Med mal’s not a factor in health care costs – more evidence

More research indicates tight restrictions protecting physicians and facilities from malpractice suits doesn’t reduce health care costs.

Three states, Georgia, South Carolina, and Texas, essentially prohibit suits unless the physician intentionally orders care that s/he knows will hurt the patient.  A pretty very high standard, and one that would – one would think – allow docs to practice care with no concern about “defensive medicine.”

That may indeed be the case, however it is also the case that there’s no evidence that this high standard reduces cost.  The research, which focused on Emergency Department utilization and costs, found tight limits on suits didn’t reduce the “cost or volume of ED care.”

Moreover, “Legal risk does not motivate physicians as much as some previously thought.” [emphasis added]

This will not still the wagging tongues in the talking heads – nothing will.  But they’ll have less to wag about.

What does this mean for you?

Question those assumptions…

Good news is bad news – Medical cost inflation’s continued decline

Perhaps the biggest news to hit this summer is the decline in medical inflation.

Make no mistake, this is very, very important.

Important – as in huge decreases in the federal deficit.

Important – as in low-single-digit health premium increases.

Important – as in placing huge pressure on health care systems, hospitals, and other providers – because low premiums for employers equals less income for providers.

Here’s what the data shows.

Today, CBO projects the 2019 Medicare spend will be $95 billion less than it projected four years ago.  That’s equivalent to a fifth of the military budget.  Or the entire budget for welfare, Amtrak, and unemployment.

Over a decade, the reduction is about $700 billion.  According to a piece in the NYTimes (link above);

much of the recent reductions come from changes in behavior among doctors, nurses, hospitals and patients. Medicare beneficiaries are using fewer high-cost health care services than in the past — taking fewer brand-name drugs, for example, or spending less time in the hospital. The C.B.O.’s economists call these changes “technical changes,” and they dominate the downward revisions since 2010…[CBO analysts say] the economy is playing a negligible role in what’s happening in Medicare, meaning that they’re more confident that the practice of medicine really is changing. (emphasis added)

That’s all good, right?  The fiscal cliff is farther away, and not nearly so steep and scary as it was even a couple years ago.

Not so fast. One person’s savings is another one’s income.  In this case, that “other one” is the healthy care delivery system – doctors, pharmaceutical companies, hospitals, device companies, health systems.

Those stakeholders are adapting as fast as they can, and making great strides.  But a big part of that adaptation is revenue maximization – making darn sure they are getting as many dollars from every patient as possible.

What does this mean for you?

Pretty obvious, methinks…

Delivery systems and workers’ comp

There’s been quite a bit of focus on alternate health care delivery methods of late, with medical homes and Accountable Care Organizations prominently noted as ways care will be improved and costs reduced.  One source indicates there are 270 ACOs currently operating with an estimated 20 million members.

While the early evidence is somewhat mixed, in general the news is positive; a Pennsylvania ACO raised quality, and decreased infections and readmission rates, leading to a year over year decrease in medical costs.  Generally, ACOs involve facilities and providers agreeing to focus on specific quality measures and reward performance instead of paying on a fee for service basis.  In PA:

Half of hospitals and physicians’ potential earnings are based on their performance improvement in hospital-acquired infections, patient experience, readmissions, surgical care, and treatment for heart attacks, heart failure and pneumonia. The other half of the earnings are based on the providers’ ability to manage costs across inpatient care, outpatient care, ancillary care, home health services and prescription drugs.

There are problems inherent in the model; patient satisfaction is a tough metric to achieve when ER patients only want narcotics for their pain, while readmission rates are going to be higher when patients refuse to be responsible for post-discharge care. Our daughter works in an inner-city ER and this is all too common; patients KNOW these are key criteria and tell care givers they will downscore them if they don’t get their meds.

Nonetheless, it’s a far better financial model than fee for service as it doesn’t incent more care and higher intensity care.

Notably, it’s hard to find any evidence of ACOs in work comp.  I’d be most grateful if readers could point me to any reports or information related to alternative delivery systems in WC; while there are some bundled payment models, and a couple episode-of-care pilots I’m aware of, there’s just not much going on as far as I can see.

