday, June 22nd, 2010 | Comments

Yesterday’s post about Mass General’s mishandling (to be kind) of a woman’s procedure and reimbursement thereof elicited a thoughtful email from the former CEO of a major work comp insurer.
Here’s what he said (identifying details removed to protect the source).
I got in trouble early on with (the payer’s) UR staff and attorneys because (after giving them multiple direct orders to clean up pre-auth letters) I began directing them to pay for procedures they approved but later wanted to deny. They would simply say that the procedure was appropriate for the injury but NEVER check the claim to see if it was part of the approved injury. For instance, they would approve a shoulder surgery as medically appropriate but the injury was for a knee. Had they checked the claim they would have seen the shoulder was not covered. Regardless, the UR folks approved it in pre-auth and the surgery was done.
Only afterwards, when the bill came in and the claims rep denied it did UR look at the claim more closely and support the adjuster. UR’s excuse was that in very small lettering at the bottom of the page it said that we (the payer) may not be liable if blah blah blah. I told them that was execrable and to clean up the process and language. For too long, the UR department did not and so I made them pay the claims and docked them in their evaluations.
If the doc and the patient did everything they were supposed to and got an OK in writing I felt it was the carrier’s ethical and moral responsibility to pay regardless of what the lawyers said.
Hear hear.
I’m of the opinion that this happens more frequently than one might surmise, but these types of determinations are kept quiet so as to not motivate more requests for treatment on non-covered body parts/conditions.
I’d also surmise that many non-approved treatments get paid due to the lack of an automated electronic connection between UR and bill review/claims. This is also an ethical issue of high importance, as it is a failure to act as a responsible fiduciary.
What does this mean for you?
How does your company handle these issues, and how do you feel about that?

Jun

Financial shenanigans and their impact on moms

Posted by Joe Paduda on Monday, June 21st, 2010 | Comments

Anne Zieger has written a brief, very compelling piece about how a certain large teaching hospital crossed (at least technically) ethical boundaries by telling a patient she was covered, then that she wasn’t, but only after she had a procedure that was billed at $25,000.
I don’t know why the insurer didn’t cover the procedure, or why the hospital didn’t tell her it wasn’t covered, just like I’m sure the patient has no idea how she’s going to come up with $25k. It could be a breakdown in communication at MassGeneral, or it could be the patient was told and can’t remember, or perhaps there’s some other explanation.
Regardless, it certainly points out – as if we needed more evidence – exactly how screwed up our financial reimbursement ‘system’ is.
Yecch.

Jun

The Medicare physician reimbursement ‘fix’

Posted by Joe Paduda on Monday, June 21st, 2010 | Comments

With the Senate’s passage of a bill preventing cuts to Medicare physician reimbursement for another six months, we’re only waiting on the House’s action to boot the problem further down the road, where it can grow, and fester and frustrate just in time for the New Year.
That said, it isn’t all bad news. The good news is the (short term) fix is paid for, it was the product of bipartisan action, and, for docs, it increases reimbursement by a touch above two percent.
With that said, this is so illuminating and so frustrating on so many levels, that it is worth exploring in detail.
First, the House may not pass the bill. Speaker Nancy Pelosi (D CA) has said that she’s got big problems with the narrow fix as it doesn’t address the House’s priorities in other areas including jobs and unemployment extension.
If the House doesn’t pass the fix early this week – like before Wednesday – expect physicians to go ballistic. CMS has already told their bill payers to start cutting checks to docs reflecting th 21% cut; each day that passes before those cuts are rescinded will increase the level of anger among physicians, which is already close to an all-time high.
Second, ‘fixing’ the current Medicare physician reimbursement price-setting process (known as the Sustainable Growth Rate (SGR) for the methodology in place today) will require Congress recognize a quarter-trillion dollar addition to the deficit.
Ouch. Hard to see how any politician will explain that to their constituents at a Town Meeting. Let me see, “Well, Mr X, in order to understand why I voted for a quarter trillion dollar addition to the deficit, let me explain how the SGR contributes to medical price inflation…” Can’t wait to see the headlines on FauxNews on that one…
Third, as I noted last month, “there’s an inherent problem with the SGR approach – SGR attempts to use price to control cost. The complete failure of the SGR approach to control cost is patently obvious, as utilization continues to grow at rapid rates. This was a problem four years ago, and its done nothing but get worse. Not only does the RBRVS/SGR approach contribute to cost growth, it also ‘values’ procedures – doing stuff to patients – more than listening to them.”
As Gail Wilensky wrote, “The primary problem with the SGR is that while it can control total spending by physicians (assuming it is actually implemented), it does not affect nor is it driven by the volume and intensity of spending of individual physicians. In fact, there is some concern that expenditure targets may actually exacerbate the incentives for individual physicians to increase the volume and intensity of services they provide.” [emphasis added]
Fourth, changes to Medicare physician reimbursement will impact group, Medicare Advantage, Medicaid managed care, and workers comp – both directly and indirectly. Many network contracts are based on or reference RBRVS, so changes to RBRVS can result in alterations in network reimbursement. The indirect impact may be more significant, as physicians alter practice and billing patterns to address revenue shortfalls and opportunities. With eventual cuts in reimbursement for surgeries and imaging likely, payers will have to carefully monitor practice patterns if they are to stay on top of potentially problematic trends.
Finally, Congress is indeed in a ‘fix’. Caught between the Scylla of budget deficits and Charybdis of an enraged and engaged physician community, it decided to prolong its agony until after the fall elections, in hopes that passage of a more permanent solution will come so early in the 2012 election cycle that other issues will overshadow it by the time the voters hit the booths in November 2012. That, and the Democrats may well be thinking they are going to lose a bunch of seats in both houses this fall, so any post-2010 election solution to SGR/RBRVS will require the Rs to make policy and not just hurl bricks. It’s one thing to point out problems, it is entirely another to come up with solutions, especially when any foreseeable solution will anger a powerful constituency.
What does this mean for you?
Watch what happens this week in the House. It will be a lesson in civics, if not civility.

