Managed Care Matters

We're going to stick with the hospital story for just a bit longer. So far posts have discussed the significant profits generated by workers comp payments, the inability of comp networks to manage facility costs, and a cornucopia of other hospital-related issues.

The thesis statement for all could be summed up thusly - Hospitals are gaining power at the expense of commercial payers.

Here's the proof.

The largest hospital/surgery center company in the nation, HCA reported a 21.6% jump in profits in the last quarter. Revenues "increased 3.7 percent to nearly $7 billion despite a decline in surgeries and flat admission numbers. "

Lets parse that statement out.

Profits were up much more than revenues, indicating the company (also known as Hospital Corp of America) has been able to keep expenses under control while delivering higher margin services.

Revenues were up even though surgeries (which tend to be very profitable) were down (albeit slightly at 0.5% for inpatient and 0.7% for outpatient facilities) and admissions were flat. The only way that can happen is by changing the mix of services delivered and improving the payer mix (think private insurance instead of Medicaid).

HCA's success wasn't an anomaly. Unlike the other hospital companies, Universal Health Services (could we please get just a bit creative with the company names here?) enjoyed an increase in profits and revenue. UHS saw its profits increase 35%, driven by a big increase in inpatient admissions (up 8.5%) and smaller, yet significant increase in the length of hospital stays (up 3.1%). This wasn't just a one-quarter event; looking at the first half of the year, revenues were up 8% and net income rose 34%. Note that UHS is one of the smaller for-profit hospital companies with fewer than 31 hospitals.

Revenues and profits were also up at HMA, with top line increasing 3.9% despite a decline in patient volumes. HMA, which operates 58 hospitals, also had a good first half of the year with profits almost doubling on a 4% increase in revenue. Interestingly, surgery counts also declined slightly at HMA over the same quarter in the prior year.

We'll round out the review with a quick look at Tenet - the 58 hospital company saw admissions up almost 2%, driven mostly by 'governmental managed care admissions' which jumped 16%. (I wonder, does that mean the Medicaid and Medicare Advantage programs are seeing higher inpatient admission rates? or is it just a shift from unmanaged Medicare?) Tenet also enjoyed a 7.5% increase in 'same hospital commercial managed care revenues'. (which brings up the rather uncomfortable question - is Tenet a preferred partner with the big managed care companies, or are the big managed care companies seeing a jump in hospital admits?)

Notably, Tenet's revenues were up 6.3% on that 1.9% increase in admits, a rather surprising jump given that the Feds are not exactly a generous payer. And digging deeper into Tenet's earnings report, one learns that commercial insurer admits actually declined 2.2% and patient days dropped 3.1%, while outpatient visits were also down 1.8%. So, revenues were up 7.5% on fewer admits and shorter stays...Cost-shifting, perhaps?

Here are a couple statements from Tenet's earnings report that shed additional light on the situation.

• Outpatient pricing outpaced the growth in inpatient pricing due to an improving mix of procedures performed in our outpatient facilities.
• Pricing improvement was evident across all key metrics, primarily reflecting the improved terms of our commercial managed care contracts [emphasis added]

And this from Forbes "Price increases from better terms in its commercial managed-care contracts also helped boost Tenet's profit and revenue."

Looks like a trend to me - hospital revenues are up slightly, profits are up much more than revenues, and this despite (mostly) flat patient volumes and lower surgical volumes.

The source of all these profits? Commercial managed care companies.

Which brings us back to a question I asked a while ago; "what exactly are 'managed care' companies managing?"

Thanks to FierceHealthcare for the heads up

Posted by at 7:08 AM | Permalink | Comments (3)

Pundits (myself included) are detecting a sea change on the Hill - the health plans' power meter is just barely registering while physicians are pegging the needle. If you're wondering why physicians were so adamantly opposed to the Medicare reimbursement cut, it is because their compensation is barely keeping up with inflation.

Recall that the GOP was going to cut their Medicare reimbursement by 10.6% (while also reducing Medicaid and other Medicare-linked compensation). And this after physicians had gone several years with their income not even keeping pace with inflation.

According to the latest data from 2007, primary care docs enjoyed a 3.35% increase in compensation after inflation (6.3% before accounting for the 2.85% CPI uptick last year). This rather modest increase is way better than their specialist colleagues saw - inflation-wise, specialists broke even. However, specialists' median income was almost a third of a million bucks, while specialists were just over $182k, so the primary care docs have a long way to go to catch up.

And some of them have a really really long way - median general practice income was $119k, whlle Family practice docs made $129k.

Not bad money, but not exactly huge bucks either. The other part of the equation has to do with job satisfaction - if you love your job, you're likely to be less concerned with how much you make. But if you don't love your job, and some damn President/Congressperson is threatening to cut your already low income, while paying big health plans billions more than they should...

Job satisfaction amongst primary care docs is declining. 60% of PCPs (primary care practitioners) would not choose primary care if they got a do-over. 39% would pick surgery or diagnostics, and over one-fifth would not choose medicine.

