Insight, analysis & opinion from Joe Paduda
Apologies for acronym-itis; Matt Holt at The Health Care Blog has posted the latest edition of Health Wonk Review, employing his usual sharp wit and canny insight. Or is is sharp insight and canny wit..
You decide.
News reports indicate Amerisource Bergen (ABC), the hospital supply firm, is unloading its Pharmerica subsidiary. Actually, it is forming a joint venture with Kindred Healthcare to combine both companies’ long term care businesses in a new entity.
These companies provide drugs and supplies to nursing homes around the country, have annual combined sales of $1.9 billion and rather thin profits of $75 million.
Pharmerica also was the parent company of workers comp PBM Tmesys/PMSI, which evidently is staying within the ABC company fold.
Last week PMSI/Tmesys also made several changes in management, including promoting Mark Hollifield to president to replace Dave Weidner, who moved on to another senior position within the parent company. Hollifield, who was promoted to COO at the end of March 2006, is a well-regarded manager. Tamara Wagner, the long-time head of sales departed as well, and an interim sales leader was appointed from within.
Other sources indicate Coventry’s First Health unit is looking into entering the WC PBM business, likely by going the acquisition route.
Jason Shafrin at Healthcare Economist has an intriguing analysis of administrative expense in Medicare v private insurance. My net is that Medicare is less costly from an admin expense perspective than private insurance, but not as “less” as I thought.
This is where blogs really excel – making us rethink “common knowledge” and question our assumptions…
In the “we could not make this stuff up” category, former Ohio coin dealer/money manager Tom Noe (!) is set to be sentenced on September 12 for funneling illegal campaign contributions to the Bush re-election campaign . Noe is likely to spend upwards of two years in prison, and perhaps a lot “upwards”. The funds totaled $42,000, and helped Noe attain the coveted “Pioneer” status in the Bush campaign.
The bad news won’t end there for Noe; several weeks after his sentencing he will begin defending himself against separate charges filed by the state of Ohio relating to his alleged theft from the reserves of Ohio’s Bureau of Workers Compensation. For those who have not been following Noe’s transgressions, be advised, the man was pretty busy.
CMS is going to change the way it pays physicians. Really. Well, CMS Director McClellan says they will, and soon. Policy types will recall that every year, physician reimbursement for procedures under Medicare is slated to drop by between 3% – 5%, depending on total expenditures the prior year and a really complicated formula (that is never followed). So each year, physicians scream, and every year, politicians say “no, just kidding”, and tweak the reimbursement to send a few more dollars to the docs. And I do mean “few”.
This year expect the same to happen; it is an election year, there are lots of powerful (read “lots of money”) forces in play here, and few elected officials want to take the political hit for cutting Medicare. So far, 80 senators have signed a letter asking that reimbursement levels be increased, not reduced.
Despite the political realities, McClellan is of the opinion that our elected officials will come up with a pay-for-performance scheme for CMS. Whether it ever gets through Congress is another story altogether.
For further edification, I’ll pass on the perspective of Bob Laszewski, long-time national health care policy expert and good friend. Bob’s view is that the increase in utilization driven by physician practice patterns is leading to the huge cost increases we are seeing in Medicare, and the stats back him up. Medicare’s per-service reimbursement in 2006 is essentially unchanged from five years ago, while utilization has gone up dramatically. So, price controls have not worked to hold down medical inflation.
Thus the interest in pay for performance for physicians. While it sounds interesting, it’s really hard to do.
As tough as it’s going to be, I see no better alternative.
The increasing consolidation in the health insurance market is beginning to run up against the same situation among health care providers, creating the market condition known as a bilateral oligopoly (few sellers and few buyers). This appears to be happening in Denver, where UHC is battling HealthOne over contract terms, reimbursement and likely other sticky issues.
There are two points here.
First, according to several sources, HealthONE is an excellent system with enviable outcomes; therefore is entitled to ask for better reimbursement than lower-performing systems. One of those sources is UHC itself. Here’s a quote from the press release
“”Interestingly, HealthONE hospitals earned the highest quality rankings among Denver metropolitan hospitals for a majority of procedures evaluated in UnitedHealthcare’s first ever-report card, released in June of this year,” said Patrick Powers, HealthLeaders-InterStudy senior analyst. “These report cards are part of UnitedHealthcare’s new pay-for-performance initiatives, which should translate into improved rates for high quality hospitals.” That’s only half of the story, as we aren’t privy to the rates UHC is offering and HealthONE is demanding. That said, HealthONE seems to have a strong case for strong rates.