Just leave a comment here – and thanks!

The revenge of the nerds

It’s about understanding medical care, cost drivers, and components thereof.

Several years ago (ok, more like ten) I was in a client CEO’s office discussing medical care cost drivers, competitors, and possible differentiation strategies.  He stepped out for a few minutes to take a call, and, finding myself with nothing to do, I pulled out the latest Health Affairs to catch up on the latest and greatest in health policy research.

Upon this august gentleman’s return to his office, he asked me if I actually read Health Affair. When I said I did, he said something to the effect of “no one reads that, they just carry it around to look smart.”

And therein lies the problem.

And no, it’s not that I don’t need all the help I can get to look smart.

It is a lack of attention to the underlying drivers, influencers, issues.  It is a failure to think about how Medicare’s physician reimbursement affects commercial rates, how Medicaid enrollment drives provider behavior, how Part D enrollment influences drug pricing, how the lack of coverage among certain populations increases facility costs to commercially-insureds, how low adoption of evidence-based medicine makes for poor outcomes, how productivity is affected by insurance coverage status, how payment reform will affect workers’ compensation medical expense ratios.

There’s also a predilection on the part of some to ignore, or more commonly discount, information that runs counter to their worldview.  I see this all the time with workers’ comp execs when discussing Obamacare; they allow their political blinders to affect their business decisions.

There is so much happening in health care delivery and financing and reimbursement and evaluation and coverage that no one can possibly keep up.

What does this mean for you?

The ones who take the time to read and listen objectively, to think about import and impact are going to be more prepared, more aware, and better equipped than those that, for ideological or other reasons, have tunnel vision.

And thus more successful.


Friday catch-up

It’s been a very busy week.

Today Mitchell announced they’re going to buy specialty bill review firm FairPay Solutions.  Makes sense for Mitchell, as FPS’ technology and expertise is unmatched in the business, and will add a lot of value to Mitchell’s WC and auto BR solutions. Looks like current FPS CEO Chad Birckelbaw is only sticking around for a few months.  That’s a BIG loss for Mitchell; Chad is not only one of the best people in the work comp services business, he’s also the guy who automated what had been a mostly-manual process and kept FPS moving forward in what has become a very competitive business.

Notably, Mitchell’s announcement said FPS will continue to support other bill review entities.  That’s not going to last.  I very much doubt the other BR companies are going to keep working with FPS; there’s just too much inherent conflict and the other firms are likely very concerned about KKR’s future plans for Mitchell.

There are a couple other transactions in process now which should close shortly.  Looks like the trend is positive for strategic buyers – other companies with related businesses as they are winning most of these bidding wars.

WCRI has just released their annual CompScope Medical Benchmarks reports; the latest info on what’s happening in 14 states; haven’t had time to dig into them but hey, that’s what weekends are for!

The Benchmarks will be discussed at length at WCRI’s annual meeting – if you haven’t signed up yet, best get on it as they do max out.  March 12-13 in Boston…details are here.

On the I-Can’t-Wait-Till-We-Drive-A-Stake-In-Their-Black-Hearts front, Pennsylvania, Arizona, Hawai’i and Maryland are doing their best to control physician dispensing in work comp.   Alas, bought-and-paid-for legislators are much more interested in taking cash from dispensers than saving taxpayer dollars and employer jobs; in a hearing in the PA legislature, Representative Donna Oberlander asked Labor and Industry Secretary Julia Hearthway how much money the Workers Compensation Program would save if the General Assembly ended physician dispensing.   

The response – $18-$26 million.  



The GOP’s Alternative to Obamacare

Three republican senators have proposed a bill – the Patient CARE Act – to replace PPACA aka Obamacare.

Kudos to Senators Burr Coburn and Hatch for their efforts – and for staying away from the useless ideas of selling insurance across state lines, high-risk pools which are never adequately funded, and that favorite non-solution, tort reform.