Looking at changes from 2006 to 2007, the percentage of docs who counted themselves as 'very satisfied' declined from 24% to 18%, while those who were 'very dissatisfied' went up from 9.4% to 13.2%.

So what do these newly-empowered, angry docs want?

36% want a Canadian-style single payer system.

66% agreed that the "US should move to a market driven system that reduces the role of third party payers."

(note these were separate questions and therefore don't add up to 100%)

Yes, working with physicians has heretofore required cat-wrangling skills. And their egos require outdoor meetings as no hall is big enough. And all want more for their specialty and their patients are sicker than average. And they are all better than average.

And they've recently found out what they can accomplish when they stop acting like Augustus Gloop and work together.

Thanks to FierceHealthcare for the triggering tip.

Posted by at 6:16 PM | Permalink | Comments (2)

Workers comp medical expenses account for less one-fiftieth of total US health care costs - $30 billion(see WC report pdf) out of $2 trillion.

Yet workers comp generates almost one-sixth of hospital profits.

Here's how the numbers work. About one-third of comp medical payments are issued to healthcare facilities. The average US hospital cost-to-charge ratio (what it costs the hospital to provide a service compared to what they bill for that service) is approximately 31.2%; in comparison workers’ compensation payers reimburse about 55% of hospitals' billed charges.

Thus workers comp payers pay hospitals 176% of their costs.

(There is another, very big argument over the methodology hospitals use to calculate their 'costs', my opinion is there is conclusive evidence that costs are exaggerated and overstated)

In dollar terms, in 2007 workers comp insurers and self-insured employers paid facilities roughly $9.1 billion. $3.9 billion of that $9.1 billion was profit for hospitals.

The entire US hospital industry generated profits of roughly $25 billion, workers’ compensation – which you will remember represents only about 1.5% of total hospital revenues – accounts for approximately 16 percent of all the profits for US hospitals.

Few dispute that workers comp insurers and SI employers should adequately reimburse hospitals. It is equally indisputable that under the current systems, comp payers are paying much more than their fair share.

How much should workers’ compensation payers pay? According to Vincent Drucker of FairPay Solutions, "something between what Medicare pays and the costs + twenty percent that group payers are reported to be paying." (FPS is an HSA client)

Why are comp payers overpaying hospitals? That's a subject for a later post.

Posted by at 7:53 AM | Permalink | Comments (3)

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.

Posted by at 6:47 AM | Permalink | Comments (1)

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).

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.

Posted by at 7:10 AM | Permalink | Comments (0)

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.

Posted by at 10:24 AM | Permalink | Comments (1)

Ingenix has had a tough few months. The latest injury comes in the form of a suit filed by a Connecticut man, seeking class action status based on allegations that the United HealthCare sub engaged in an "alleged conspiracy in which insurance companies calculate their usual, customary and reasonable rates from a flawed and manipulated Ingenix database. The low payments to providers, according to the lawsuit, left Weintraub and other consumers with higher out-of-pocket costs." (Modern Healthcare)

For the legal folks out there, the full case can be accessed here. (PACER sub req)

The plaintiff, Jeffrey Weintraub, is suing Ingenix, their parent, UnitedHealth Group Inc; sister company Oxford Health Plans, as well as Aetna Inc, Cigna Corp, Empire BlueCross BlueShield, Humana Inc, Group Health Ins Inc, Health Ins Plan of NY and Health Net Inc.

OK, so what does this mean? My sense is this is piling on; since the Cuomo announcement Ingenix has been a highly visible target, and based on the company's rather lackadaisical approach to defending its methodology in the Davekos case, it looks like the legal sharks smell blood in the water.

But just because it is piling on does not mean these cases are without merit.

I would expect to see more of these suits filed, perhaps in more class-action friendly jurisdictions (Mississippi, for example). I also expect the industry to rally around Ingenix - this is a very, very big deal, and one that has been mishandled so far. Ingenix, and the health payer industry, cannot afford any more mishaps.

Thanks to Fierce Healthcare for the heads' up.

Posted by at 6:24 AM | Permalink | Comments (2)

Why do regulators base WC reimbursement on Medicare? It's easy, simple, and already familiar to legislators and regulators alike. It is also a big mistake.

Medicare is a program for America's elderly - over-65, mostly sedentary, and mostly not employed. Workers comp covers 'working age' folks; primarily 18-65. ) Many of the surgeries being performed on Medicare vs. workers’ compensation patients are fundamentally different.

The types of outpatient surgeries that can be performed on workers’ compensation patients, who are generally young and in overall good health, are different than the outpatient surgeries Medicare covers (pays) for. Medicare sharply restricts outpatient surgery for good reason as Medicare patients are frail and surgery followed by an inpatient stay is safer given their complicated medical conditions and health risks of prolonged general anesthesia. WC claimants are younger, in better physical condition, and much better suited for outpatient surgeries - yet basing WC reimbursement policies on Medicare would forbid, or at the least financially dis-incent, outpatient surgery in favor of inpatient.

