Medicare physician reimbursement – a two year fix?

It looks like Congress may well include a two-year fix for Medicare physician reimbursement in a sort-of catch-all bill focused on extending the payroll tax cut.
At least that’s the way it looks this morning.
The Medicare SGR formula/process was first implemented in 2000, intended to establish an annual budget for Medicare’s physician expenses and thereby better control what had been steadily increasing costs. Each year, if the total amount spent on physician care by Medicare exceeded a cap, the reimbursement rate per procedure for the following year would be adjusted downward.
And for ten of the last eleven years, reimbursement – according to SGR – should have been cut, but each year (except 2002) it was actually increased, albeit marginally. The result is a deficit that is now about 300 billion dollars, a deficit that we’re carrying on our books, and, by the way, is not addressed in the bill currently under consideration in Congress.
The reason the deficit is still there, and still growing, is simple – fixing SGR permanently would require acknowledging the deficit and thereby adding it to the total debt.
But not fixing SGR may well be worse, as it is a fatally flawed cost containment “approach”. The SGR attempts to use price to control cost. The complete failure of the SGR approach to control cost is patently obvious, as utilization continues to grow at rapid rates. This was a problem four years ago, and its done nothing but get worse. Not only does the RBRVS/SGR approach contribute to cost growth, it also ‘values’ procedures – doing stuff to patients – more than listening to them (I realize this is an unfair comparison, for more click here).
There is at least one Senator willing to acknowledge the accumulated deficit Sen Jon Kyl (R AZ).; Kyl is proposing using the “savings” from ending the engagement in Iraq and Afghanistan to offset the accumulated deficit, thereby allowing Congress to come up with a permanent fix. Kyl’s backed repeal of SGR before, notably when he joined with Sen Majority Leader Harry Reid (D NV) to push the Super-Committee to include the fix in their work.
What does this mean for you?
Fixing SGR for two years will remove this political dynamite from the landscape till 2014 – and give some stability to provider prices based on Medicare (which applies to lots of group and workers comp contracts).


Is York Claims buying Avizent?

I’d have to say “Yes.”
Several sources have confirmed that the rumored acquisition of Avizent by York Claims is an all-but-done deal.
York was a small, low-price NYC-based TPA a decade ago, a subsidiary of AIG (who had bought the company from the founding family) that won business on low bid awards. THe offices were modest (to say the least), staff over-burdened and under-qualified. Over the last ten years, the company has evolved been transformed into what is now a well-regarded, well-positioned TPA with offices in a dozen states, thousands of customers, and a growth record that’s pretty impressive given the economic conditions of the last few years.
Purchased by management and private equity firm Bexil in 2002, York was acquired by Odyssey (another private equity firm) in 2006, where York’s growth accelerated through acquisition and new clients. York acquired several TPA and related businesses including Southern California Risk Management Associates (SCRMA) and Bragg and Associates, expanding the company’s reach in California and the midwest.
Columbus Ohio-headquartered Avizent looks to be the next company purchased by York. Not to be confused with Advisen, Avizent is a well-regarded TPA that has also grown, albeit primarily via new business acquisition. With its roots in the old Frank Gates organization, Avizent added FA Richard (FARA) in 2010, a major deal that greatly expanded Avizent’s business in the south.
The contract is done, due diligence essentially completed, and it’s just details and timing now.
What does this mean?
There’s been a lot of consolidation in the claims administration industry. Industry leader Sedgwick has been acquiring various and sundry claims services and claims related entities for several years, Gallagher Bassett bought GAB Robins back in 2010, and regional TPAs have been consolidating – or closing – as the soft market has dramatically affected their business.
These deals have removed competitors and added strength in different geographic areas and industry sectors.
Now that the market looks to be hardening, TPAs are positioning themselves for organic growth. As insurance premiums increase and insurance becomes harder to find, more employers are going to turn to self-insurance. The TPAs that have survived the brutal conditions of the last few years are – in general – well positioned to flourish.
(Note I asked both entities for comment; if I hear back I’ll provide an update)


Brad’s Christmas list suggestions

Brad Wright’s edition of Health Wonk Review has suggestions for everyone on your list – from wonkers (that’s with an O, not an A !) to President Obama to Florida-domiciled relatives to the skeptic to the health reform repealer.
It’s kind of like Philippine boxer Manny Pacquiao, short, sweet, and packing a big punch…


