Medicare doc payment – the details

My post earlier this week on the pending changes to provider reimbursement resulted in a few emails from colleagues looking for clarification and more detail.  So, here goes.

First, why?

Well, everyone agreed that the Medicare doc payment program known as Sustainable Growth Rate (SGR) that had been in place for decades was not working. Details here.

And, CMS – as well as pretty much everyone in health policy not tied to a specialty medical society wanted increased reimbursement for cognitive services, and lower payments for procedures – surgeries, imaging, etc.

So, in 2015 Congress repealed SGR and replaced with Medicare Access and CHIP Reauthorization Act (MACRA) (you can now forget what MACRA stands for.  The highlights are, MACRA;

  • Still uses CPTs and reimbursement based on RBRVS system
  • Tosses out the old quality evaluation metrics and methodology, replacing it with one that seems more doc-friendly.
  • The evaluation system is MIPS – Merit-based Incentive Payment System, and includes a value-based payment modifier, physician quality reporting system, and meaningful use of Electronic Health Records
  • MIPS goes into effect in 2019, using data from 2017 and 2018 to evaluate provider performance.  CMS expects docs who score high will get bonuses of 4 – 9% over the next five years.
  • Provides for an annual payment increases of 0.5% thru 2019, then frozen till 2026
  • Then .75% increase for APM providers (see below) and .25% for others

While those increases may seem pretty small, it’s important to understand that these are on the margin.  That is, the extra payments may well double – or even triple, the profit margin for providers.  Conversely, for providers that don’t meet standards, profiits (or margins for not for profits) may hit zero.

What is the hoped for result?

With APM reimbursement going into effect in 2019, MACRA is intended to drive docs from fee for service (FFS) into a merit-based, quality-driven reimbursement system.  Hoewver, participation in the Alternative Payment Model s not mandatory; and CMS’ expectations are that the vast majority of docs will NOT be in APMs, even though APMs (which include) Medical Homes, ACOs, etc) can get lump sum bonuses of 5% from 2019 – 2024; after that reimbursement increases 0.75% annually.

What does this mean for workers’ comp

RBRVS stays around, which is key as almost all provider fee schedules are based on RBRVS.

Providers are going to work very hard to meet CMS’ quality standards, regardless of whether they choose to stay with MIPS or go to APM.  They have to; their financial viability is dependent on it.

Work comp’s future is not what you think it is

What drives workers’ comp is employment – more specifically, payroll, industry type, and claim frequency.

Employment is the end-all and be-all of workers’ comp – for premiums and policies on the front end, and getting work comp patients back to work when claims do happen.

So when a whole lot of jobs in a bunch of industries look to be disappearing, we work comp folks need to take notice.

If you insure, manage claims for, provide services to, or otherwise work in the transportation/logistics industry, you’d best be watching developments in Pittsburgh and keeping your eye on Otto.

Uber is experimenting with its self-driving cars in the Steel City, a big step on the way to fully automated driverless cars.

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Ford is heavily involved, and will have a self-driving car on the market in 5 years.  Sign me up; as one who spends way too much time behind the wheel, I’m all over this.  Do work, read, work while being transported to client meetings? Heck yes!

The giant “ride-sharing” company is also behind Otto, an effort to automate long-haul trucking.

Photo below from SF Chronicle; testing of Volvo truck by engineer Nic Munley.

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Unlike competitor Lyft, Uber doesn’t seem to care that its current drivers are going to be left ride-less in the not-too-distant future, nor is Uber bothered that, if when Otto and its lookalikes are successful in removing drivers from trucks, those 900,000 truck drivers will not have jobs.

And without truck drivers, truck stops won’t be selling much food or necessaries. Motels won’t be providing showers or rooms. Body shops won’t be needed as much either.

Uber contends that the 24/7 usage of driverless vehicles will mean more jobs for mechanics, but that’s speculative at best.  In fact, as these vehicles will just be replacing miles driven by vehicles currently piloted by people and not adding more vehicle miles, I don’t see why any more mechanics will be needed. Actually, less maintenance may be the norm due to constant monitoring of vehicle systems.

