Mar
4

Medical malpractice – fixed or broken?

The medical malpractice insurance business is either back under control and meeting the needs of the market without the benefit of major and widespread tort reform, or is in crisis, near death, and likely to expire without major tort reform.
Where you sit determines what you see.
From consumer watchdog group Americans for Insurance Reform comes the following excerpt from their press release:
“Americans for Insurance Reform (AIR) released a new study today confirming the wholesale decline of medical malpractice insurance rates nationwide. The AIR study also shows that this phenomenon is occurring whether or not states enacted restrictions on patients’ legal rights, such as “caps” on compensation. The medical malpractice insurance “crisis” is over, according to the study.
AIR’s study is based on the most recent Council of Insurance Agents and Brokers survey of market conditions, showing that the average rate hike for doctors over the past six months has been 0 percent. This is following similar results for the last quarter of 2004, which saw rates rising only 3 percent at the end of that year. By comparison, rates jumped 63 percent during the same quarter of 2002. ”
In contrast, the Council of Insurance Agents and Brokers released their own interpretation of the numbers, noting:
“‘ to interpret that data to mean that the ‘crisis’ is over is a gross misrepresentation of the situation,” Crerar said. “First of all, having rates stabilize for one or two quarters doesn’t mean those rates have gone down. It only means that they have not gone up any farther. It is like saying that just because gasoline costs $2.50 a gallon today, down from $3 a gallon last year, we don’t have an energy crisis, and gas is cheap.”
CIAB also finds fault with AIR’s math, and reading CIAB’s interpretation it does appear the Americans for Insurance Reform could do with a little more practice with the calculator.
So, what’s the real deal?
Well, the malpractice “crisis” is partially related to insurance cycles (we’re in a transition from a hard market to a confused one right now), and as I’ve noted before, has a relatively small impact on overall health care costs. While the med mal debate is interesting, it is a sideshow – med mal is not a major force in US health care.
That said, the interesting point is that the drop in rates is occuring in states that implemented tort reform and those that did not. Makes one wonder what influence tort reform has on costs…


Feb
21

Health care quality measures, politics, and dollars

There are lots of moving parts, political agendae, and battling priorities in the pay for performance movement, and it is getting even complicated-er. Today’s announcement by the AMA that it will produce metrics for assessment of physician quality (registration required) is a clear indicator that financial motivations have, at least temporarily, outweighed physicians’ measurement phobia.
There are two distinct but closely related and very powerful forces at work here – one financial and the other political. Financially, the key issue is concern among docs that these “quality indicators” will be used to reduce reimbursement. And that fear is not unfounded. One has to look no further than the latest Federal budget proposal and the annual battle over the mandatory reduction in Medicare physician fees to understand that the phobia has a solid foundation in reality.
Politically, Bush’s pronouncements in favor of consumerism as the solution to the health care cost crisis have painted him into a corner. Critics (myself among them) have noted many problems and challenges (read near insurmountable obstacles) with this approach, chief among them its breathtakingly na


Feb
6

Medical Malpractice – crisis, what crisis?

An excellent review of the realities and myth behind medical malpractice is on Kate Steadman’s Health Policy blog. The series of posts are a sort of book report on Tom Baker’s The Medical Malpractice Myth.
I’ve posted on med mal before, as has Ezra Klein – both using the article published in Health Affairs last year as the basis for the posts. But Kate’s is the best rebuttal of the myth I’ve come across.
What does this mean for you?
Medical malpractice insurance is NOT a meaningful contributor to health cost inflation. Medical errors certainly are – remember to distinguish between the two.


Jan
24

Medtronic’s questionable practices – “bribing” docs?

A (free subscription required) lawsuit filed against medical device manufacturer Medtronic claims the company paid over $50 million over four years to doctors for highly questionable “consulting services“. Some physicians were paid several hundred thousand dollars a year for a few days’ work. The suit, filed by a whistleblower, sheds light on what some view as the highly questionable practice of combining marketing and research efforts, with the apparent goal of “encouraging” consulting physicians to use Medtronic devices.
With technology adoption one of the major drivers of health care cost inflation this is a particularly troubling accusation.
According to an article in the New York Times describing the suit, physicians’ use of Medtronics devices was closely tracked, with dollar values attached to each doc;
“A spreadsheet compiled by Medtronic for a June 2003 meeting in Dana Point, Calif., indicated what Medtronic hoped to accomplish with each doctor attending an event, Ms. Poteet said. This list of 230 or so doctors included an estimate of the dollar value of the devices each doctor used in surgery, including the value of the devices made by Medtronic. One doctor is described as “a 100 percent compliant M.S.D. customer,” while others were cited for “special attention.” M.S.D. referred to Medtronic Sofamor Danek, the largest competitor in the spinal device market.
A surgeon in Phoenix, who used an estimated $400,000 in devices, favored a rival maker, Spinal Concepts, the spreadsheet said. Company representatives were urged to make overtures to him. “M.S.D. corporate involvement at this program,” it said, “would help us earn a bigger share of his business on a grand scale