Aetna’s exiting the work comp network business, part 2

Here’s what Aetna provided in response to my questions about the termination of their workers comp business. The company did not directly respond to my queries about who was going to keep access for how long, and there’s a good bit of corporate-speak here.
If I hear more inside info about the decision I’ll pass it on…
“Aetna is focused on committing resources to areas where we see the greatest potential for growth and where we can deliver the greatest value to our customers. After reviewing our business portfolio, we made the decision to transition out of the AWCA [Aetna Workers Comp Access] business so that we can invest in other areas of the enterprise where we see greater opportunities for growth. We notified our customers of this decision earlier this year and have committed to honoring all existing contracts, which in some cases run through the end of 2013…
Since we are transitioning out of the business over a two year period, there will be no immediate impact to the services that we provide to our customers or to the employees that support the AWCA business. We will continue to monitor our staffing levels to ensure that they are in line with our business needs and will look for opportunities to realign staff to other business areas as appropriate.”
Readers will recall AWCA laid off a number of customer-facing staff early in 2011, so there may not be many left to go.
Initially Aetna said no other business areas were affected; in subsequent conversations I learned they will no longer underwrite the insurance risk for PetsBest pet insurance – but that’s it.


Where work comp networks are headed

There are three types of physicians – the few really good ones, the few really bad ones, and most who either aren’t good or bad, or you just don’t have enough information to tell. The problem with most networks is you can’t de-select/kick out/avoid the bad docs without going thru lots of effort.
That’s about to change.
Most comp provider networks are pretty much interchangeable – a big directory of every provider alive – and some not – that’s agreed (usually) to give a discount to payers accessing that network’s contracts.
A great friend and colleague referred to these networks by the mildly-pejorative term “a box of contracts” many years ago – and that description, unfortunately, still fits.
Recently I’ve had yet another opportunity to evaluate a network – or more precisely, a managed care firm with an interesting network ‘capability’. The company is Anthem Workers’ Comp (subsidiary of Wellpoint), and their network offering is somewhat unique – somewhat more than that proverbial box.
First, buying power. Originally created by Blue Cross of California back in 1992 as a for-profit managed care subsidiary, Wellpoint is comprised of what we used to know as Blue Cross and Blue Shield plans. Anthem is an operating entity under giant healthplan Wellpoint, which was ‘created’ back in 2004 when the two companies merged. Health Plans in California, Colorado, Indiana, Kentucky, Missouri, Nevada, Ohio, New York, Virginia, Wisconsin and a few other states were acquired by the parent over the years, and those plans, along with new plans in other markets, form what is now the nation’s largest health plan company.
(The work comp network isn’t available in all areas, but is limited (for now) to California, Colorado, Nevada, Missouri and Southern Illinois.)
Wellpoint is best known for their dominant market share in the group health (and governmental sectors) in California and several other states. Several years ago, Wellpoint decided it was going to be a major force in work comp. Leveraging their provider contracts and relationships, they began contracting in California, which remains the core market. As Wellpoint is one of the dominant players in the state for non-comp business, the list of providers is rather extensive, as is their buying power. The result is clients get pretty good deals with most providers. (That’s not to say there are any bargains out there for comp payers – far from it. Unfortunately work comp remains one of the best payers in most states, especially for hospitals and facilities.)
So far, pretty standard stuff – big health plan uses its buying clout to get providers to sign work comp deals. Here’s the second point; Anthem (the brand they operate the WC sub under) has a unique offering – customers can use Anthem’s network ‘selection’ tool to pick whatever providers they want. Now operational in California, payers are essentially building their own, customized workers comp MPN.
According to Anthem work comp president Bob Mortensen, payers are able to pick and choose whatever providers they want from Anthem’s directory. If they want to focus on one county, one region, or need a custom MPN in a few different communities they can do that. For those payers who want a small MPN with relatively few physicians, that’s their choice. How they select providers, the criteria they use, that’s up to the payer.
I’ve spoken with a couple of their customers, and they are generally pleased with the result.
Big insurers and TPAs that work with large self-insureds need the flexibility to add or remove docs as those employers see fit. As payers increasingly push for smaller and smaller networks comprised of physicians who understand work comp and treat appropriately, the ability to manage their own network will gain more traction.
For insurers with lots of mom-and-pops, big networks with lots of providers are critical, as there’s precious little chance a claimant will think to check the posted panel before seeking care.
The big advantage to Anthem’s approach is this – they’ve got the world under contract, and you can pick and choose which docs you can exclude. Because those are the ones that do the most damage: the ones who overprescibe opioids, refuse to release to return to work, recommend spinal fusion far too often, don’t communicate with payers and employers, and generally deliver lousy care.
What does this mean for you?
Anthem is building what looks to be a reasonable alternative in multiple jurisdictions.
Competition is good.
While it would be great to be able to identify the docs who are definitely the “best”, that’s hard to do for myriad reasons: not enough data, inaccurate data, low claim frequency, diverse patient population, the list goes on. But rather than focus on the good ones, there’s a lot to be gained by identifying the ones at the other end of the spectrum. And once those outliers are gone, results will improve – probably dramatically.