So…

  • far fewer truck drivers
  • fewer support staff
  • fewer jobs in service stations, motels
  • fewer “taxi-type” drivers
  • fewer accidents = less work for body shops, less demand for auto parts and paint, less need for auto claims adjusters

For work comp…

  • much lower premium volume
  • far fewer claims to service
  • far fewer jobs to return injured drivers to
  • possibly more claims in the near future as drivers see the writing on the wall

Pre-vacation catch-up

Headed out on a much-needed vacation; MCM will be on hiatus till the middle of next week.

Here’s a few items of note that came across the virtual wire over the last few days.

Mylan’s EpiPen Disaster.

In the story-that-will-not-die, EpiPen manufacturer Mylan continues to dig its hole deeper and deeper.  The latest news – the actual cost to make and fill an EpiPen is less than 10% of the product’s actual price.  And may be as low as four bucks – for a $300 injector.

Of course, when you need an EpiPen, you really, really need one – and could not care less what it costs. (it is used to reverse the most dangerous symptom of anaphylactic shock – asphyxiation)

But there are so many hands out in the EpiPen distribution chain, all making a margin as the product works its way down to the end user.  Most striking is the rebate Mylan likely pays to the insurer – one estimated by the estimable Adam Fein at around 40% of the product’s list price.

Now Mylan CEO Heather Bresch is providing all of us a lesson in how NOT to respond when confronted by reporters asking about price increases and huge compensation packages.  Bresch said, and I quote: “No one’s more frustrated than me.”

That takes some balls – and a whole lot of cluelessness.

The parents who can’t afford to replace their kids’ EpiPens every year when they expire and have high-deductible plans so they pay the $600 out of pocket might be a touch more “frustrated” than Ms. $19-million-a-year Bresch.

Beyond that, there’s a nastier, uglier, and way bigger problem here.  Health care in this country is a for-profit business, and Mylan is operating in the best interests of its stockholders.

And no, the “free market” won’t solve this issue – markets don’t care about people.

Provider consolidation continues

CMS’ changes in reimbursement are driving adoption of IT systems designed to track and report patient encounters with a focus on quality metrics.  These systems are expensive, difficult to implement, and require ongoing updating and maintenance.

More consolidation does not mean more efficiency or cost-effectiveness…in fact some data indicates costs go up.

Implication – more sophistication in billing, electronic medical records (EMR), coding and contracting means payers will find smarter and more knowledgeable negotiators across the table, and more sophisticated billing.

Work comp rates keep coming down

California, North Carolina, Kentucky, Tennessee all are joining the states that have announced decreased work comp rates.  I know Florida’s getting all Sunshine-y for plaintiff attorneys, and payers are in a justifiable uproar about that, but that’s an anomaly.

Implications – good news for employers and taxpayers, bad news for opt-out.

Which remains a “solution” (and a pretty poor one at that” to a problem that doesn’t exist.

Okay, gotta run.  see you next week!

Does workers’ comp have a future?

Not much, at least according to workers’ comp legend Frank Neuhauser. In an article published in last month’s Perspectives, the IAIABC journal, [sub req] Neuhauser argues that workers’ compensation is no longer needed for 90% of America’s employees, as the workplace has become safer than the non-occ environment.

Noting that the occupational injury rate has dropped precipitously over the last 25 years, he draws a contrast between today’s occupational risks and those extant 100 years ago when workers’ comp was just a few years old. This contrast is so compelling that Neuhauser makes the case that workers’ comp insurance is superfluous, unnecessary as the risks are so low in our largely service economy.  Further, he makes the case that this safe workplace is one of the primary reasons to do away with work comp. Moreover, the medical care that would be needed for those few injuries that do occur can be delivered via health insurance, while disability coverage can simply be added to workers’ existing short- and long-term disability.

I find Neuhauser’s case far from compelling.  In fact, it is so far-fetched at least one very knowledgeable colleague wondered if Neuhauser had penned the piece just to provoke discussion.

If that was his mission, it was accomplished. At today’s Maine Workers’ Comp Summit, all panelists at the Think Tank disagreed with the central premises of Neuhauser’s case, raising multiple objections to his data and logic.  Here are a few.