In a nutshell, the GOP bill does away with most PPACA regulations including the mandate, reduces the tax break on employer-sponsored insurance, does away with Medicaid expansion, and gives low income folks tax credits to buy insurance.  There’s not a lot of detail, and it’s clear this is a work in progress.  I would note the GOP’s claim that their bill expands coverage without increasing taxes is sophistry;  according to many in their party, eliminating a tax break IS raising taxes.

There is no mechanism or approach or tools that would reduce health care costs, no assurance that those with pre-existing conditions will get coverage (unless they constantly maintain insurance, something that many folks don’t do), no control over benefit design (which is skillfully employed by insurers to discourage the unhealthy from signing up)

While a home-team analysis indicates the GOP bill will reduce uninsurance by about the same amount as Obamacare, the analysis isn’t credible.  For one thing, the “coverage” provided under the GOP bill would be a LOT thinner than that provided under Obamacare – they’d have to be, as the maximum credit for young singles would be $1,560, hardly enough to pay for anything but the skimpiest of catastrophic coverage.  This may be “insurance” but it certainly isn’t “coverage” .  In addition, doing away with the Medicaid expansion would dump millions of just-covered folks back on the safety net, aka emergency rooms, charity care, and community health centers that have been hammered by budget cutbacks.


Finally, the provider, payer, information technology, supplier and health system communities have all been working feverishly to prepare for and implement Obamacare.  This train left the station four years ago, and Burr, Coburn, and Hatch are just now showing up trackside with a revised itinerary.

Moreover, the passengers on this train – the middle class, health care providers, and older folks – are going to be adamantly opposed to the GOP plan as it:

  • raises taxes on the middle class;
  • undoes Medicaid expansion thereby harming health care providers; and
  • increases insurance costs for older people.

Politically brilliant it’s not.

As Jonathon Cohn notes; “It would have been a lot more productive if these three senators, or any other Republicans, had been similarly constructive back in 2009…”

He also thinks it is better late than never – I disagree.

Obamacare is the law of the land.  It is not going to be repealed.  The triad would have better spent their time working on something more productive; say immigration reform or revamping the tax code.  Alas, this is an election year, and the GOP bill is a political ploy.

But it’s not a very smart one.

What does this mean for you?

Not much.



Opioid guidelines are about to get a whole lot better

In about ten days, providers and payers struggling with opioids will get a big hand up.

ACOEM will be releasing their just-completed Opioid Guidelines; they are comprehensive, extremely well-researched and well-documented, and desperately needed.

I learned about the guidelines from a presentation delivered by Kurt Hegmann MD MPH, Professor at the University of Utah and Chair of the Occ Med Division at the University of Utah’s Compensable Disabilty Forum.  In his spare time, Kurt is also responsible for ACOEM’s guidelines as the Editor-in-Chief, a role he’s filled for eight years.

Affable and engaging, Dr Hegmann walked the audience through the development process (quite rigorous, involving 26 professionals with NO conflicts of interest using the Institute of Medicine methodology), the research and (960) references behind the guidelines and the ranking/categorization of individual guidelines.

Here are a couple of takeaways.

  • Of the 220 pages, the vast majority are tables of evidence – some practitioners may peruse them, but most will focus on the couple dozen pages specific to individual treatments
  • The guidelines address acute and chronic treatment, with chronic defined as > 3 months
  • The detail, specificity, and depth of research and their application to guidelines are impressive indeed.  What these guidelines add to our understanding of what works, why, and what doesn’t is impressive by itself; how they blow apart pre-conceived notions of “appropriate” care and challenge long-held conventional wisdom was – at least for me – rather jarring.

    For example;

  • Other guidelines say it is Ok to be on safety sensitive jobs and take opioids – that is NOT supported by the research
  • The researchers found NO link between opioids and improved function – studies that show there is a link almost always use self-reported data.
  • No trials indicate opioids are superior for acute pain than NSAIDs.
  • The MAXIMUM dosage recommended is 50 MEDs (morphine equivalent dosage), significantly lower than most guidelines which use 100-120.  The reason is the research – there is a much lower risk at this level, with the data indicating a sharply higher risk profile for higher dosage.
  • Drug testing is recommended with a baseline and random tests 2-4x a year; the higher the dosage – more screening
  • Pain rating scales are all but useless as data points as lots of patients indicate their pain is a 10 and yet are working full time.  This is not possible, and indicates the uselessness of subjective ratings/scores/data.

