Insight, analysis & opinion from Joe Paduda

Jun
8

Watch out for that hole…

The Fresno Bee editorial page picked up on a study published in the New England Journal of Medicine about the impact of deductibles and copays on compliance. The study analyzed what happened to seniors once they met their coverage limit under a drug program known as Medicare Premium Plus. (this limit was set at $1000)
The results are not terrible surprising – visits to the ER rose, compliance with drug regimens diminshed, blood pressure rose.
We may well see the same result around October, when many seniors will hit the “doughnut hole”; after they have incurred about $2250 in costs, they are responsible for the next $3000 or so, after which coverage kicks in again. If they stop taking their medications, we can expect to see a bump up in ER visits and potentially other services. When you add in their copays and the doughnut hole payouts, a beneficiary who hits $5100 in total expenditures will have paid $3,600 out of pocket.
About 25% of beneficiaries are projected to hit the doughnut hole; 10% will hit the $5100 level and therefore be defined as catastrophic cases.
It is likely that these folks will be less healthy than the seniors who don’t spend that much on drugs. And for many, the drugs are keeping them out of the hospital by managing their blood sugar, hormone levels, lipids, hypertension, psychiatric issues, and chronic pain.
If they stop taking their meds, Part D costs may well come in under projections. The other Medicare “Parts” wiil not be so fortunate.


Jun
7

Ohio hospitals’ misguided complaints

Hospitals in Ohio are complaining that proposed cuts in reimbursement by the Bureau of Workers Compensation are unfair, even though the proposed reimbursement level is Medicare +15%. According to one spokeswoman for the hospitals, “There is a misconception that a broken arm costs the same in Columbus, Ohio, as it does in Los Angeles, Calif.,” said Tiffany Himmelreich, spokeswoman for the Ohio Hospital Association, which has 170 member institutions.
Well, talk about a non sequitur. No one is claiming that hospitals in LA have the same costs as hospitals in Columbus. What Ms. Himmelreich is missing is that the proposal would pay the hospital their costs plus a 15% margin. And, with Medicare hospital reimbursement generally accepted as satisfactory, I have a tough time following the Hospital Association’s argument that the cuts are unfair.
Here’s why. Ms. Himmelreich went on to say “”For instance, a hospital with a high level of uninsured patients might charge more than a hospital with a lower level of uninsured.” Since when is it the responsibility of BWC, or Ohio employers, to cover the costs of the uninsured?
I’m as vocal as anyone about the problems of the uninsured, the drag they place on our economy, and the desperate need for our elected officials to get out of their golf carts and fix the problem.
But shifting costs to workers comp payers is not the solution. It hides the problem, and in the long term the Hospital Association’s complaints will do them more harm then good.
Workers compensation premiums are a significant cost of doing business. The BWC is well within its rights to refuse to subsidize a problem that is societal. In fact, between 1997 and 2004, Ohio’s employers overpaid hospitals over half a billion dollars. Think about what that money could have done if it was invested in employee training, new technology, alternative energy sources…
BWC and the Ohio Hospital Association should be working together on the uninsured issue, not fighting.
What does this mean for you?
A reminder to look deeper into issues, because there is a lot of common ground among payers and providers.


Jun
6

First Health’s new Work Comp exec

Sources indicate First Health is set to announce they have hired a new executivefor their workers comp business. The new guy will be Robert Gelb, late of IntraCorp where he most recently led their sales and account management effort. This may mark the end of a seventeen-month long search for a leader for this highly profitable but somewhat troubled property, acquired by Coventry in January of 2005.
IntraCorp’s recent struggles have been well-documented, and I have commented at length on the challenges facing any new leader of First Health.
IntraCorp has recently lost a significant amount of business, with Sedgwick moving a big chunk of bill review to Concentra and ESIS doing the same. I’m not sure what Mr. Gelb’s role was in this process, but I’m guessing it came up during his interviews.
For Mr. Gelb’s new employer, the biggest question remains the present strategic position of First Health; the company is trapped in what Clayton Christianson calls the “Innovators’ Dilemma”. And its WC revenues have been flat over the past five quarters, in contrast to management’s projections for significant growth.
Placing a sales guy in charge of WC at First Health may makessense, as Coventry has been quite public about their desire to grow WC significantly. And the original compensation package, with a base in the $300k range plus bonus and equity, should have been enough to entice a strong leader. It remains to be seen whether Mr. Gelb is that person.
What does this mean for you?
Either not much or an awful lot.


Jun
5

CMS data release – and their point is…?