  • About a third of workers have disability coverage.  What about the other two-thirds?
  • About 15% of workers do not have health insurance.
  • Employers have worked diligently to reduce injuries and risks thereof in large part because they pay higher premiums with higher injury rates.  Removing that financial incentives would almost certainly result in higher injury rates.
  • Eliminating workers’ comp would also eliminate the tort protection enjoyed by employers in today’s no-fault system.
  • In some cases, there is no tort system as a recourse. As Think Tanker Alison Denham pointed out, some injuries, such as those suffered by fire professionals, have no “cause of tort.”  Who would an injured fire professional sue?

Pennsylvania Judge David Torrey succinctly addresses many of Neuhauser’s arguments, bringing a much-needed legal perspective.

The net?  Sorry, Frank.  Work comp is here to stay.

 

Companies need strategies, Execs need success

And those two often don’t match up very well.

Example.  Work comp insurance companies benefit when medical and indemnity costs are lower than expected.  So, lower medical costs = better “outcome” for the company.

Many – if not most – managed care executives are evaluated in part based on “network penetration” and “discount below fee schedule”.  Thus, the more dollars that flow thru their network, and the deeper the discount those providers give the network, the “better” the executive’s performance is.

Superficially, this makes sense – more care thru lower cost providers equals lower medical cost, which benefits the insurance company.

“Superficially” being the key word.  Here’s the problem with this model.

Insurers contract with PPOs, which in turn contract with providers to deliver services at a discount. Most PPOs get paid a percentage of the savings that is delivered by that discount, typically 15 to 22 percent of the savings. So, the more the PPO ‘saves’ the more it makes. On the surface, this sounds good: the system rewards the PPO for saving money and does not pay it when it delivers no savings.

Under a percentage-of-savings arrangement, reducing total medical cost is ignored in favor of saving money on unit costs. The PPO gets paid for savings on individual bills. Therefore, the more services that are delivered and the more bills generated, the greater the ‘savings’ and the more money the PPO makes.

The system encourages over utilization because it is in the PPO’s best interest financially to have numerous providers generate lots of bills for lots of services. Also, the providers, squeezed by a per-unit fee schedule that is lower than fee schedule/Usual and Customary Rates (UCR), have a perverse incentive to make up for that discount by performing more services.

The fact is few carriers, TPAs, or employers have realized that per-bill ‘savings’ is the wrong way to assess a managed care program – or the executive running medical management. And unless senior management changes their evaluation methodology, their managed care departments will have no incentive to change their program to one that actually does reduce total costs.

This is by no means the only example out there; I’m quite sure you can come up with more than a couple off the top of your head.

What does this mean for you?

Take the time to understand  – really understand – what success is, and what drives success.  You may be unpleasantly surprised to learn your execs’ motivations are diabolically opposed to your company’s success.

HealthWonkReview’s review of ACA is up

And that’s just part of Jason Shafrin’s August edition; from premium increases to Christian health plans; from not enough regulation to dumb rules; from formulary exclusions to OSHA penalties, click here for your guide to all that’s worth Reviewing.

Trump will be GREAT for workers’ comp!

No, seriously, he will be.

It’s The Wall.

For a moment, ignore the fact that the Donald is not a builder, but a developer.  And that his string of developments-gone-bankrupt show he’s not very good at the financial stuff either.

And please, don’t get distracted by folks claiming you could just tunnel under it or climb over it.  Those “dummies” would never think of that!

But the Wall…the Wall will be the single largest construction project the Feds have done, in, well, ever.

It’s bigger than the Hoover Dam. More than three times bigger. At 1,964 miles, it will rival China’s Great Wall.  40 feet tall, 7 feet underground, made of pre-cast sections supported by steel pillars and concrete footers, the Trump Wall will require 9.4 million cubic yards of cement and concrete.  2.5 million tons of steel. 

Wage costs to build the wall alone will be around $8 billion (40,000 workers at mean annual salary of $41,000.)

Then there’s annual maintenance.  In order to keep the wall beautiful, it will have to be maintained.  And, of course, upgraded.  You don’t want our “big beautiful Wall” to start to look like this…

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Or, *gasp*, like this…

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Don’t know if the Donald is going to have murals painted on the wall, gild parts of it, or have TRUMP in giant letters spaced at random intervals; all would add expense and maintenance. Fortunately, there are LOTS of extra Trump signs available, just have to ship them from Atlantic City and Nevada and New York…These are ready to go!