Are they perfect?  No.  But that’s due to the lack of research on specific issues, and not to the diligence and perseverance of the developers.  If the research is solid, it is in the guidelines.

What does this mean for you?

A lot of confidence in the guidelines, and hope that we can begin to gain control of the epidemic of opioid overprescribing.

The health insurance world in 2014 – lots of uncertainty but no death spiral


That’s the best way to describe health insurance execs’ views on their business these days.  The massively-screwed-up-but-steadily-improving rollout of the federal exchange is the biggest reason for that uncertainty, but there’d be huge uncertainty even if things had gone flawlessly.

Health care providers are consolidating rapidly, increasing their negotiating leverage.  More and more physicians are working for health systems.  Some employers are dropping coverage, while others are moving to narrow-network based plans. All this against a backdrop of an aging population, increasing income inequality, major growth in Medicaid enrollment, reduced Medicare reimbursement for facilities and a possible “fix” to the fatally-flawed physician reimbursement system/mechanism.

And, the metrics they use to measure performance are in flux as well; the old measurements were fine when insurers could underwrite, adjust benefit designs, change deductibles and copays, and negotiate with providers from a position of strength.

Add to that the uncertainty over who is going to enroll via the exchanges – will there be enough “young immortals” to balance the older, sicker folks who sign up?  More importantly, how will that play out for individual health plans; Plan A isn’t concerned about the overall picture, but is very, very concerned about the demographics of their member group.

It’s no wonder senior management – and other stakeholders – are “uncertain” about the short-term, much less the longer-term.

Amongst all this confusion, there’s one thing that is clear – there isn’t going to be an “Obamacare death spiral”, at least not for three years.  The scaremongering about death spirals and adverse selection that might result from too many old folks and not enough young folks signing up is mis-informed.

There is a financial back-stop in the form of reinsurance that protects insurers from high cost claims for the next three years.  Bob Laszewski has an excellent description of the program and implications thereof here.  Funded by a tax on each insured, the program provides coverage for insurers “selling coverage on the state and federal health insurance exchanges as well as in the small group (less than 50 workers) market…”

By then, things will have settled down, insurers will have figured out what works, what doesn’t, and what they need to do to operate profitably.  Some will drop out of the exchange(s), while others will expand their service offerings and coverage areas.

What does this mean for you?

Lots of uncertainty means lots of opportunity for those aware, nimble, and stalwart enough to take advantage.  Not that there are many in this business that fit that description!

Friday’s catchall and catch-up

It’s been a crazy busy year for all; in the run-up to the Christmas holiday I missed a few items that well deserve mention.

First, my post about female CEOs missed a couple women in that role; Liz Haar is CEO of Accident Fund Holdings Inc.  What’s worse is AFHI has been an HSA client for some time, proving I can on occasion be dense as a rock . Artemis Emslie runs myMatrixx, one of the more innovative workers’ comp PBMs.  Deborah Pfeifle was also disappointed I forgot about her.

My apologies to you all; I’ll strive to do better in the future.

On the good news front, medical trend is at an all-time low, with inflation running 1.3 percent since 2010.  That is nothing short of amazing/incredible/mind-boggling.  As a result, CBO projections of Medicare/medicaid spending over the next six years is down $147 billion, or 0.6% of GDP.

On a more esoteric note, CMS announced they are cutting reimbursement for interventional pain procedures; epidural steroid injections will be lowered by 36%+,  fees for spinal cord stimulation and kyphoplasty will be cut as well.  Here’s the issue; interventional pain docs may decide non-work comp patients aren’t worth their time, and focus even more on work comp. Comp payers should very carefully monitor interventional pain docs and claimants treated by those docs and be alert for practice or treatment plan changes.  