To much fanfare, CMS released several data files containing hospital charge and payment data by state, county, (but not by individual facility) for the 30 most common DRGs and elective procedures. National, state and county financial ranges are included, and the volume of services provided at individual facilities are also available.
This is the first of three planned data releases; the next scheduled for this summer is for ambulatory surgical centers followed this fall by hospital outpatient numbers.
Promoted by the Administration as a part of Bush’s “commitment to make health care more affordable and accessible, President Bush directed the U.S. Department of Health and Human Services to make cost and quality data available to all Americans”, the data is available at CMS’ website. I’m not sure how this data will help consumers become better…consumers, but in the meantime here’s my positive spin on the effort.
Here’s my take on what you can do with the data.
1. FIgure out how your payments compare to the Feds’, and use that to assess your contracting strategy.
2. Identify the hospitals that do the most specific procedures, and direct your patients/insureds/injured workers to those facilities…and away from the others.
3. Publish the data (after translating it into English) on your website so patients can draw their own conclusions.
4. Examine the volume of procedures at specific facilities and compare that to your payments to same see if there is a link between experience and efficiency (or at least billing practices).
5. Look at the payment to charge ratio and wonder.
6. Wonder how the release of the data will help consumers make better decisions, as individual hospital charge and payment data is not available.
There seems to be a problem here. How are consumers going to improve their ability to consume if individual facilities’ results are not posted? How could an individual consumer use these data to make better decisions? Do the Feds have a clue?
Here’s the detail on what’s in the files.
Top 30 Elective Inpatient Hospital DRGs” contains the volume and ranges of Medicare payments between the 25th and 75th percentiles for a limited set of conditions treated in U.S. states and counties. Included are the 30 conditions that had the highest utilization rates among all Diagnosis Related Groups (DRGs). Data are aggregated at the county, state and national level.
“Other Inpatient Hospital DRGs of High Utilization” contains ranges of Medicare payments between the 25th and 75th percentiles for a limited set of conditions treated in U.S. states and counties. These conditions are not among the top 30 utilized Diagnosis Related Groups (DRGs), but were deemed of interest to the Medicare community. Data are aggregated at the county, state and national level.”
What does this mean for you?
See above.


Jun
2

National health care is coming.

National health care will be reality within five years. All the theory, intellectual debate, politicking, lobbying, trips to Scottish golf resorts and campaign contributions funded by lobbyists, insurers, providers, and big pharma will come up against two overwhelming forces – demographics and the weight of bad decisions in the past.
As of the last Medicare trustee report, Medicare’s long term debt is $32.4 trillion. Part D alone is responsible for a quarter of that amount, or $8 billion. In comparison, the entire Social Security debt is $4 trillion.
In the face of that incomprehensibly huge figure, we have a Congress that is incapable of doing anything that might alienate seniors, doctors, pharmaceutical manufacturers or hospitals. We have an administration seeking to cut provider reimbursement and increase seniors’ costs by $36 billion over 4 years. That’s about 1% of the total medicare deficit. And we have the Bush tax cuts set to expire by 2011, which just happens to be the same time the Medicare trust fund cash flow turns from black to red as the Baby Boomer generation starts cashing in.
This will force change. The only question is will there be a single payer system, universal coverage via private insurers, some form of hybrid, or a new and as-yet unformed model. Given the recent transgressions of the major national health plans, I wouldn’t go too long on Aetna, United Healthcare, or CIGNA stock.
If you are looking for what it may look like and the features thereof, see here and here.
What does this mean for you?
Your decision – part of the solution or part of the problem?


Jun
1

Part D results are…

Part D’s enrollment deadline came and went, and along with it the orgy of claims, counter claims, blames and counter blames. So now that at least a bit of the dust has settled, where are we?
Confused.
Depending on whom you read or watch or listen to, the program has either been a success or a failure, is working or is not, is profitable or a loser, has enrolled “enough” people or has fallen well short.
The reality is as confusing as the perceptions appear to be. In any effort to cut through the spin, I checked in with Bob Laszewski of Health Policy and Strategy Associates. His take is it is too early to tell how things are going, and in the absence of truly meaningful metrics, we’re just going to have to wait and see.
Here’s why there is so much confusion.
There is no consensus on how many seniors have signed up for Part D or have alternate drug coverage under other plans. For starters, health plans and the Feds can’t agree on who is signed up by whom. Some health plans have been told they have thousands more members than they can account for, while others are being told large numbers of their “enrollees” actually signed up for Part D when they already had coverage under Medicare Advantage or another plan.
As near as I can figure it, there are between 8 million and 4.5 million seniors still without coverage. More details to follow…
Meanwhile, Humana, one of the more “successful” health plans in terms of signing up seniors for its Part D programs, recently saw its debt ratings outlook downgraded by AM Best from ‘stable” to “negative” in part due to large Part D enrollment and associated reliance on government contracts and increased capital requirements.
And AM Best may be on to something. The Medicare Trustees recently projected that the Part D program’s costs would increase by 11.5% annually over the next ten years. If those projections hold true, early claims about the currently “favorable” loss ratios may be short-lived.
We’ll have to wait until at least mid-July for reasonably accurate enrollment figures, and accurate financials will take another five months or so. If someone provides numbers in either category before those dates, be skeptical.


