Jan
5

Sedgwick CMS acquired by Fidelity National

Sedgwick CMS, one of the leading claims administrators in the property and casualty industry, will be acquired by Fidelity National, the largest title insurance company in the country. This followed a several-month process wherein a number of entities were competing to purchase Sedgwick.
If you haven’t heard of Fidelity National (no. 261 on Fortune 500), here’s their PR blurb…
“(Fidelity is a) leading provider of core financial institution processing, mortgage loan processing and related information products and outsourcing services to financial institutions, mortgage lenders and real estate professionals. Through its wholly-owned subsidiaries, FNF is also a provider of specialty insurance products, including flood insurance, homeowners insurance and home warranty insurance…”
Looks like a complementary deal – Sedgwick does “outsourced” claims processing, albeit serving a different marketplace and different customers. In the announcement, FNF’s CEO said Segwick’s acquistion will enable FNF to “leverage our core expertise in title insurance processing and financial transaction processing…”
Perhaps FNF is thinking that their home-grown expertise in processing title insurance and other transactions can be helpful to Sedgwick, or Sedgwick can provide FNF with expertise that will streamline operations at their new parent.
Other than that, I don’t see any “synergies”.
You?
Thanks to an anonymous reader for the heads-up.


Jan
4

Why I’m skeptical about United HealthGroup

A reader (Don Moyle) asked me to “elaborate on a comment I made about “…my skepticism re United HealthGroup”. The comment was in reference to Matthew Holt’s observation that “Empire BCBS has led the way (in) putting its members’ patient records online. It looks like the rest of the Wellpoint organization (which bought Empire last year) will adopt the technology this year. That will force competitors like United to follow suit.”
United was known as the most respected managed care firm in the nation when I joined it as a result of its acquisition of MetraHealth (the short-lived result of the merger of MetLife and the Travelers’ group health operations). I was excited to be part of this great company, but quickly came to find out that the emperor’s clothes were, at the least, quite threadbare.
As an ex-United employee, I had first-hand knowledge of some of the company’s practices (or lack thereof). Example – while their accreditation required the company to recredential providers every two years, at least one of their larger midwest plans had not recredentialed for four years (this was back in the mid-nineties; perhaps they have begun recredentialing since then…).
On the clinical management side, there did not appear to be much going on. Their work was remarkably similar to the utilization review and case management that had been conducted at the Travelers while I was running product development for the Travelers’ Health Company.
What United did do quite well was exercise market power in contracting with providers. Their market share in areas such as St. Louis and Chicago enabled UHC (now known as UHG) to drive down provider prices, thus giving them a competitive advantage (lower cost of goods sold, aka lower medical loss ratio (MLR).
Watching United today reveals not much has changed; United still seeks dominant market share; have publicly disavowed pre-cert and medical management; and are not the leading light in any of the promising new areas such as electronic member records, physician profiling, etc. In fact, they appear to be well behind their competitors in some of these (see Aetna for member education, Wellpoint for electronic member records).
That is not to say that UHG will not succeed, is not a dominant player in the industry, and has not done well. What I’m skeptical about is UHG’s ability to really manage care any better than anyone else. They can exercise buying power, but as the market continues to evolve to oligarchy status, their buying power will not be sufficient.
Don, that may be more than you wanted…


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.


Jan
3

Holt’s predictions for 2006

Matthew Holt has bravely published his predictions for 2006, with some surprising, some incendiary, and some intriguing perspectives. His observations on efforts to electronicize (my word not his) many of the patient – provider – payer interactions are worth reflecting upon.
One of the more intriguing is Matthew’s observation that payers are beginning to integrate clinical and billing data. Here’s the quote:
“2005 saw some of the first steps by major insurers to integrate what they know about patients’ clinical information with their administrative activity. Using technology from WebMD on an ASP basis, Empire BCBS has led the way here putting its members’ patient records online. It looks like the rest of the Wellpoint organization (which bought Empire last year) will adopt the technology this year. That will force competitors like United to follow suit.”
As an ex-United person, and one who still can’t understand how United could be viewed as the best managed care company in the country, I welcome the observation – if nothing else it validates my skepticism re UHG.
Matthew and I are both pretty skeptical about Consumer Directed Health Plans; while I believe they will grow substantially, I (and he) don’t see them as anything other than cost-shifting to individuals from employers and payers. That is not a value statement, but a definition. My bet is CDHPs will enjoy a brief but rapid growth in popularity, and may well represent the last gasp of the private sector before they implode. And when the middle class enrollees in CDHPs and their plan sponsors see that they do not resolve the underlying problem in health care (cost will continue to increase dramatically), the pressure on politicians to get this fixed will force change.
The rest is well worth a read and some reflection.
Here’s hoping I’m wrong and CDHPs work very well, health care costs come down, and access is dramatically increased. After all, the White Sox won the Series, so miracles do happen.


Jan
3

Third Party billers’ practices

Several industry sources have provided additional insights into third party billers, their billing practices and the fallout from same.
One apparently well-informed source provided additional detail on the billing practices relative to U&C, noting:
“…As far as the U&C discussion goes the only consideration given by the TPB is what the pharmacy is reimbursed. TPB’s contracts usually state the pharmacy is reimbursed the lesser of U&C or a contracted amount… As you can imagine the TPB’s profit margins increase dramaticaly when the U&C pricing is used to reimburse the pharmacy and then billed at fee schedule or the selected amount billed for non fee schedule states. I do not know the exact percentage of pharmacy reimbursements that calculate from U&C but I can assure you that it is somewhere in the neighborhood of sixty to seventy percent of the processed prescriptions for TPB’s if not higher.” See the full comment .
Another industry expert referred me to the ongoing Texas Mutual – Third Party Solutions litigation. Apparently the suit, filed several years ago by Texas Mutual, was ruled upon by the Texas Appelate Court early in 2005. TM’s contention was that the third party billers are not medical providers and therefore coudl not avail themselves of the administrative process; TM lost at the appellate level. For more information on the specific allegations made by Texas Mutual, read the entire article on TM’s website (above).
The Court ruled narrowly on Texas Mutual v. Eckerd et al, determining that TM first had to exhaust the statutory process as all billing issues must be addressed through the established administrative process. The case is now before the Texas Supreme Court.
I have been in conversations with third party billers recently, and hope to get their perspectives shortly. If and when those conversations occur, I’ll report on them if the parties are amenable.
What does this mean for you?
If you are a WC payer, PBM, or third party biller, quite a bit. This year may well see a sea change in this industry, one that will have significant implications for years to come. And with Rx in WC accounting for 12% of the medical spend, these implications will gain importance over time.