Jun

Broadspire’s the first

Posted by Joe Paduda on Friday, June 18th, 2010 | Comments

Broadspire, one of the largest TPAs in the country, has announced a new network strategy which goes by the acronym BOLD, that is notable as much for what’s missing than what’s present.
There’s no mention of Coventry in the list of Broadspire’s network partners.
I’ve discussed this at length with Danielle Lisenby, Broadspire’s top managed care exec, and the company’s president, Ken Martino. Danielle, Ken, Medical Director Jake Lazarovic, MD have led the company’s efforts to develop and implement a medical management strategy based on “a better answer than the same old broad based discount network ” approach.
Martino sees the BOLD network as a differentiator for Broadspire, a unique solution that is clearly different from those offered by the company’s competitors. Martino also noted that the extensive analysis conducted by Broadspire confirmed their belief that “greater savings could be obtained using multiple partners than relying primarily on one network.”
I’ve seen the analysis, and the numbers support the company’s assertion. When examining network penetration and net savings percentage, the new strategy provides better results in all but three states, and in those the difference is minimal.
On the flip side, the net increase (penetration x savings) in many states increases by mid-single digits, with a couple well over ten percent.
Sources outside Broadspire indicate Coventry is none too happy with Broadspire’s decision. According to Coventry reps (albeit second hand), Broadspire wasn’t willing to ‘partner’ with Coventry. I’ll leave it to readers to puzzle out how exactly Coventry defined ‘partner’.
What does this mean for you?

Coventry dominates the work comp PPO business. They are, far and away, the leader in market share, and use that position to their advantage. Since the exclusive marketing deal with Aetna was inked a couple years ago, Coventry has been raising network access prices and strongly encouraging customers to utilize their network in most, if not all, jurisdictions.
From a business strategy, this makes a lot of sense – from Coventry’s perspective. Using market clout to drive higher margins and hold off competitors is just good business – for the market leader. Over the near term, this has paid dividends for the work comp division’s parent, as the network operation has generated significant cash flow.
I’d highlight ‘over the near term’. Over the longer term, Coventry’s approach is bound to alienate payers looking for more flexibility, more control over their medical spend. As it is, payers utilizing the ‘one network’ approach are ceding a significant amount of control over the largest part of the claims dollar to an entity that makes money on medical bills – the more bills that are generated, the more money they make.
Even a non-actuary like myself can see the problem – for the payer – with that business model. Now Broadspire has become the first large payer to break away entirely from the Coventry model. Their numbers are compelling; it will be interesting indeed to watch how self-insured employers react.
Note – there are several other large payers also looking deeply into new medical management strategies. Perhaps Broadspire’s move will push these efforts along.