Medicare fee schedules (like the one Florida's Three-Member Panel is considering adopting) result in more specialist care and more procedures being performed. (opens pdf) National studies show this frequently leads to poorer outcomes and more suffering for patients, in addition to higher costs for payers.

Medicare recipients' medical conditions are very different from comp claimants'. The top ten Medicare DRGs (Medicare's coding for inpatient care) are:

• Heart Failure & Shock
• Simple Pneumonia & Pleurisy
• Specific Cerebrovascular Disorders
• Psychoses
• Chronic Obstructive Pulmonary Disease
• Major Joint & Limb Reattachment Procedures, Lower Extremity
• Angina Pectoris
• Esophagitis, Gastroent & Misc Digest Disorders
• G.I. Hemorrhage
• Nutritional & Misc Metabolic Disorders

No spine conditions, multiple trauma, burns, TBIs, crushing injuries, joint surgeries...

Inflation in Medicare billing is rampant - if you think it is bad in WC generally (and you would be right) it is an order of magnitude worse in Medicare. In Florida, the current annual inflation rate is north of 14% for Medicare outpatient services.

Medicare reimbursement disproportionately favors hospital-based care. With facilities reimbursed at levels much higher than free-standing doctors' offices and clinics, basing reimbursement on Medicare encourages providers to affiliate with, provide care in, and bill thru facilities. In Florida, the impact is dramatic; basing reimbursement on hospital outpatient service charges will increase costs by an estimated $1,675 to $2,320 per claim (calculations courtesy of FairPay Solutions, an HSA client).

What provider would want to treat in their own, lower cost clinic or office, if they could more than double their fees by working through a hospital?

Finally, CMS itself has warned against using their payment methodologies for non-Medicare patients. “The cost-based relative weights were developed solely using Medicare data. We do not have non-Medicare data…For this reason we are concerned that non-Medicare payers may be using our payment systems and rates without making refinements to address the needs of their own population.” (page 272)

I could go on, but you get the picture. The populations are starkly different, claimants' health status is different, their motivations are different, provider types are different, and reimbursement should reflect these differences.

Unfortunately, Medicare is the easy choice. Easy, but dead wrong.

Posted by at 7:01 AM | Permalink | Comments (2)

It's 2008. There are thousands of really smart people working to change the delivery of health care, reduce inappropriate use, and improve outcomes.

But in one state, things aren't getting better - they are getting worse. (I'm not picking on Pennsylvania; they just have the misfortune of being in the news more than other states lately)

A study of admission rates in Pennsylvania found that patients with chronic conditions are being admitted to the hospital more often. The analysis focused on HMO members with diabetes, asthma, and/or hypertension and the result is particularly troubling as these conditions are responsible for a large percentage of US health care costs.

Notably, these HMOs have also been lauded for their effectiveness in delivering preventive care, care that should help reduce the number of admissions for these conditions.

Previous studies indicate that effective primary care can dramatically reduce the number of admissions for these conditions. And further reductions can be achieved by implementing quality improvement programs, programs that have well-documented results.

So we're left with the conclusion that despite the fact that we know how to keep patients with chronic conditions out of the hospital, admission rates are going up. And Pennsylvania is not particularly bad - there are a dozen other states that spend a lot more money on inpatient chronic care than the national average.

Can you sense the frustration?

Posted by at 7:21 AM | Permalink | Comments (1)

Alex Swedlow and the good folks at CWCI have published a study that clearly demonstrates the amount of waste in the US health care system, waste generated by nothing other than greed and lousy medicine. While the analysis focused on workers comp, the lessons cross all coverage.

The great thing about workers comp is that unlike health insurance, payers are actually concerned about and financially motivated to ensure claimants get the amount and type of care needed to help them recover and get back to work. And there is a wealth of data to evaluate the effects of medical treatment on RTW.

California changed its workers comp rules a few years ago to limit the number of physical or occupational therapy or chiropractic visits a claimant would get covered by workers comp. The limit was 24 (for each, not together), which all the data suggest is more than adequate to take care of 90%+ of WC medical conditions - surgical or non.

So, what happened?

The average number of PT, OT, or chiro visits per patient dropped by almost half, and the number of patients with more than 24 visits dropped from 30.4% to 9.7% (a decline of 68%). Costs declined dramatically as well.

But did this lead to poorer outcomes?

The results, while encouraging, are not as clear.

While there are data from California that appear to show reductions in the length of disability, the results are muddled by a cap on benefit payments that was also part of the WC reforms. The duration of disability (the length of time claimants were out of work) did decline post-reform. Comparing disability duration two years post-injury, the median length of disability declined by 21.4% (average was down 17.4%).

My sense is the reduction in physical medicine visits contributed to the drop in disability duration - without endless visits to PTs and Chiros to receive 'care' that was not helping them recover but merely extending the process, claimants were more likely to be released to return to work.