CMS Director Don Berwick’s gone. Now what?

Now that Don Berwick has returned home from Washington, what’s to become of Medicare?
The former head of the Centers for Medicare and Medicaid, widely acknowledged as one of the brightest and most effective health care executives in the nation, was only there for 17 months, a victim of politics. That’s sad, disheartening, and deeply concerning.
Here was a guy whose life’s passion is to improve the delivery of health care; one who founded and turned the Institute for Healthcare Improvement into one of the most effective agents for change in the nation; who, by all reports was doing a masterful job at CMS changing the culture to one of continuous improvement in the quality of care delivered while reducing the cost of that care.
Yet Dr Berwick couldn’t get approved by the Senate. He was rejected by Republican Senators who vilified him for such blatant transgressions as:
– complimenting one aspect of the British National Health Service (while ignoring Berwick’s pointed criticisms of NHS),
– explicitly acknowledging the US health care system rations care, and calling on politicians to acknowledge that fact as well (a quote remarkably similar to one from GOP Rep Paul Ryan)
These attacks were misguided, politically motivated, and in most instances relied on taking highly selective, out-of-context quotes to misrepresent what Berwick was actually saying.
For those unfamiliar with IHI, the basic premise was to take improvement techniques learned in industry and seek ways to apply them to health care. IHI has had a major impact on all areas of health care; their Improvement Map is widely used and demonstrates the Institute’s focus on bringing quality improvement – carefully thought out and rigorously evaluated – to health care.
What bothers me – a lot – about this is politicians decided that demagoguing and scoring political points was more important that reforming Medicare.
What Don Berwick was trying to do was exactly what needs doing – reform CMS to improve quality and strip out unnecessary cost. If we are ever to get health care costs under control, we have to do so by rationalizing what services get delivered, in what setting, by which providers, to which patients. CMS can be, and under Berwick has been, an enormous force for positive change.
The good news – to the extent there is any – is Berwick’s replacement is an accomplished, effective health care exec with a long history of achievement. Marilyn Tavenner.
Here’s a quote that bodes well for her tenure:
“The only way to stabilize costs without cutting benefits or provider fees is to improve care to those with the highest health care costs.”
Here’s hoping Ms Tavenner is actually allowed to do just that.


Aetna’s exiting the work comp network business

Aetna Work Comp Access will be exiting the provider network business. Over the next couple of years, current direct customers will be losing access, with the duration of access dependent on whether the relationship is direct or through a reseller. I’ve got my own opinions on why, but will hold them for now in hopes I hear back from Aetna soon.
This hasn’t been announced publicly, but sources indicate all AWCA’s direct clients were informed over the last couple of months, and the ‘indirect’ clients – those accessing AWCA through Coventry or another entity – are finding out thru their account managers (if not, to misquote Desi Arnaz, “you got some ‘splainin’ to do…”).
First, a bit of history. Veterans of the industry will recall Aetna made a big push into the WC provider network business back in 2006, positioning itself as a competitor to Coventry/First Health. An executive team was hired, staff came on board, and they were off and running. Some years later, senior management at Aetna decided to change course, and instead of competing with Coventry, they became Coventry’s network in what they said at the time was nineteen states.
Coventry’s been using Aetna as their underlying network in about 15 states since late in 2007.
Shortly after, senior management was terminated in a surprise move in September, 2008.
More recently (January 2011 to be precise), most of their customer-facing staff were laid off r and Aetna ended (most of) their direct relationships and pushed those customers to work thru their resellers, including Coventry.
I spoke with David Young, President of Coventry Work Comp about this, and here’s what he had to say.
Way back when the two entities first got together, they included what David called “divorce provisions” in the deal they structured. Back in January Coventry got notice to term contract at beginning of year. Over the course of 2011, both parties were in discussions, with Coventry looking to renew the relationship. That was not to be. Early this fall, Aetna confirmed their intent to exit the business.
As a result of those “divorce” provisions, Coventry’a network customers will have access to Aetna’s network thru 12/13. David believes this is longer than any other entity (I’ll ask Aetna when I hear back from them). Coventry plans to use that two year window to evaluate their current network, figure out where they need to backfill, and get as much as possible of that done before the clock stops ticking.
So far, Young’s analysis indicates Coventry’s current non-Aetna direct and leased network contracts can cover about 70%+ of the dollars flowing the network. They’re starting a targeted recruitment effort in areas most affected by Aetna’s departure, and are looking to strengthen relationships with current leased network partners as well.
Of course, David was quick to note this has no bearing on their interest and commitment to the WC business – Coventry is commited to the comp business. I believe him. They are making so much money from comp that they’d be nuts to get out – and Chairman Allen Wise is not nuts.
That said, this opens up the door for other network companies, as large and mid-sized payers, network aggregators, and bill review companies are looking hard at alternatives.
One last point. A lot of work comp dollars flow thru Coventry’s networks, and they aren’t shy about using those dollars to squeeze providers for better pricing. David indicated they’ve had success in negotiating deals with two health systems recently doing just that.
I hope to hear from Aetna tomorrow.