Jun

Regulation, Legislation, and Unintended Consequences

Posted by Joe Paduda on Thursday, June 17th, 2010 | Comments

I attended a meeting of work comp insurance execs in DC yesterday that addressed, among other topics, the dynamic situation in Texas, fee schedules for drugs, pending Federal legislation and the potential impact on comp, and the Gulf oil spill and its potential ramifications for Jones Act and Longshore/Harbor workers coverages.
While there wasn’t a common theme (beyond the obvious) at the outset, by the end of the morning I was struck (as were several others in attendance) by the unintended consequences of past actions, and potential adverse consequences of future legislation and regulation.
As an example.
California slashed the work comp pharmacy fee schedule just about in half six years ago. Since that time, the number of scripts per claimant has increased 25% and costs per claimant are up 31% (CWCI stats). And that’s not the worst of it. Schedule II narcotics have gone from less than one percent of scripts to almost six percent, a six-fold increase.
Why? How could costs go up if the fee schedule cut prices so deeply?
Simple. Some bad actors figured out how to game the system by repacking drugs and inventing their own prices, prices that were several times higher than they should have been. OK, that was fixed, albeit several years, and several hundred million dollars, later.
But there’s another problem, one highlighted by the huge growth in narcotic dispensing – PBMs could not afford to effectively manage the drugs dispensed to claimants.
PBMs make their margin on the delta between what payers pay the PBM for scripts and what the PBM pays the pharmacy. When that delta is negative, as it is in California, there isn’t any money to pay for data mining to identify potentially problematic prescribers; pharmacies that have low generic fill rates; claimants taking multiple narcotics and/or other meds that may conflict with those narcotics. And if they can identify the issues, they can’t pay pharmacists and physicians to review medical records, contact the treating physician, discuss the issues, and resolve any disagreement.
Sure, PBMs and payers could decide to operate on a cost-plus basis, but there are business reasons payers prefer bundled pricing – its easier to assign it to a file, simpler to administer, and easier to report to clients and regulators.
That’s not to say all PBMs don’t try to clinically manage claimants’ drugs – many do, and do a pretty good job given their severely limited resources. The payers that operate in multiple jurisdictions know that the PBM’s fees in other states subsidize their California drug spend…and as long as California is the only state with a catastrophically low pharmacy fee schedule, that’s OK (unless you’re a California only payer, in which case good luck finding a PBM that will handle your pharmacy at fee schedule). But if other states decide to use a similarly low fee schedule, the wheels fall off the system.
This is but one example of unintended consequence of a seemingly obvious and easy way to reduce comp costs – costs actually increased dramatically, and I’d argue that length of disability did as well for those claimants on narcotics that otherwise would not have been.
The pending sunset of pharmacy networks in Texas is another example; due to the wording of Texas’ comp reform legislation (as interpreted by the decision makers in Texas), PBMs can’t operate in the state after 12/31/2010. There’s a good bit of activity in Austin as various entities attempt to resolve this situation before the end of the year, and there’s some hope those efforts will be successful. That said, there’s no question a lot of work is being done by a lot of people who are tasked with cleaning up the ‘unintended consequence’ of unfortunately-worded legislation.
What does this mean for you?
As some smart person said years ago, “What makes you think you’ll have time to fix it if you don’t have the time to do it right to begin with”. Lest readers construe this as a ‘blame the regulator/legislator’ rant – it isn’t. Rather, stakeholders must engage with the people tasked with addressing these issues – before the laws are passed and regulations written. And yes, regulators and legislators would be well served to listen to those who live these issues every day.