There's a lesson here for the non-workers comp world, and policy wonks in particular. It is this - providers overtreat, to the detriment of the patient and the payer. Draconian measures such as flat limits on the amount of treatment do work.

With health reform on the horizon, here's a great example of the waste in our health care 'system', waste that benefits the provider.

Posted by at 6:26 AM | Permalink | Comments (4)

Surgical devices left inside a patient. Dispensing the wrong medication or the wrong dosage. Giving a patient the wrong blood type in a transfusion. Serious pressure ulcers incurred while hospitalized. Infections from catheterization in the ICU.

These are among the 'never-ever' events - incidents that should never, ever happen during an inpatient stay. CMS recently decided to stop paying hospitals for care required due to certain"preventable complications" — "conditions that result from medical errors or improper care and that can reasonably be expected to be averted" (NEJM, 10/18/07). The list includes air embolisms, certain infections, patient falls, pressure ulcers and the like.

HealthPartners in Minnesota was one of the first payers to identify the problem and take action, way back in 2002. Now, other commercial health insurers, notably Wellpoint and Aetna, are planning to move beyond CMS' list and eventually refuse payment for 28 events. These events, identified by the National Quality Forum are also under review by the Blue Cross/Blue Shield Association, United Healthcare, and CIGNA who may decide to stop paying for them.

And the Leapfrog Group's membership, which includes many of the country's largest employers, is also asking providers to not bill for these events.

It is not just the payers; hospitals themselves are starting to see the light. Hospital associations in Massachusetts and Minnesota have agreed to not charge payers or patients for these events, which include "wrong-site and wrong-patient surgery, patient death or disability due to wrong use of blood or blood products and medication errors, and follow-up care needed to bring the patient back from such errors."

The largest payer in the nation, CMS, has decided that paying for certain medical errors is bad policy. So has two of the largest health plans, along with one of the best-run health plans in the country. Our biggest companies have joined the "no pay for mistakes" movement. Hospitals themselves have decided it is inappropriate to charge for their screw-ups.

So why are workers comp payers reimbursing hospitals for 'never-evers'? I don't have any empirical evidence that WC payers are not paying for these events. In fact, given the lax payment policies of most payers, I'd be very surprised if more than a very few (if any) payers have the ability to deny payment, much less a policy to do so.

What does this mean for you?

There is clear precedent for non-payment for medical errors. Moreover, workers comp payers may find themselves in the rather awkward position of trying to justify their payments for conditions that their clients have publicly stated are not reimbursable.

Posted by at 6:58 AM | Permalink | Comments (1)

Among thought leaders in occupational medicine, three of the most influential have to be Ed Bernacki, Gideon Letz and Jen Christian. All three are speaking at a workers comp conference in San Diego in early February, along with Barry Eisenberg, Exec. Dir of ACOEM and Larry Yuspeh of the Louisiana Workers Comp Corp. (LWCC developed one of the first physician-centric delivery systems in WC). Conference details are here.

The conference is sponsored by HCN, a firm working in the WC space. HCN will waive the registration fee for Managed Care Matters readers; email dparkerAThcn-usDOTcom for details.

Note - Neither my firm nor I have any relationship, business or otherwise, with HCN or any of their principals. This conference looks to be different in that it has a strong clinical focus, a concentration that is missing from other trade functions.

Posted by at 9:33 AM | Permalink | Comments (3)

The cost of surgical implants is increasing by over 7% annually; and even more in workers comp spinal cases. In audits my firm has performed we have seen costs ranging up to $27,000 for the hardware and related bits and pieces used (or allegedly used) in a neurosurgery case.

It looks like one of the contributors to those high costs is that old reliable - fraud. Blackstone Medical, a spinal implant manufacturer, is in deep legal trouble, facing allegations that it paid doctors kickbacks to use the company's devices.

And as I've noted before, surgeons select the specific devices used in surgeries, with little or no apparent concern about the cost.

Continue reading "Why implants cost so much" »

Posted by at 1:31 PM | Permalink | Comments (4)

A recent court ruling in New Jersey could shut down Ambulatory Surgical Centers across the state.

The judge determined that physician-owned ASCs (almost all ASCs are at least partly owned by physicians) violate a state law banning physician self-referral. Not surprisingly, the 200 ASCs in the Garden State (there are about 5000 nationwide) are pulling out the stops to overturn a ruling that, if it stands, would effectively shut down most ASCs in NJ.

Continue reading "ASCs -- good, bad, or just ugly?" »

Posted by at 7:53 AM | Permalink | Comments (1)

A group of docs in Texas has decided that two can play the ratings game. They are working on a project to rate insurers - on their "billing procedures and issues".

It strikes me that these physicians may be engaging in the same type of behavior that infuriates them when exhibited by insurers - using an arbitrary, internally-developed methodology to evaluate payers solely on administrative indicators.

