Mar

What’s on your mind?

Posted by Joe Paduda on Tuesday, March 31st, 2009 | Comments

I’m going to be attending the NCCI conference in May and RIMS in April and plan on covering both here in MCM. And no it’s not because I’m excited to spend time in Orlando: the location is perhaps my least favorite in the country.
This will be my first NCCI conference and comp wonk that I am I’m really looking forward to it. NCCI produces some of the most detailed and yet useful information regarding comp cost drivers, the impact of legislative and regulatory changes, and industry trends. Their work on drug costs has been particularly enlightening. I’m attending as a member of the press; kudos to NCCI for recognizing blogs as media.
The people at RIMS have yet to ‘get it’. This is the second year they’ve told me that MCM doesn’t qualify for media status, this despite the blog’s 35,000 visitors each month. I wonder how they’d handle a media request from dailyKos?
So, what do you want to know? What info do you want to hear about? Any emerging trends, companies, issues you’d like to hear about? Let me know and I’ll do my best to get the details. I’ll be blogging and twittering (?) from both conferences – this will be my first experience with twitter so let’s manage those expectations, people…

Continue reading What’s on your mind?

Mar

Why a public health plan option isn’t anti-competitive

Posted by Joe Paduda on Monday, March 30th, 2009 | Comments

Perhaps the biggest battle brewing in Congress in the health reform war is that of the public option. As I said back in January, “Opponents claim that the Feds would have an unfair advantage due in part to their sheer size; they’re just so big that private plans could not compete.” Some Republicans and their affiliated think tanks continue to complain private health plans will not be able to compete with a public option as the public plan will just dictate pricing to providers, and they don’t have the capital and financial stability requirements forced on private plans.
They’re half right. Re the capital requirements, they’ve got a valid argument. As we know all too well with Medicare and Medicaid, the Feds (and we taxpayers) know we have an ultimate unfunded liability in excess of $22 trillion, but that figure doesn’t show up on any formal financial statements.
But when they complain about pricing, that’s a red herring – for two reasons.
First, physicians don’t have to accept Medicare or Medicaid, and wouldn’t have to agree to any ‘public option’ pricing. In fact many docs don’t accept Medicare today. As participants in the free market, they are able to opt out if they feel the compensation is too low – and many do.
The other factor is just as simple – pricing is but one component of the health cost equation. The others are utilization and frequency. ‘Utilization’ is the number of a specific type of services used by a patient, while ‘Frequency’ is the percentage/number of patients that use that type of service.
Here’s an example. For MRIs, the total cost calculation might be 10 million patients (frequency) X 1.2 MRIs per patient (utilization) X $800 per MRI (price).
Sure, price is a factor – but it is not the most significant factor – not by a long shot. By keeping patients out of the hospital, a private plan would eliminate utilization and prevent price from ever becoming a factor. So, even if a service area was dominated by a public plan, a private plan that did a really good job of keeping members healthy and out of the hospital would deliver lower costs – even if their hospital stays, when they did occur, were more expensive.
Those lower medical costs would enable the private plans to offer lower premiums, which in turn would attract more members, and those members’ dollars. The private payers that could deliver better health would also deliver better returns to their investors, while taking share from both the public plan option and other, less successful private plans.
The other reason – markets are already monopsonies
As noted previously, there’s another reason the arguments against a public plan don’t stand up. Opponents complain that the government’s market power would allow it to dominate a market, thereby making it impossible for a private plan to compete.
The reality today is that almost every market is already dominated by a very few health plans, so much so that in most markets, there really is very little market competition amongst health plans.
Here are a few factoids using 2005 data; if anything there has been more market consolidation, so these percentages are even higher today…
– 96% of HMO/PPO markets are deemed highly concentrated
– 99% of HMO markets are highly concentrated
– in 96% of markets, at least one insurer has share higher than 30%
– in almost two-thirds of the markets, at one insurer has share greater than 50%
– in a quarter of the markets, one insurer has share at or above 70%.
What does this mean for you?
If anything, a robust public plan would add competition to many markets, competition that would, if anything, increase consumer and provider choice.
How exactly is that bad?