Jun

Work comp pharmacy fee schedules – what’s the answer

Posted by Joe Paduda on Tuesday, June 15th, 2010 | Comments

The evidence is pretty clear – low fee schedules don’t have much, if any, impact on drug costs. Sure, they give the appearance of action, and some actuaries and politicians are able to claim future cost reductions based solely on slashing drug fee schedules from some multiple of AWP to some fraction of AWP, or perhaps even a state’s Medicaid rate. But the data – whether from NCCI, CWCI, or my own firm’s surveys, suggest that the price per pill (with some notable exceptions) is much less important in the scheme of things than how many and what type of pills are dispensed to claimants.
Exhibit One is CWCI’s recent analysis of drug costs post implementation of MediCal as the basis for the work comp fee schedule. Alex Swedlow (one of the best and brightest analysts in the business) and John Ireland’s analysis found “significant post-reform growth in both the average number of prescriptions and the average payments per claim for prescription medications. Between calendar years 2005 and 2007, the number of prescriptions per claim in the first year following a work injury increased 25 percent, while first-year pharmaceutical payments per claim increased 36 percent.” [emphasis added]
Yes, after slashing the fee schedule from AWP+40% for generics and AWP+10% for brand (plus dispensing fees) to something closer to AWP-50% Generic /AWP-20% Brand, drug costs per claim went up. A lot. But that’s not the worst of it.
The biggest percentage gainer? Schedule II narcotics – the heavy-duty stuff, associated with significant risk of addiction and abuse – went from less than one percent of scripts to almost six percent – a 600% jump in three years.
Why? One theory, which I’ve tested in conversations with several clinical pharmacists, is the drastic decrease in reimbursement in the Golden State left PBMs with no funds to do any real Drug Utilization Review (DUR), and even less to intervene on potentially high-cost, high-impact claims. PBMs make their money on the delta between what they charge the payer and what the retail pharmacy charges them; in almost all cases, PBMs’ retail contracts call for reimbursement above the CA MediCal rate.
Tough to make that up on volume…
I’m meeting with interested folks in DC tomorrow to discuss this issue, and perhaps to think thru some potential alternatives to AWP, or God forbid, Medicaid as the basis for comp Rx fee schedules.
And as I prepare for the conversation, I’m thinking that a fee schedule based on Usual and Customary has some appeal.
U&C in pharmacy is the cash price for that drug on that day at that pharmacy; think $4 for the long list of generics pioneered by Walmart (which, by the way, is lower than what Walmart charges comp PBMs for the same drugs). Unlike other U&Cs, it is tougher to game, can be reported and collected electronically, and bears some relevance to market price – unlike AWP, which is known as ‘Ain’t What’s Paid’ as it doesn’t factor in rebates, volume discounts, and other price-reducing mechanisms. True work comp drug geeks will know that 33 states currently use AWP as the basis for their fee schedules.
U&C isn’t perfect – any time you base reimbursement on a rate that can be set by the payee, you open yourself up to abuse. But risk of abuse or gaming is likely pretty low – pharmacies see very few work comp scripts, and aren’t likely to play games with their cash price customers just to make a few more bucks on a comp patient. And pharmacy chains do tend to alter pricing to respond to market demands, making U&C at least somewhat credible.
Perhaps best of all, U&C is going to be around for the long term – unlike the version of AWP that is most popular which will disappear within a year.

Jun

Why don’t comp payers change?

Posted by Joe Paduda on Monday, June 14th, 2010 | Comments

I was talking at length with a good friend who works for a large payer last week, discussing the process of getting the organization to make significant, and very much needed, improvements to their managed care program.
This got me thinking – by no means is this situation unique to that one payer. If anything, resistance to change is a consistent thread throughout the workers comp payer/buyer/service industry. Pondering this over the weekend I came up with a few warning signs of and reasons for the resistance.
Warning signs
Statements such as “we’ve always done it that way”, “that’s our policy”, or “that’s how we handle X here” can indicate pride and consistency, traits that are often excuses for not thinking more and deeper about specific issues. Policies are good, as long as they’re ruthlessly examined under a very bright light on a regular basis.
Long, exhaustive, exhausting studies and analyses and research into a new idea, especially those that involve a large committee of folks with lots of other, higher priorities. Committees are where good ideas go to die.
A culture of fear, where junior staff wait to hear what the boss says before chiming in; where criticism is pointed and personal, where people are afraid to speak up for fear of being criticized or chastised.
A resistance to comparison and measurement, where managers seek to report the data that demonstrates positive results (or at least results that help them achieve their bonus targets) and don’t look for ways to compare their performance to competitors or the industry as a whole.
Why?
There is a cultural issue in comp, and perhaps in the larger property and casualty industry that has significant negative influence on the ability of companies to evolve and improve.