Jan
13

Cost shifting to private payers

A new report published in Health Affairs provides an excellent history of cost-shifting, gives an excellent analogy and and quantifies its impact on private payers.
Cost shifting occurs when providers, typically hospitals, recoup lost revenue resulting from underpayments by some patients by charging other patients more. The article provides an excellent statistical summary of the issue, noting that private payers reimburse at a rate that is around 122% of costs, while Medicare is about 95% and Medicaid even lower.
Of course, the uninsured are at the bottom, with reimbursement rates at about 5% of charges.
While I have a couple minor arguments with the article’s authors, the overall message is quite clear – those of us with private health insurance are subsidizing the care for those covered under governmental programs or with no coverage at all. Yes, Virginia, we do have universal access, we just don’t have universal insurance.
This gives the lie to statements to the effect that we as a nation can’t afford universal coverage. In fact, we do have it, and pay for it via these hidden taxes.
Taxes that are quite inefficient, that are inappropriately targeted, and that penalize employers who offer health insurance (at rates their employees can afford) at the expense of those who do not. This is leading some states (Maryland is the most prominent) to try to force employers to offer health insurance at affordable costs. This is an effort on their part to get some employers’ workers off the Medicaid rolls.
What does this mean for you?
As uninsurance and underinsurance increases, so will these hidden taxes, further adding to the burden placed on employers and covered employees.


Jan
10

Medicare to pay docs more if…

Medicare says they will compensate doctors for underpaying them if Congress succesfully rescinds the cuts in reimbursement that went into effect the first of this year.
CMS says they will simply figure out how much docs should have been paid and cut them a single check to make up the difference (the cut is 4.4%).
This is predicated on the belief that Congress will actually rescind the SGR cuts. It does not mention how much this bookkeeping will cost the doctors or Medicare processors, who may have to apply this amount retrospectively to specific bills, providers, procedures, etc.
Meanwhile, the Medicare fee schedule is the basis for most workers comp and other state-set fee schedules. Sources indicate some payers are not changing their WC payment schedules to reflect the official decrease, others are, and all are wondering what to do if Congress does something wierd.
Glad I’m not in operations…
What does this mean for you?
More work, probably more mistakes, and absolutely no benefit or increased profit, productivity, or pleasure for anyone.


Jan
5

Practice pattern variation in Medicaid

The folks at SignalHealth have published an interesting paper on practice pattern variation in Medicaid within New York State. I’ve been interested in variation, small area analysis and the results thereof ever since reading John Wennberg’s seminal study of hospital discharge variations in New England, and Signalhealth’s contribution is quite useful.
For those not quite as geeky about these matters, practice pattern variation is simply the geographical differences in medical practice for similar demographic groups. Or, why do people in New Haven have significantly fewer hospital admissions than those in Boston (to quote Wennberg).
One of the problems with this somewhat-arcane topic is what do you do with the information? Yes, there are significant public policy implications involved here, but what could an employer, insurer, or managed care firm do about practice pattern variation?
My recommendation to clients is to figure out where differences in practice patterns exist, then either sell health insurance in the “good” places(underwriting approach) or target case/utilization management at the “bad” places (managed care approach).
There actually might be a positive public policy impact from these private initatives – increased attention focused on providers treating outside the norm may impact their practice patterns, and higher prices and reduced availability of insurance in certain areas may encourage employers to seek change.
In the meantime, smart companies can take advantage of the inherent inefficiencies in the market revealed by practice pattern variation analysis.
What does this mean for you?
See above.