Mar

United Healthcare’s workers comp history

Posted by Joe Paduda on Friday, March 27th, 2009 | Comments

Amidst the speculation that UHC may be buying Coventry Health comes the inevitable questions about what UHC would do with Coventry’s work comp division. A historical perspective may be instructive.
UHC has had at least three previous ventures into the work comp world over the last fifteen years, in addition to the services delivered by its Ingenix subsidiary (fee schedules, ucr databases and the PowerTrak bill repricing software). Way back in the mid-nineties UHC was in the work comp business in Florida in a big way. UHC actually accepted risk via its health plans in Florida, calculating that it could deliver lower medical coats through a more efficient delivery system.
This worked well – until the tail caught up with UHC and they subsequently lost millions of dollars.
This may have affected the company’s view of comp going forward; since the Florida fiasco UHC has assiduously avoided comp.
At one time the company owned two comp managed care entities, Focus and MetraComp ( where I labored for a few years). Both eventually ended up at Coventry, Focus via a sale to Concentra (which was in turn bought by Coventry) and MetraComp through a sale to NHR, which was then sold to Concentra.
As part of the NHR deal, United agreed to let NHR access its network contracts for three years in return for an access fee. At the end if that term NHR was on its own.
If history repeats itself, UHC would likely seek to sell off the work comp division if indeed it does but Coventry. There are already discussions going on at at least two private equity firms regarding putting together a bid for the business.
This may well be just as much an indicator of the sorry state of the M&A business as the potential attractiveness of a Coventry work comp spinoff. That said, even if UHC decides not buy Coventry there is the chance that Coventry will sell the business off itself. CEO Allen Wise has not been an enthusiastic supporter of the business, at least not publicly.

Mar

Providers rating health plans

Posted by Joe Paduda on Thursday, March 26th, 2009 | Comments

There is a growing movement on the part of providers that is turning the tables on health plans. Providers have long objected to profiling, ranking, and rating as done by health plans, complaining (with and without justification) that the systems/algorithms used were inaccurate, unfair, superficial, and/or misleading.
Now providers are giving health plans a taste of their own medicine, and for United Health, it is bitter stuff indeed.
One of the first surveys that evaluated providers’ opinions of health plans was the survey conducted by the Verden Group. Their Q4 ratings of health plans is out, and once again Aetna is looking good. The rankings are driven by providers’ views of health plans, the complexity and difficulty of their interactions with health plans, and plans’ tools and processes that affect providers. Reimbursement policies are also factored in, as is the cost to the provider of complying with health plan policies.
While the report does not include all health plans, it does cover around forty of the largest.
There is always movement up and down the ratings scale, but Aetna is consistently at or near the top. Other plans seem to bounce around due to changes in reimbursement policies, more or less onerous prior authorization requirements, changes in ease of access to patient eligibility and medical record information – with jumps up or down the rating scale commonplace. The lowest score wins in the Verden scale; Aetna is the only plan to not only score in the single digits in Overall Rankings, but to do so every quarter.
Health plans that partner with providers – provide ready access to eligibility data, reduce the administrative burden of pre-certs and appeals, pay quickly, minimize policy/process changes so providers aren’t constantly confused about the current requirements, and add value in the form of access to member medical data are going to do much better over the long term.
A hospital-focused survey was just released, and it confirms Aetna’s leadership position. United HealthGroup is at the bottom of the rankings (it is towards the bottom in the Verden survey, although one of its operating units, (Oxford) is ranked quite high. The survey was conducted by Davies Public Affairs, identified a sharp differences between the ‘best’ and worst plans. Here’s how they put it:
“For the first time, the survey revealed a preferred partner for hospitals and physicians. Aetna received a 64% favorable rating (compared to a 34% unfavorable rating), which was 9% better than CIGNA, the second-best rated plan and a full 48% better than the worst rated plan, UnitedHealthcare. The survey reveals a strong preference from hospitals based on trust, honesty, business practices and good faith negotiations.
“Aetna is clearly the preferred health insurance partner for hospitals and health systems across the United States,” said Brandon Edwards, President/COO of DAVIES. “When you combine this survey data with recent publicly traded health plan earnings announcements, it’s clear that provider trust and satisfaction are leading indicators of organic membership growth. This bodes well for Aetna, and perhaps CIGNA, as they look at 2009 commercial enrollment retention, as well as 2010 commercial enrollment growth.”
The survey revealed that 82% of respondents indicated an unfavorable opinion of UnitedHealthcare, {emphasis added] which is actually an 8% improvement for them over last year. This contrasts with an average unfavorable rating of 34% among all other insurance companies in the survey.”
It gets worse.
“One striking finding is that UnitedHealthcare was not the largest payor in terms of revenue for the average hospital, and its reimbursement rates were not significantly lower than other major health plans. UnitedHealthcare is paying as much or more than other insurance companies for healthcare services but they are viewed as the worst performer by a large margin. [emphasis added] The survey makes clear that dissatisfaction is driven by distrust, dishonesty, flawed business process, inadequate claims processing, claims denials and other business process problems.”
I was excited when the company I worked for – MetraHealth – was acquired by UHG fourteen years ago. At the time United was the most respected health plan company and was seen as the model that others would aspire to. After working for United for a couple years, I had to leave. My sense was ‘if this is the best health plan out there, I’ve got to stop working at health plans.’
Looks like nothing’s changed.
The full Davies survey is here; the Verden Quarterly Report is here.