Second, while a “bilateral oligopoly” may send you (and certainly sent me) scrambling for the e-dictionary, the net is the big players do battle while the consumers try not to get trampled underfoot. Here we have a very large insurer and a very large provider fighting over rates and access, while the consumer waits anxiously for these behemoths to resolve (or not) their squabbles.
Reminds me of the old joke about what you find between elephants’ toes.
Slow running natives.
I’ve received an invite from the folks conducting the Consumer Driven Healthcare Summit to attend the September 13-15 conference as a representative of the blog world, sort of a “press invite”. I applaud their openness in two respects – first, I’ve not exactly kept my skeptical views of consumerism in health care to myself; and second, bloggers are a wierd, strange, new form of media that many don’t yet recognize as important or even worth noting.
So, I’m looking forward to it.
The agenda includes talks by Paul Ginsburg of the Center for the Study of Health System Change (one of the few truly excellent policy/analysis concerns); Jon Gabel on how much consumers are actually contributing to their HSA accounts; Karen Davis of the Commonwealth Fund, Ron Pollack of Families USA and John Iglehart of Health Affairs on the Downside of Consumer Driven Healthcare; and several sessions on results of studies and research into various aspects of CDHP and its cousins.
This should be fun. And I’ll be doing my best to report live from the scene, in the best tradition of Matthew Holt.
Sen. Bill Frist, the senate majority leader and ex-cardiac surgeon and heir to the Frist family fortune (they started hospital firm HCA), has launched a health care blog. A quick perusal indicates posts on med mal reform, Massachusetts’ health care reform initiative, and bioterrorism. There are also copies of articles by the Senator for those inclined to learn more about his opinions.
As a relatively new entrant to the field, we’d suggest a couple of things to the Senator. First, hotlinks are pretty useful, and help provide support for statements such as “Many states have passed laws that attempt to keep frivolous lawsuits from being filed and keep liability premiums down…”
It’s also helpful to be specific and clear when writing. Parsing out the quote above, it is notable that the dependent clause “that attempt to keep frivolous lawsuits from being filed and keep liability premiums down” relates to the “passed laws”, and does not imply that these laws actually do reduce frivolous lawsuits. Kind of nuanced, but readers appreciate the clarity.
At the risk of being accused of being snarky, I’d also point out that the focus on medical malpractice is somewhat bizarre, given the Doctor/Senator’s propensity for refuting other physicians’ diagnoses without first examining the patient.
Here’s another way health care costs weave their way into our lives – the town of Richland Hills, Texas is increasing property taxes to pay for a 20% rise in health insurance costs. While the increase in the mill rate (the cents per hundred dollars of property value) will only go up 0.6, it’s another example of the growing awareness of the impact of health care costs on a community.
The same is occuring in communities as different as MIssoula Montana, Boxborough Mass, and the state of New Jersey.
This is a national problem. Today’s NYTimes reports that property taxes have gone up two to three times faster than personal income in the tri-state area. As a resident of Connecticut and eight year veteran of my Town’s Board of Tax Assessment Appeals, I have first hand knowledge of taxpayers’ growing concern, and even anger, over rising property taxes. Now, new laws will require municipalities to report their future health care liabilities, a requirement that had a significant impact on public companies’ valuations and financial reporting.
And may well lead to even more taxpayer unrest; public entities typically provide health care benefits that are considerably more generous than those dispensed by the private sector. One of the stated reasons is these benefits are a form of compensation that makes the jobs more attractive given the wages, which tend to be somewhat below the private sector. While the latter may be true, the rationale instantly brings to mind the disaster unfurling at US auto manufacturers, who used the same logic decades ago to provide very generous health benefits in lieu of salary increases.
And look what’s happened to them.
Drugs account for over one-eighth of workers compensation medical expenses, and that number continues to increase. The data from NCCI’s latest research paper on workers compensation drug costs is consistent with the findings of my firm’s research, and provides additional detail on the specific drugs that account for the majority of dollars spent.
NCCI’s report includes results up to 2003; while there have been several significant changes since then (the disappearance of most of the COX-2s, patent expiration on Oxycontin, and the explosive growth of Actiq), the report’s year-over-year trend data is sobering.
Of note, experience indicates that the most sophisticated payers are holding increases in the 2-5% range through the use of clinical management programs, data mining, adjuster training, strong EDI connections, and intelligent third party biller strategies.
Their less-sophisticated colleagues are at the other end of the spectrum, experiencing 15% and higher annnual inflation rates.
What does this mean for you?
If you aren’t working hard on this, you may want to get started.