Jan
4

Bridges to nowhere and physician reimbursement

While the rest of the country’s physicians have been fighting to keep their financial heads above water due in part to Medicare reimbursement issues, their colleagues in the northernmost state have been enjoying a rare display of Federal largesse.
Showing the power that politicians have, Alaska’s physicians actually were the beneficiaries of a $53 million increase in Medicare reimbursement over the last two years. Engineered by powerful Sen Ted Stevens (R), the program ran for 2004 and 2005, before ending at the end of last year. According to news reports, the idea was to see if the increased reimbursement would lead more docs to accept Medicare patients.
The Anchorage Daily News notes the impact on reimbursement is significant:
“The office charges $133 for a 20- to 30-minute office visit with a regular patient. Blue Cross Blue Shield and Aetna — both preferred insurance providers for the clinic — cover about $113 of the $133, Warner said. Medicaid, the government insurance program for people with low incomes, pays $77.61.
Starting in 2006, Medicare will pay the least of all. While the extra money was available, Medicare would cover $87.97 of $133, or 66 percent. Now that the money is gone, Medicare will pay $53.30 for the same visit, or only 40 percent, Warner said. The federal government allows patients to make up some of the difference but not all of it. ”
Perhaps the providers would have liked to trade a continued subsidy for a couple of bridges to nowhere. These bridges, both in Alaska, have been widely seen as evidence of Congress’ predilection to spend money on projects that benefit their own constituents at the cost of others’. The much-derided bridge project would have funded the subsidy for about eight more years.


Jan
4

Physician reimbursement cuts

Price-fixing, the bluntest of economic policy instruments, is enjoying a resurgence among health care policymakers at the national and state levels. In California, Medi-Cal reimbursement rates for physicians have been cut 5%, effective the first of this year. The cut is expected to save the state some $65 million while in effect (it is slated to expire at the end of the fiscal year).
California’s action was initiated under former Gov. Gray Davis (D), but the cut was suspended until approved through the legal appeals process. The cuts do not affect facilities, pharmacies, or other ancillary providers.
Reimbursement cuts may lead to more physicians refusing Medi-Cal; today about half of the state’s docs don’t accept the state program and about 2/3 of surgeons have opted out as well. One pediatrician noted that he gets about $26 for an office visit, and $13 pmpm for those kids on capitation.
Notably, Gov Schwarzenegger has declined to reduce benefits or cut eligibility; that willingness to hold the line, coupled with the rising costs of Medi-Cal which now accounts for 15% of the state budget, led to the reimbursement reduction.
Meanwhile, Congress has yet to resolve the 4.4% reduction in Medicare physician reimbursement scheduled to go into effect 1/1/2006. While both the House and Senate have agreed to rescind the cuts, the implementing legislation is stuck in a procedural process (the Senate’s version and the House’s differ, so a conference committee is working on resolving the differences). It appears likely that the cuts will be reversed.
The AMA and other physician groups note that the cuts go into effect simultaneously with implementation of the new Part D prescription drug program. The result, according to some, is physicians will be inundated with questions from concerned patients at the same time they are getting paid less money to see said patients.
For those who are interested, the “logic” behind the cuts is based on something called the “sustainable growth rate” formula. Here’s the summary from “Medical News Today”
“The SGR formula unfairly ties the fees paid for physician services to the performance of the overall economy. Because costs of taking care of an aging population, many of whom have multiple chronic diseases, continue to increase at a faster rate than overall growth in the economy, calculating physician payments using the SGR formula would trigger across-the-board cuts. As a result, Medicare payments for physician services keep decreasing while the cost for doctors to provide care keeps climbing.”
What does this mean for you?
Price fixing is the last resort of the policymaker unable to address a problem intelligently. The unintended consequences will be significant. However, the good news is the potential rebellion by providers will add to the pressure to reform health care.


Dec
23

Malpractice investigations

Insurance Journal reports on changes in the way the State of Maryland will deal with investigations of potentially problematic physicians in yesterday’s edition. In a study conducted by the Baltimore Sun newspaper, 120 of the state’s approxinmately 17,000 physicians were found to have five of more malpractice claims in a ten-year period.
The review of the state’s policies was initiated when a new review board found the staff was swamped and overloaded, investigating too many situations where problems did not appear to be significant. In revamping the criteria, the review board decided to:
“investigate automatically only when doctors settle three cases for $150,000 or more each over five years. Pinder (head of the review board) said the board also reviews any doctor who resolves a claim about care in the past five years with a payment of at least $1 million”
There were 11 settlements over $1 million, and only 4 physicians met the three cases for $150,000 or more over five years criterion.
There are wide differences among the states in the criteria and process for investigating physicians, ranging from Nevada and Pennsylvania which investigate each and every claim, to Massachusetts which reviews any physician with three or more claims in a ten year period.