Mar

The last word on AIG

Posted by Joe Paduda on Thursday, March 26th, 2009 | Comments

Congress’ political grandstanding and completely misdirected public outrage over the AIG bonuses brought back memories of the Terry Schiavo tragedy, where members of Congress embarrassed themselves and the nation by intervening in a family matter (Schiavo was in a persistent vegetative state and her husband wanted to take her off life support).
Hopefully the last word in this fiasco was published yesterday in the New York Times. You may already have seen the letter circulating from Jake DeSantis, a former AIG Financial Products exec who recently left the company after the public pillorying of everything AIG.
Congress’ public outrage was beneath that body, misdirected, and counter-productive – and awful to watch. deSantis and his colleagues at AIGFP were (mostly) working diligently to unwind the bad investments entered into by their predecessors. Few, if any, of the idiots who caused the implosion of AIG are still with the company.
Yet the President and Congress (both Ds and Rs) took it upon themselves to publicly humiliate the very people who were trying to fix the problem. As did the attorneys general from Connecticut and New York as they sought political advantage from public outrage.
I said last week:
“Every minute we spend screaming about AIG’s bonus plan is a minute not spent on fixing the company up to sell off assets. Every ounce of energy spent on this is wasted.
I don’t know the details of the plan or how execs who left could still be paid or what the restructuring of the plan looks like (other than pushing half the payouts off and subjecting them to performance metrics). I do know the execs primarily responsible for the disaster are long gone and bonuses are being paid to those trying to clean up their mess.
I am quite sure everything possible is being done – within the law – to ensure our dollars are not used unless there is no other option.
Passing punitive legislation, faulting Geithner, citing changes in AIG’s condition, all miss the point. That point is we need to fix AIG so we can sell off AIU holdings, Alico, the auto business, and the rest and thereby recoup taxpayer dollars. To expect a Treasury Secretary dealing with the greatest financial crisis in eighty years to know every detail about the bonus plan at one division at one company is ludicrous. Trying to tax these bonuses when most are paid to people that don’t even live in the US is political grandstanding of the worst kind. Trying to weasel out of the contracts using tenuous arguments will do nothing but tie up AIG in litigation for years, likely extending the time it takes to wind down this operation and get our tax dollars repaid. ”
What does this mean for you?
Our officials have done the nation and the good people of AIG a tremendous disservice.

Mar

Coventry to be acquired by United HealthGroup?

Posted by Joe Paduda on Wednesday, March 25th, 2009 | Comments

Rumor is UHG is making a run at mid-tier managed care player Coventry Health. Forbes reported late today that Coventry’s share prices ticked up on the ‘news’.
I’m not surprised; as I noted several months ago Coventry is likely to be sold or dismembered this year. CEO Allen Wise has deep-rooted connections with UHG. Formerly an EVP at United, Wise was also a senior executive at MetraHealth and facilitated the acquisition of MetraHealth by UHG.
Coventry has been battered by news that it missed its medical loss projections a year ago, beginning a slide that continued with a major miss on Medicare numbers in the fall. Former CEO Allen Wise was brought in to assess the situation, a move that led to the dismissal of CEO Dale Wolf, a re-ordering of priorities, and renewed focus on the core small group HMO business (potentially at the expense of Medicare, Medicaid, Workers Comp, and National Account segments).
The deal wouldn’t be good news for providers; according to the Verden Group’s survey of physicians UHG is a mediocre performer in terms of policies, procedures, and reimbursement. Hospitals have a much more negative view of the huge plan, as UHG is considered the worst health plan to work with according to a survey by Davies.
If this comes to pass, there will be much more to consider. For now, it’s just a rumor.