Continue reading "Two can play that game" »

Posted by at 6:14 AM | Permalink | Comments (4)

Carol Gentry of the Tampa Tribune has authored one of the more accessible pieces on the hows and whats of hospital price variation.

Carol's piece illustrates two key issues - the data is available, and consumers aren't using it.

Continue reading "Humana's good effort" »

Posted by at 7:29 PM | Permalink | Comments (2)

CMS will no longer pay for medical treatment(reg req) for injuries or illnesses resulting from hospitalization. Expect private insurers to follow suit.

Its about time.

Continue reading "Pay for non-performance" »

Posted by at 8:17 AM | Permalink | Comments (7)

The adage goes something like - when the US sneezes, the world catches a cold, signifying just how much influence this country has on the rest of the world.

That's analogous to Medicare's impact on the health care sector. And Medicare is about to change the way it pays hospitals, a change that will have a dramatic effect on every private payer from HMO to individual carrier to workers comp insurer to self-insured employer.

Continue reading "Medicare sneezes" »

Posted by at 9:36 AM | Permalink | Comments (1)

If you want to know why you are getting more physician bills with meds on them, it's simple - physician dispensing generates big profits.

Continue reading "Physician dispensed meds" »

Posted by at 8:44 AM | Permalink | Comments (3)

Texas just released workers comp medical payment data for 2005 and 2006. There's some really great stuff here.

Continue reading "Applause applause for the Lone Star State" »

Posted by at 8:37 AM | Permalink | Comments (3)

The manufacturer of oxycontin agreed to pay $20 million in penalties for encouraging docs to prescribe the drug more often than approved by the FDA.

And that's just for starters.

Continue reading "Really expensive off label shenanigans" »

Posted by at 10:46 AM | Permalink | Comments (1)

Richard Eskow of Sentinel Effect reports on the latest revelations about a bit of book-cooking at the VA. Seems the VA has been a bit, or perhaps more than a bit, overly positive about its record.

More troubling than boosterism is the allegation that the VA selectively reported results, and even fabricated conclusions to make the system appear better than it actually is.

As a fan of the VA, I'm concerned about two things.

Continue reading "The VA's been cooking the books" »

Posted by at 7:13 AM | Permalink | Comments (0)

I'm on a brief vacation mountain biking in Moab, Utah. A gorgeous place, great people, great riding. And upon return from a long and tiring but very fun ride this am, I open up the latest from Fierce Healthcare to read reports about not one, but two reimbursement scams and one piece on docs who don't disclose when they make mistakes.

That just crushed the hard-earned buzz.

Continue reading "A buzz kill" »

Posted by at 3:24 PM | Permalink | Comments (3)

The folks over at Fierce Healthcare have posted their Hospital Innovation Awards. These aren't the standard JCAHO-type plaques, but rather focus on creativity and novel solutions to common problems.

Continue reading "Hospital innovation" »

Posted by at 5:14 AM | Permalink | Comments (0)

Big pharma woos docs with free food, trips, and samples. Now that's a "dog bites man" story. The reason for the ongoing marketing to docs is obvious - more contact, more drugs sold.

But the world is starting to look much more closely at the pharma-physician relationship, and that examination is likely to bring changes.

Continue reading "Direct to Doc marketing" »

Posted by at 7:16 AM | Permalink | Comments (2)

Just to be clear, I'm talking about the ones used in spine surgery, bone and joint surgery, and other orthopedic procedures. The use of surgical implants has grown dramatically, as have their prices, and the impact of utilization and price means big bucks for WC payers.

Big bucks as in $72 million in California alone. As in adding 11% to 33% to inpatient hospital bills in the Golden State.

Continue reading "Implants" »

Posted by at 7:15 AM | Permalink | Comments (2)

Jason Shafrin reports on the link between physician compensation mechanisms and surgery rates.

Here's the "money quote" -

"When specialists are paid through a fee-for-system (FFS) methodology rather than a capitation or salaried basis, surgery rates increase 155%. There is suggestive evidence that surgery rates fall when primary care physicians are paid on a fee-for-service basis compared to capitation or salaried payments."

Not addressed is the key question - is the rate of surgery appropriate under either compensation mechanism?

Posted by at 7:24 AM | Permalink | Comments (2)

Continue reading "Docs don't think about patient costs" »

Posted by at 4:29 PM | Permalink | Comments (2)

Insurance companies, employers, and TPAs rely on vendors to process bills, build and operate networks, manage prescriptions and PT, support litigation, and provide expert advice on problematic medical issues. In many instances the vendors are selected thru a competitive bidding process, wherein the lowest bidder gets the deal, or at the least has a much better chance of landing the business than their more costly competitors.

But in others, the selection process goes on seemingly without end.

Continue reading "those damn vendors" »

Posted by at 8:20 AM | Permalink | Comments (6)

More evidence is emerging about the rather minimal impact medical malpractice has on medical costs.