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Sorry, got distracted there…

Ok, forgot about the road construction, truck drivers, excavation workers, and concrete and cement plant workers.  Figure about $1 billion for their wages.

Now, some parts will be really remote, and others run right thru big cities, so land costs will be pretty variable.  But they will be real; landowners will have to be paid fairly as the Fedrul Gubmint is going to be taking their land.

But those costs aren’t labor, so never mind…

Here’s the calculation.  To keep it simple, we’ll use the $8 billion in construction labor plus $1 billion in additional labor, plus $500 million in annual maintenance labor multiplied by average work comp rates for industrial work – which is about 3.1 percent of wages.

That gives us $356.5 million in work comp premiums over the first five years of the wall, or about $71 million per year – a really nice addition to premium in the border states.

Of course, that’s assuming the Donald pays the premiums, something he’s had a bit of trouble with in the past.

True, he’d be using Mexico’s money.

REAL innovation in healthcare

What do these have in common?

Duexisis.

Valent.

Martin Shkreli

Mylan.

Answer – they are all on the leading edge of healthcare innovation.

More precisely, these examples show there’s no need to create really new products, develop new medicines, figure out how to keep people healthier longer, when you can just raise prices on your current product.  A lot.

Duexisis is just ibuprofen combined with an acid reducer, creating a brand medication that sells for about 50 times what it should.  Yep, you can just buy Advil and Pepcid instead of breaking your bank enriching Horizon Pharmaceuticals.

Valeant has made a business out of buying generic manufacturers and other pharma companies and jacking up the price of their medications, a practice that has earned the company the attention of the Department of Justice, presidential candidate Hillary Clinton, and the US House of Representatives.  Oh, its stock price has gotten hammered of late due to some of these issues.

Shkreli is the brilliant and totally tone-deaf former hedge fund exec who discovered it’s a lot easier to make billions by buying little-used drugs made by one company than raising the price by, oh, say 6000 percent.

Mylan makes Epi-pens, the life-saving devices used to prevent deadly allergic reactions. Altho late to the “let’s just increase the price by a gazillion dollars for our poorly designed device cuz people who need it HAVE to buy it” game, they’re making up time quickly. Mylan raised the price by 6 to 9 times recently, causing problems for paramedics, families with kids with deadly allergies while jacking up their profits.

There are many, many more examples, but you get the point.

For anyone looking to assign blame for our ludicrously high cost of health insurance and pathetically poor outcomes, there are plenty of convenient culprits; HMO executive salaries, mandated benefits under ACA, specialty physician income, device manufacturers, hospital inefficiency, stupid and counterproductive HHS regulations, legislators who bow before the PHARMA lobby, physicians who refuse to wash their hands.

But it all gets back to this – the US health care “system” is based on a capitalist ethos, one where the shareholder and profits are God.

These companies and people do this stuff for a very simple reason – because they can, and they are rewarded for doing so.  There’s no reason to spend millions innovating when you can make billions just by raising prices for your product or service.

What does this mean for you?

Reality sucks.

Big things that affect work comp

Perhaps the biggest factor driving workers’ comp is the economy, and more specifically employment trends.

In a down economy, payroll declines, claims cost increase, and it’s harder for recovering workers to find new jobs, resulting in longer disability duration. The result – lower total premium dollars and a challenging claims environment.

In an up economy, there are lots of jobs looking for workers, payrolls are up as employers have to pay more to get and keep workers, and it’s therefore easier to place recovering workers.  Plus premiums are up as payroll is higher.

We are now enjoying the classic “up” economy. While there are spots where the economy is not booming, overall things are pretty good in most places. And, the latest data is even more encouraging.

We are near a 16-year high for job vacancies at 5.6 million.

540,000 jobs were added in June and July, and unemployment is at 4.9 percent.

Wage growth is finally showing some movement, with BLS reporting private industry workers compensation over a rolling-twelve-months up by 2.6 percent last week.

This isn’t a post about who created what jobs, or who gets credit or blame, its about workers’ comp and what drives the business.  And right now, with comp carriers enjoying a string of financial success that’s all but unheard of in our industry, it’s good to know the macro factors out there are generally pretty positive.

What does this mean for you?

Good news until the pricing wars hit.