Mar

Doing the devil’s work

Posted by Joe Paduda on Tuesday, March 24th, 2009 | Comments

Merrill Goozner reminds us of why so many dollars are wasted in the US health care system. The prostate cancer scare is exhibit one in the ability of device manufacturers, pharma, and advocates thereof to raise America’s health care costs with their voodoo medicine.
Prostate cancer is usually a very slow growing cancer; many men over sixty have it and few will die of it. Of course some will die young, but overall, far more men (and their loved ones) are harmed by misdiagnoses of prostate cancer and the potentially horrible effects of unnecessary treatment than actually benefit from early detection.
The ugly truth about prostate cancer testing is it doesn’t work. The most common test, a blood test known as PSA (Prostate Specific Antigen) is terribly inaccurate. Men who have been tested have no better survival rate than men who have not.
This isn’t my opinion, it is the finding of research published in The Archives of Internal Medicine in 2006. The authors found that neither a PSA test, nor a rectal exam reduced the chance of death from prostate cancer. And the latest data confirm that testing is a huge waste of money and is wildly inaccurate
OK, so what’s the problem? Men get tested, no harm no foul? Actually there are lots of problems. First they aren’t free – PSA tests range in cost from $70 – $200, dollars that could be saved or spent on more effective medical services. OK, what happens if you decide the heck with the cost, I’m going to get a PSA test. The PSA level can be abnormal even when a man does not have prostate cancer. Seventy percent of positive PSA tests are false positives; the patient does not have prostate cancer.
Not only is this a huge waste of money, but patients who undergo treatment (radiation and/or surgery) may well end up impotent (38% – 63%) or incontinent (13% to 52%) or have bowel issues (5% to 17%). As a fifty year old man, I don’t much like those odds.
What’s even worse is when regular people become unwitting advocates for these charlatans. As I noted several months ago, one of hte more ardent advocates of early prostate cancer screening is Ed Randall, host of the terrific ‘Talking Baseball’ radio show. I’m a big fan of his show, and equally angry about the damage Randall is doing to individuals, their families, and the nation with his unabashed, and ill-informed, support for prostate cancer screening.
I’ve contacted Randall in an attempt to discuss this, but never got a response. The title of this post may be considered inflammatory and over the top. So be it.
What does this mean for you?
Don’t get a PSA test.

Mar

Blunt’s performance as CEO of WSI

Posted by Joe Paduda on Tuesday, March 24th, 2009 | Comments

In my last post I reported my findings that former North Dakota state fund boss Sandy Blunt’s conviction on charges of authorizing sick leave, failing to get moving expenses repaid, and authorization of payment for small gifts and meeting coffee and danish is nothing short of outrageous.
But perhaps these were sought because the guy is a raving incompetent, and under an employment agreement the state couldn’t fire him unless he was a convicted felon, so they got what they could to kick him out.
Further investigation proves that this couldn’t be the case. Documents from an audit conducted by Marsh in Q1 2008 and other sources indicated the WSI made significant progress under Blunt’s leadership. A few of the findings are below.
– the percentage of claims reported in one day (one day!) increased from 6% before he got there to 45% due to a reporting incentive program he initiated.
– revisions to WSI’s safety programs led to a reduction in severe claims from .81/100 workers to .67.
– claim frequency dropped after Blunt created a financial incentive program for employers – before the program, frequency had averaged a 3% annual increase; after claims dropped 3.7%.
– Under Blunt, the fund’s operating ratio, or administrative expense ratio, was 16.2%, dramatically lower than the average state fund operating ratio of 24.5%. (Conolloy and Associates Report, 3/5/08)
– Paid loss trend was less than half of one percent per year, a remarkable result given medical trend in workers comp.
– WSI’s performance enabled North Dakota’s employers to enjoy the lowest work comp premium rates in the nation – a full 52% below the average state (Oregon Dept of Consumer and Business Services study)
There are lots of workers comp insurers, TPAs, and large self-insured employers that would love to have these kind of results.
Clearly the people who brought down Sandy Blunt did so for reasons other than incompetence. Outside the inevitable complaints from claimants complaining about mistreatment at the hands of their insurance company, the evidence seems to be squarely in Blunt’s favor.
Performance at WSI got better when Blunt was there.
Here’s hoping the new guy – you know, the one who was at least tangentially involved in the ‘investigation’ that resulted in Blunt’s dismissal, the one with zero experience in workers comp, can continue to build on Blunt’s successes.
Because he sure has a tough act to follow.
I don’t know why Blunt was targeted with trumped up charges, and fired despite his obvious strong performance. And I’m not going to try and find out.
The more I learn about this, the more I think I’d have to don a hazmat suit before digging any further, because this just stinks of something rotten in North Dakota.
And that smell is coming from whomever decided for whatever twisted and sick reason that a competent manager needed to be fired and have his life ruined.

Mar

Health care reform – have they lost their minds?