Continue reading "Debunking the med mal monster" »

Posted by at 5:49 AM | Permalink | Comments (14)

Two timely topics are in the news; the likelihood of cuts in the additional payments for Medicare Advantage programs and reductions in Medicare reimbursement rates for physicians.

The juxtaposition is just too...obvious to pass without comment.

Continue reading "Physician pay v. Insurer overpay" »

Posted by at 4:05 PM | Permalink | Comments (2)

Controversy over treatment types, overly generous payments to physicians to endorse a product, lawsuits alleging faulty research, the FDA under fire for inadequate evaluation, fights over reimbursement for a new procedure, and confusion over the usefulness of a common and very expensive procedure.

If you want to know why the US health care system is so dysfunctional, I give you low back pain.

Continue reading "my aching back" »

Posted by at 8:11 AM | Permalink | Comments (2)

Health care outsourcing to India was a $300 million business last year. And a just-released Health Affairs article indicates that the total market may be a lot, and I mean a LOT, bigger.

Continue reading "Over there" »

Posted by at 12:09 PM | Permalink | Comments (1)

You're better off getting treated at a not-for-profit hospital. Unless you qualify for treatment at a VA hospital, in which case you're the luckiest of all. At least that's the conclusion drawn by researchers at Harvard who evaluated care for three common conditions at over 4000 hospitals.

Continue reading "Not for profits deliver better care" »

Posted by at 6:10 AM | Permalink | Comments (1)

The annual Medicare physician price cut season is on us. Next year's reduction will average 5%, although payments for office visits (evaluation and management codes) will increase by up to 30%, but reimbursement for other procedures will be slashed up to 20%.

Don't expect this to actually happen; every year the Medicare reductions are reversed by Congress. And this year will be no different. I'd expect Congress will do something to reverse the cuts, at least in part.

Continue reading "Medicare games" »

Posted by at 6:25 AM | Permalink | Comments (0)

Kudos to USAToday for publishing a pretty good article on variations in practice patterns related to back surgeries. In a front page story today, the paper that has been derided by some as "McNews" explores the issues surrounding the explosion in the number of spinal fusions.

The reporting is balanced, insightful, and thorough, a bit of a surprise coming from a paper that prides itself on short sentences, really short words, and lots of color, not depth and nuance.

Noted throughout the article is the primary problem - no one knows how many spinal fusions are the right number, and there is significant disagreement among stakeholders re when a patient should have surgery. (free registration required) That's all true, and that's where workers compensation comes in.

Continue reading "Workers' Comp - the answer to the spinal fusion question" »

Posted by at 7:11 AM | Permalink | Comments (2)

My recent post on the battles between large health plans and hospitals/health systems generated a good bit of debate. One comment deserves special attention; "the other Joe" notes that the western PA landscape is marked by a combination health care system/health plan that dominates the region. While this type of vertical integration has been tried many times in the past with rather limited success, this version looks to be much better positioned to succeed.

But as the other Joe points out, there are significant costs associated with that "success", costs that are borne by the system/plan's employees, payers, insureds, patients, and employer customers.

Posted by at 7:57 AM | Permalink | Comments (4)

A reader asked several excellent questions about when and under what circumstances direct contracting makes sense. That's when an employer contracts directly with health care providers.

My take is an employer has to have at least 750 lives in one area - plant, school, city government, facility, etc. in order to have any buying power at all. And 750 may well be on the low end.

As to whether a partially self-insured employer, say one with a specific deductible of $50,000, should do this, I'd say yes. The vast majority of bills will come from members with total costs well under the $50,000 limit.

Lastly, direct contracting takes expertise and patience. Knowledge of provider payment mechanisms and expectations, an understanding of the related legal issues, an intimate understanding of the local provider community, and really good employee relations are the bare necessities. Without these, stick with a "regular" health plan.

Continue reading "Direct contracting" »

Posted by at 7:51 PM | Permalink | Comments (3)

Payer-provider interactions are getting downright pugnacious. Perhaps a more accurate characterization is the big health plans and health care systems are raising pugnacity to new levels.

Denver is the scene of one highly public row featuring United Healthcare and HCA’s HealthOne, one of the largest health care systems in the Denver metro area. The ongoing contractual dispute has led to lots of nastiness:

- termination of the UHC-HealthOne contract,
- filing of a temporary restraining order on the part of UHC to force HealthOne to enable UHC members to access some HealthOne facilities, and
- efforts by HealthOne to tightly control UHC case managers’ access to their facilities after reports that case managers were tring to get UHC patients to transfer out of HealthOne facilities.

This is not an isolated issue. Recent disputes have arisen in Rhode Island, Tennessee, and western Florida. Notably, several of the more contentious battles are between UHC and HCA.

Hospital and facility costs are the largest single contributor to health care cost inflation, and hospitals’ negotiating power, and willingness to use same, has grown significantly in recent years. It's likely that the recent announcement that HCA will be bought out by private investors will lead to an increase in the number and intensity of contractual battles.