May
31

UHC fighting the wrong battles

The latest health care plan to enter into a very public battle with a large provider is Oxford Health, a subsidiary of United Healthcare. And their opponent, Jamaica Hospital of Queens, New York, appears to be on the losing end of an unfair battle. Evidently (free registration required) Oxford and Jamaica Hospital completed negotiating a new contract about 18 months ago that increased reimbursement rates significantly. Jamaica signed the deal, sent it on to Oxford, and went on about its business.
Jamaica’s business is providing health care, which it does for many poor, uninsured, and underinsured folks in and around Queens. The hospital was counting on the new deal with Oxford to help it continue to provide these services to this population.
A few months later, Jamaica figured out Oxford had not changed its reimbursement amounts, and complained to the payer. After a bit of wrangling, Oxford told Jamaica that it would not honor the contract (which it had yet to sign) until the hospital helped Oxford negotiate a deal with an anesthesiology group at another hospital in the same system. Jamaica said no, and after more wrangling, Oxford threatened to terminate the contract.
A termination would have jeopardized Jamaica’s ability to provide a broad range of health care services to the uninsured and underinsured.
As a for-profit health plan, United Healthcare is one of the three remaining dominant national health plans (with apologies to Coventry and CIGNA). United is tough, very aggressive, and not afraid of a fight. While one can take issue with its negotiating tactics, my real objection is to the company’s bad battle selection. Instead of strong-arming a hospital system to force a group of docs to kowtow to its demands, United should be screaming about the unfair nature of the health care system that requires its contracted providers to shift costs to United to make up for revenue lost by caring for people without insurance.
United Healthcare’s obligation is to its customers, patients, and shareholders. It is not United Healthcare’s responsibility to pay for care for those people it does not insure. By using childish tactics in its fight with Jamaica over what are really petty issues, United is ignoring a much larger problem, and one it could, and should, actually win.
While I’m no apologist for United or its management, they are getting a raw deal. Too bad they haven’t figured out they are doing it to themselves.


May
30

Physician income, priorities, and the free market

It is axiomatic that one’s income is based on one’s value. If recent studies on physician income are any indicator, society still places a lot more value on doing procedures than on keeping people healthy.
According to physician recruiting firm Merritt, Hawkins & Associates, job offers for internists and family practice docs came with average salaries of $162,000 and $145,000 respectively. In contrast, cardiologists and radiologists were offered $$342k and $351k. The first group of docs provide primary care; diagnosing conditions, encouraging healthy behaviors, finding early indicators of life-threatening disease. They get paid for their time. Yes, they do procedures (excisions, tests, x-rays and the like) but their time is spent not doing things but figuring out what’s wrong with patients and making recommendations to fix the problems.
The second group of docs do procedures – yes, they diagnose, albeit on a patient that arrives with records in hand, preliminary work-up completed, and some indicators of a problem that falls into the specialist’s area of expertise – but they get paid to do things – analyze images, perform surgeries and invasive procedures, apply radiation to attack cancers and the like.
And primary care physicians are not (Lowes R. Earnings: Primary care tries to hang on. Medical Economics. September 17, 2004) seeing their incomes increase, while invasive cardiologists enjoyed an 11% jump in income from 2002 to 2003. Internists who are looking to generate more income are encouraged to sub-specialize in gastroenterology, cardiology, and other more lucrative areas.
The Lowes article provides an excellent perspective on the causes and results of the rise of “proceduralists”.
“The proceduralists have benefited from the waning of the gatekeeper model, since they’re now more accessible to patients. And they’re kept busy by graying baby-boomers anxious to preserve their hearts, knees, and various organs. Specialists also have managed to make up for meager third-party reimbursement by generating income from ancillary services such as diagnostic imaging, outpatient surgery centers, and even specialty hospitals.”
What does this mean for you?
The free market in healthcare is working. For specialists. It is most definitely not working for payers, taxpayers, and patients. And it is continuing to drag down our nation’s commercial and industrial competitiveness.


May
26

Concentra to announce major deal in Q3

Several sources indicate Concentra will announce a major acquisition in Q3 2006. Speculation is that the deal will involve adding a significant number of occupational medicine clinics to Concentra’s present 300 or so.
The next question is likely to be who/what clinics would be acquired. Here’s where the speculation turns to outright guessing.
One candidate may be HealthSouth. The troubled chain needs cash, has a lot of clinics, some of which actually generate decent patient volumes, and does a fair job of marketing itself to doctors and employers. However, HealthSouth sold its occ med clinics to another potential target several years ago.
The acquirer was USHealthWorks, a much smaller company company with strong traction in markets that are complementary to Concentra, including 56 occ med clinics in California alone. USHW is privately held, making a transaction smoother and likely faster than a deal with a publicly-traded firm. Concentra is owned by private equity firm Welsh Carson Anderson Stowe, which apparently remains enamored with the company’s potential.
Headquartered in Alpharetta GA, USHW has more than 160 clinics, 450 docs, and treats over 10,000 patients per day.
Adding USHW to the Concentra operation would result in one company with over 450 clinics touching over 13% of all workers comp injuries.
What does this mean for you?
More consolidation in the health care industry is quite consistent with recent developments, and while it may help streamline operations and reduce some overhead while improving claims and medical record document flow, my guess is some of the larger payers will be concerned about the growing market power of Concentra as the “initial treater” of WC injuries.


Joe Paduda is the principal of Health Strategy Associates

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