People who say ‘no’ succeed; risk-takers do not. Risk takers seek to write the somewhat questionable policies, try different approaches, ask ‘why not’ instead of ‘why’, look for creative solutions to old intractable problems, seek answers outside the industry instead of always relying on the time-tested. Sure, these risk-taking efforts aren’t always, or even often, game-changing successes, but occasionally they do work brilliantly, and even when the improvement is incremental, it is improvement.
The ‘no’ people don’t write the risks that fail to meet every criterion, stick to the book when ‘managing’ claims, don’t direct injured workers in states that don’t provide explicit authority, complain that the laws don’t support tougher stances. They don’t look for the ‘how to’, they complain about the ‘why not’.
More specifically, there’s a financial gravy train that drives TPAs and insurers that makes it difficult to try new approaches in managed care.
That gravy train is fueled by managed care fees, fees that in many cases are larger than the earnings from claims administration, and can represent a big chunk of an insurer’s profit margin. Fees, whether from case management, utilization review, bill review, networks, or other services, contribute to the overall organization’s financial results, making it tough to consider programs that might actually reduce the amount ‘earned’ by managed care programs.
Never mind that these new programs will also reduce medical costs. In fact, I can, and often have, made the argument that the current large generalist PPO reimbursed on a percentage-of-savings basis is actually driving up workers comp medical expenses, and the data I’ve seen bears that out.
Yet the vast majority of payers are still wedded to this old model.
What does this mean for you?
More evidence that change in the comp industry, however much it is needed, will be difficult and frustrating. Precisely because of that difficulty, those organizations that adapt and evolve will find themselves better positioned than their moribund competitors.

Jun

Auto insurance and hospital cost shifting – so THAT’s why my premiums are so high!

Posted by Joe Paduda on Friday, June 11th, 2010 | Comments

Cost-shifting – the practice of seeking higher reimbursement from some payers and patients to cover shortfalls due to low or no reimbursement from others – is rampant in the US health care system. Having worked with providers, health care systems, and payers, I can attest to the pervasive nature of the beast – it happens all the time, everywhere.
More evidence came across my virtual desk yesterday in the form of a study by the Insurance Research Council entitled “Hospital Cost Shifting and Auto Injury Insurance Claims” [available for purchase thru IRC]. The study compared auto injury hospital costs in Maryland to those in 38 other states that don’t have the all-payer hospital rates mandated in Maryland. Thus, whether a patient is covered by a health plan or auto insurer in MD doesn’t matter – all are reimbursed at the same level.
Here are a few of the highlights.
– the “percentage of a state’s population without health insurance was found to be the strongest predictor of average hospital costs for auto injury claimants”
– “another important predictor of average hospital costs for auto injury claimants is the percentage of a state’s population covered by Medicaid”
– IRC estimated of the impact of cost shifting to auto insurers totaled $1.2 billion in 2007.
It is clear that cost shifting is rampant, particularly to property and casualty payers. Work comp payers are particularly vulnerable as their network arrangements are under growing pressure from hospitals seeking higher reimbursement.
What does this mean for you?
Your hospital costs are headed up. What are you going to do about it?
predictive modeling
And
artificial intelligence

Jun

Can the surgical implant problem be fixed?

Posted by Joe Paduda on Thursday, June 10th, 2010 | Comments

According to Bill Kidd’s piece [sub req] in WorkCompCentral this morning, several states are attempting to address the rapidly growing problem of surgical implant device fees via regulation or legislation – by basing reimbursement on the manufacturer’s invoice. While it is great to see authorities paying attention to what has been a big problem for comp payers for several years, this solution may not be much of a…solution.
As I noted in a post a couple weeks ago;
“In several jurisdictions (including NY TX CA (working on a change) and FL) the basis for reimbursement is some version of the “documented paid amount” plus a handling fee of 10% or so up to a cap of a few hundred dollars (CA) or a percentage of the invoice amount (FL). Illinois is also contemplating a similar arrangement. [Bill notes that Minnesota is also looking into a fix]
The problem lies in the documentation of the paid amount. Most payers ask for a copy of the invoice, which, on the surface, makes sense – this is what was paid.
Not exactly. What the invoice doesn’t show can include:
– volume purchase discounts
– rebates
– “3 for the price of 2″ deals
– waste (some surgeons use the cage from one kit and screws from another, so the payer is paying for more hardward than is actually being used)
– internally developed invoices (documents prepared not by the supplier but by the provider)
This last point is the crux of the issue. Hospital systems often buy in bulk, with several implant kits shipped and billed; this obviously makes it impossible for the provider to produce the invoice for the device used in a specific surgery, as they never got one. Thus, many providers develop the invoice for a specific implant kit themselves.”
So, what to do?
I don’t see a legislatively-simple solution, or rather one that only requires a revision to existing fee schedule language. Requiring providers to disclose the ‘price’ is only practicable if they know what that ‘price’ is; as noted above, that often is difficult if not impossible to establish.
What states can do is require reimbursement at ‘cost’ plus something, allowing payers to work with specialty bill review vendors to determine what that ‘cost’ is. (HSA Client) FairPay Solutions provides this service; if there are others out there that can assist, let me know.
predictive modeling
And
artificial intelligence

Year: 2010