What does this mean for you?

As United and others seek to constrain medical inflation, and hospitals work to maintain their margins in the face of increasing numbers of uninsured patients expect to see more of these battles hit the news around the country.

Posted by at 6:33 AM | Permalink | Comments (14)

Actiq, the lollypop pain killer, is rapidly becoming the biggest problem drug in workers comp. FDA approved only for treating cancer pain, the potent narcotic is now on most payers' top 5 drug list (ranked by dollars spent).

There are likely several factors that have enabled a drug clearly not approved for musculo-skeletal conditions to achieve this high "honor".

Continue reading "Workers comp's top problem drug" »

Posted by at 7:20 AM | Permalink | Comments (11)

HMOs are cheaper than other forms of health insurance due to lower provider costs. At least that's what an analysis of a 2004 study comparing HMOs to other forms of insurance discussed by Jason Shafrin in a post on Healthcare Economist says.

The difference amounted to 9.3%, with no measurable difference in utilization rates or risk selection between HMOs and other plans.

So, as an industry, HMOs are not more efficient because they are better at managing care or selecting risk, they are cheaper because they pay providers less. I would note that the analysis is based on data from the nineties, so perhaps a more accurate statement is that in the past HMOs were more efficient.

I don't know if that's the case today.

Posted by at 5:22 AM | Permalink | Comments (1)

As a public service, I've put together a (partial) list of firms that repackage drugs for physician dispensing. This is primarily a workers comp issue, as comp insurers and TPAs are increasingly concerned about the cost of drugs dispensed by physicians. In some circumstances, the billed and payable amount can be several times higher than the cost for the same type of drug dispensed through a pharmacy.

Continue reading "Drug repackagers and physician dispensing" »

Posted by at 3:39 PM | Permalink | Comments (6)

It's happening. Actually, it has been happening for years, albeit not very often. Frustrated with increasing premiums and no real solutions from the health insurance industry, large employers are investing in direct contracts with health care providers to deliver health care services to their employees and their dependents.

The practice got its start before WWI, when lumber mills in Tacoma Washington contracted with the Western Clinic to provide health care services for their employees. Leland Kaiser built health care facilities and hired staff to provide services to workers on the Grand Coulee Dam in the nineteen-thirties, a project that was the beginning of today's Kaiser Permanente.

While there are no statistics on the number of lives covered under direct-contract arrangements, the total number is probably tiny. Unless there is a "magic" combination of a large employer and a dominant health care provider group with extensive facilities in a relatively small geographical area, direct contracting will just be too complicated and difficult to pull off.

But when those conditions do exist, expect more employers to seriously consider the move. Employers that are likely to consider direct contracts include large municipalities, school boards, manufacturing concerns, transportation hubs and entertainment companies.

What does this mean for you?

A business opportunity for providers, another challenge for health plans, and another way to tackle the problem of access and cost.

Posted by at 7:17 AM | Permalink | Comments (4)

Some "quality" awards are based on rather shaky ground. And the Mercury Awards, which used to be handed out by HCIA (now Solucient) appear to fit that category.

According to the website for the North Ohio Heart Center (a cardiology practice in Elyria Ohio), "EMH Regional Medical Center had the top score for quality of care in Cardiology. According to the award, "It had the lowest complication rate and the most efficient length of stay. Its Patient Services score was boosted by its staff ratio and broad offering of cardiac services."

That's great, and if you were looking for a place to get your ticker checked, this impressive award may influence your decision. But the basis for the award should get anyone thinking, and at the very least asking a few pointed questions.

For example, the center had "the lowest complication rate". That could be because the cardiologists are really great. Or it could be because they perform a lot of procedures on low risk patients , patients that are likely to require relatively short lengths of stay and experience low complication rates.

Evidence indicates that the latter may be reality. In fact, compared to national averages, there are four times as many angioplasties performed by the docs at EMH than in the rest of the country. More procedures = more experienced docs; more experienced docs doing procedures on low risk patients = good outcome scores, lower complication rates, shorter lengths of stay.

This looks more like an award for doing too many procedures including procedures on patients that may not have needed them in the first place, resulting in lots of income for both the docs and the hospital.

And the money ain't bad either. (reg. req.)

Posted by at 7:26 AM | Permalink | Comments (2)

In what appears to be straight out of alternative papers' "News of the Weird" column, several private equity firms are looking to buy HCA and take it private. These are really smart people who make lots of money finding gold where others only see dross; they must see something here that I (and lots of others) don't.

Pro, demographics favor the deal; older folks need more hospital care. Con, there is a growing recognition that end-of-life care is too expensive, and hospitals are the most expensive place to deliver this care. Expect to see a push to relocate terminal patients from hospitals to hospices and other less-intensive facilities.

Pro, hospitals' profitability has been improving. Con, legislators and regulators are looking to reduce hospital costs.