(this is the letter ASIPP is requesting docs send to their representatives…)

Finally, a piece from JAMA provides sobering statistics on why health care in America is so expensive.  (thank you to Vincent Drucker for the tip, and kudos to the Incidental Economist for posting on it long before I did)

  • 84% of medical costs are for the treatment of chronic conditions
  • Price increases – not utilization – accounted for 91% of medical cost increases since 2000.  Price is driving cost, with hospitals increasing the most.
  • The aging of the population is pretty much a non-factor, while provider consolidation is a major contributor to pricing power.
  • IT is a driver as well; “investment has occurred but value is elusive.”

So what’s to make of the super-low inflation numbers while historical research indicates prices are up?  Couple things spring to mind.

First, CBO numbers are for total spend, and governmental programs have done quite well in controlling cost; commercial payers not so much (except in Mass, where average group health premiums have gone down over the last two years!)

Second, the JAMA piece includes data from the 2000 decade while CBO is just 2010 on.  Different sample set.

What does this mean for you?

Taking all these cost items together, watch out for cost-shifting!

Investors may well keep their focus on work comp

I’m thinking the investment community’s current obsession with workers’ comp is not going to end anytime soon.

For several months I’ve been saying investors will move away from work comp when the next new thing comes along.  As one who spends waaaay too much time perched on the bleeding edge, I’ve learned to revisit my assumptions and question my firmly-held views more often and more deeply.  Here’s what’s causing the re-think.

First, market forces.

The Affordable Care Act has already caused huge changes in the US healthcare industry; medical homes, ACOs, tech adoption, provider-payer partnerships, accelerated consolidation of health care providers and payers, new reimbursement models.  Those changes are driven in large part by the need to prepare for a very different competitive dynamic.  That different competitive dynamic, coupled with the growing influence of HHS due to the aging population (more Medicare folks) and Medicaid expansion and the rollout (deeply flawed as it is) of the mandate, makes investors very nervous.

Investors wake up in the middle of the night in a cold sweat with visions of some HHS staffer writing a regulation that kills their entire business plan/profit.  With so much riding on ACA implementation, and so much budgetary pressure on entitlements (Medicare and Medicaid specifically), entities who focus on health care investing are looking to diversify, to spread the risk into industries that, while not too different from the overall health care market, are protected from the regulatory risk present in Medicare, Medicaid, and ACA-regulated businesses.

KKR’s purchase of Mitchell International last month is evidence of just such a move.

So, that’s the logic.  What about evidence?

  • Last week I spent an hour talking with a sovereign wealth fund from a very wealthy Asian country about all things workers comp.  The capital these guys have dwarfs even the largest PE firm; just the fact that they’re looking into comp tells you a lot about the visibility of our tiny little industry.
  • A couple of very big transactions are going to close this fall, and when they do they’ll grab a lot of attention.  That will generate even more interest, and the snowball will keep rolling.
  • At least two more mid-sized transactions are in the works; while they likely won’t close – or perhaps hit any radars – for a few more months, when they do they’ll likely generate more buzz.
  • There are also several smaller deals likely to close before the comp conference; while no one outside the industry will pay any attention, the transactions will keep owners thinking about selling and potential buyers looking for acquisitions.

Which brings me to a somewhat-related topic; Aetna’s purchase of Coventry Healthcare.  Sources indicate Coventry’s work comp business was, if not an afterthought, more of a “nice to have” part of the transaction.

A few hundred million in free cash flow is very much “nice to have”.

As mother Aetna has begun to absorb Coventry, there’s a growing awareness in the huge brick headquarters that the Coventry WC business has two really nice features; it is NOT ACA-related (see above), and it is fee-based, not risk-based.

If anything, I’d expect Aetna to invest in work comp and other non-ACA business.  There are a lot of rumors circulating about potential transactions involving various work comp service/tech companies.  As of now, they’re just rumors, but I would not be surprised if CEO Mark Bertolini et al decided to get just a bit more involved in the comp space.

What does this mean for you?

Long ignored by the rest of the world, we’re now the prettiest girl at the dance.  Or, if not the prettiest, perhaps the most desirable.