Posted by Joe Paduda on Monday, March 23rd, 2009 | Comments

Alas, lost in all the sound and fury about AIG and executive bonuses is the news that many stakeholders in the health care reform debate have lost their collective minds.
Bob Laszewski posted last week about the document signed by many of the more active health care reform groups/advocates suspending the ‘pay as you go’ requirements that require Congress to find sources of funding for new spending initiatives.
Instead, the signatories (including Phrma, the US Chamber, AFL-CIO, Families USA, and various physician and provider organizations) have called on Congress to ignore the final cost of health care reform.
It will come as no surprise that this is happening now, as health care reform is starting to move from the discussion stage to front-and-center. And the broad themes and feel-good goal setting is now being replaced by the much tougher discussion about who gets to pay for reform. As CQ Today reported on 3/9 suspending the PAYGO rules will allow Congress to “avoid tough choices that could splinter” the coalition of health care reform advocates that so far has been fairly unified in its support of reform.
It’s crunch time. Several House and Senate committees will be taking up health care reform legislation this week. We’re now going to get into the nitty-gritty of who wins and who loses – because there simply cannot be health care reform without cost containment.
We cannot afford the ongoing costs of Medicare and Medicaid, much less expand coverage, until and unless Congress and the President make some very hard decisions. Suspending PAYGO is nothing less than an effort to avoid making those choices – to saddle future taxpayers with yet another unaffordable obligation.
To date, the Administration and Congress have gone after health care costs by hitting the insurers and other peripheral players. Now it’s going to get interesting. The device manufacturers, drug companies, physicians and hospitals are all going to have to take a hit – a big one. There is just far too much care, too many medications and procedures, too many services and treatments that are unproven or downright useless. But these treatments all provide big bucks to device manufacturers, drug companies, and the providers who prescribe, dispense, and install them.
Health care reform will not happen until we attack costs.
Unless spineless Senators and Representatives give in to these stakeholders and abandon all fiscal responsibility.
Unfortunately there’s precedence for avoiding fiscal responsibility – Medicare’s Part D program, which now has an $8 trillion unfunded ultimate liability.

Mar

Blunt was railroaded

Posted by Joe Paduda on Sunday, March 22nd, 2009 | Comments

I’m still befuddled by the North Dakota state fund situation. Recall that former CEO Sandy Blunt was tossed out amidst accusations of malfeasance, corruption, theft – pretty much everything bad a CEO could be accused of. I’ve been digging into this, and it turns out the charges against Blunt were discussed in detail in a local ND publication, the Dakota Beacon.
The charges that led to conviction of Blunt on felony charges were in three areas –
– unauthorized use of sick leave by a senior employee. Sources indicate Blunt allowed a departing senior exec to take sick leave when that employee was not actually ill, but was on his way out of the organization. An investigation by the ND State Auditing Organization of the sick leave indicated the exec likely would have qualified for FMLA – and the sick leave authorization was not illegal. As a state agency required to report any potentially illegal activity, this is instructive, as the SAO’s determination came over two years before Blunt was charged and the agency never reported the authorization as problematic.
– failure to get moving expenses repaid – The same employee noted above left before hehad been with WSI for two years, and thus should have been required to repay about $7000 in moving expenses. Blunt had asked the WSI’s internal counsel for her opinion on requiring reimbursement, and in a written memo she advised that she “did not feel comfortable” seeking reimbursement becuase the employee had been asked to leave, and therefore the legal requirement to repay moving expenses did not apply.
– unauthorized use of state funds to pay for meals, gifts, trinkets, and entertainment purposes. Turns out Blunt merely continued to use the same processes that had been in place at WSI before he got there. And, as soon as he determined these might be against WSI’s policies, he stopped them. We aren’t talking trips to Pebble Beach here; we’re talking coffee and pastries for employee meetings, a welcome cake for his own welcoming party (that had been ordered before Blunt even arrived), a flower and small gift certificate for workers on their employment anniversary. These expenditures had been in place for years, had never been questioned before Blunt arrived, and had actually been authorized by WSI’s purchasing department.
This guy is now a felon because he continued purchasing practices that had been in place before he got there, stopped them when he found out they were questionable, perhaps authorized sick leave for an employee on the way out who would have qualified for FMLA, and somehow was responsible for getting that employee to repay moving expenses that the state’s own attorney didn’t want to go after?
My conclusion?
Blunt was railroaded on the basis of charges that at best look to be incredibly nit-picky, and at worst political manipulation of law enforcement by a prosecutor gone nuts.
I’ve changed my mind.
I’m not befuddled. I’m outraged.

Year: 2009