Pro, hospitals have been investing heavily in profitable lines, e.g. cardiology and orthopedics. Con, in some areas ambulatory surgical centers partially owned by physicians (where that's possible) have been capturing a significant number of profitable cases, leaving the hospitals to handle the more severe and less profitable patients.

The deal has passed the FTC approval process, and now is closer to reality. However, don't expect this to be the first of many deals; the private equity community does not seem enamored with the industry, but rather sees HCA as the best bet in a troubled business.

Posted by at 4:40 PM | Permalink | Comments (1)

Two recent articles highlight the massive inefficiencies in the US health care system. In Philadelphia, five hospitals now have heart transplant programs, even though there are only enough patients for two. The result? Hospitals will not perform enough to gain the experience needed to improve safety and efficiency while lowering variable costs.

A few hundred miles away, a (reg req)group of cardiologists in Elyria Ohio have evidently decided that their Medicare patients need angioplasties four times more frequently than the national average. I wonder if it's the fried dough at the Elyria fair?

Continue reading "Too much health care is bad on many counts" »

Posted by at 7:15 AM | Permalink | Comments (2)

Three workers comp physicians and one medical practice were recognized as the best comp providers in Florida at the fourth annual Florida Choice Awards for Workers Compensation banquet last night in Otlando. Sponsored by Choice Medical Management (a consulting client), the awards are one of the few, if not the only, attempt to recognize the second-most important player in workers compensation, the physician.

These are the folks who diagnose the injury, assess causality and relatedness (is the injury work-related and to what extent is work responsible) write the scripts, encourage the patient, talk with the employer about alternate duty, fill out the innnumberable forms, develop treatment plans, and deliver the care.

The Choice awards represent the right way to work with comp docs - respect them, recognize them, reward them.

They are also in marked contrast to the way other networks, payers, and insurers think about and act towards physicians. For example, the head of claims for a large work comp insurer, speaking at the Florida Work Comp Institute conference (host of the Choice Awards) noted in his speech that driving greater network penetration and "savings" was key to reducing work comp expense. That mis-prioritization is largely responsible for the explosion in medical expense in work comp.

And physicians are beginning to reject the discount-oriented "managed care" approach employed by many work comp payers. Sources indicate that the Florida chapter of the American College of Occupational and Environmental Medicine (the professional association of occupational medicine physicians) will be forming a committee to develop a position statement related to managed care networks.

Here's hoping it is direct, definitive, and blunt.

Posted by at 7:37 AM | Permalink | Comments (0)

According to several providers in Florida, Aetna is recruiting physicians for its workers comp network while requesting discounts that are quite aggressive.

I'm attending the Florida Workers Compensation Institute annual conference in Orlando, and spent much of Sunday moderating a session for physicians. I caught up with several providers after the meeting, and the conversation turned to work comp networks (in my opening comments at the physician seminar, I posed the question "why are you, the acknowledged experts in treating WC patients, providing care at a discount?).

Several of the providers had been recruited by Aetna for participation in their AWCA workers comp network; all were already participating in Aetna's group health and other arrangements. According to these providers, Aetna's letter, which was sent regular mail and was thus no different from the dozens of letters they get each week from managed care firms, stated that unless the provider informed Aetna that they did NOT want to be part of their WC network, they were going to be listed as a participating provider.

That runs counter to what I have been hearing from Aetna, so perhaps there is some confusion on the part of these providers. Or perhaps Aetna is assuming that because the providers are already in their group network, this is all they have to do to enroll them in the WC version. If that is the assumption, Aetna may want to rethink their strategy.

(virtual Sidebar - I'm not an Aetna basher, and believe that on balance Aetna is one of the better mega-healthplans. My sense is their people really try to do the right thing, their leadership is smart and thoughtful, and their "brand" of health care is much preferred over that of their major competitors.

But no one is perfect.

(Back to the main post)
There was no confusion regarding the reimbursement offered by Aetna, which ranged from 30% off the work comp fee schedule to 20% off to 20% below Medicare. These were seasoned, intelligent veterans of the managed care world, well-versed in contract negotiations and reimbursement, and all agreed that the proffered rates were, to say the least, inadequate.

Perhaps that is why Aetna is having a bit of trouble launching a FL workers comp network.

I'd also note that the providers were quite clear in describing the contents of the letter, and the requirement that they inform Aetna if they declined to participate.

Discounting key providers is not the way to reduce workers comp costs. And if Aetna is requiring its group health docs to inform them if they do not want to participate in the group health network, it is setting itself up for major confusion on the part of the physicians, anger on the part of injured workers, and frustration on the part of WC claims adjusters.

For the reality is most practices will either not read the letters, understand the contents, and respond in a timely fashion.

What does this mean for you?

A likely delay in implementing in FL, and potential problems when you do.

Posted by at 7:20 AM | Permalink | Comments (3)

Assuaging concerns about quality, treatment standards, and outcomes is one of the biggest challenges facing off-shore medical facilities eager to extract a fraction of US health care dollars. That and figuring out how t