Kudos for CVS, and a warning for you

The giant pharmacy/PBM company has told some Florida physicians they will no longer fill their scripts.

The article by the St Pete Times’ Letitia Stein, reported “CVS pharmacies appear to be flagging prescriptions for a specific combination of medications with high potential for abuse — oxycodone, Xanax and Soma…”. CVS is focusing on a relatively small group of doctors; this isn’t a blanket policy. These docs received a notice from CVS stating:
“CVS Pharmacy Inc. has become increasingly concerned with escalating reports of prescription drug abuse in Florida, especially oxycodone abuse…We regret any inconvenience that this action may cause. However, we take our compliance obligations seriously and find it necessary to take this action at this time.”
Pharmacies are obligated to refuse to fill scripts they believe are questionable; some, including Titan Pharmacy in New York, believe strongly in this obligation. Unfortunately the vast majority don’t. If they did, the current disaster in opioid overdosing would be much less of a problem.
Which is a nice segue to our next news item – WorkCompCentral’s John Kamin reported [sub req] this morning that the widow of work comp claimant who reportedly died as a result of an oxycodone overdose can pursue death benefits.
That’s right – a comp claimant, who was receiving drugs as a result of a work comp injury, died and the carrier may be liable for death benefits.
In this case it appears that the prescribing physician was careful and judicious, as the patient was prescribed a total of 60 mg of oxycodone (equivalent to 120 MED, the generally accepted dosing limit)
. And, the patient’s toxicology report appeared to indicate much higher usage than expected.
With all that said, the warning here is clear.
Some number of work comp claimants die as a result of opioid usage, and the employers/insurers who own that claim may well face liability for a death claim.


Repealing health reform – 20-20-20

If health reform is overturned, 20% of Americans may be without coverage in 2020, yet we’ll be spending 20% of our GDP on health care.
That’s David Blumethal’s prediction in today’s New England Journal of Medicine.
Blumenthal walks thru three potential electoral scenarios: status quo with the Democrats retaining the White House and Senate (ranked as unlikely); the GOP winning the Senate, House, and the Presidency; and what may be the most likely outcome of November’s elections: President Obama re-elected with a GOP-dominated Congress.
If the GOP wins the trifecta, ACA is dead, and at least at this point, there doesn’t look to be any Republican alternative to health reform that would fill the “replace” part of the “repeal and replace” slogan. Blumenthal notes that after blasting health reform for the last several years, a GOP administration and Congress would find it difficult to then legislate a new approach.
Moreover; ” the traditional Republican approach to covering uninsured Americans [is] an individual tax credit subsidizing purchases of private health insurance funded by ending the tax exemption for employers’ contributions to employees’ health insurance. Many employers and employees oppose this idea, and it would be difficult to pass without a major political fight. Historically, Republican presidents have been reluctant to take on the political costs of comprehensive health care reform, and the last thing a new Republican president will want is to fall on the political sword that impaled his predecessor.”
So, what does this all mean?
Repealing health reform will undoubtedly lead to more people without health insurance. My best guess is we’re somewhere in the 52-53 million range now, an all-time high due to the recession and ever-higher employer premiums coupled with an individual market that is essentially closed to all but the most affluent, healthiest Americans. Without limits on medical underwriting, it will become increasingly difficult for those with pre-ex conditions to get coverage in the individual market – and in many states, the small employer market will be severely restricted as well.
Blumenthal predicts as many as 65 million Americans will be without health insurance in 2020 – eight years out. I think he’s optimistic.
As more go without insurance, cost-shifting to those with coverage will increase, driving up their premiums even faster. The vicious cycle will accelerate, and as costs rise, employers and families will drop coverage, dumping more cost onto the ever-smaller population of insureds.
I’ve been predicting family premiums will top $30,000 this decade. If ACA is repealed, that timetable will accelerate, and perhaps then America will wake up.
Then again, probably not.

Thanks To Merrill Goozner for the tip.


Where did the jobs go and will they ever return?

You know them – the friends and colleagues without work, the folks who’ve been looking for a job for months and months. Perhaps they’ve sort of dropped out of sight, embarrassed about their inability to find work. Maybe you stay in touch, passing on leads and dropping an email or call occasionally to check in.
Or this might be you; laid off from what looked to be a solid job, terminated as a result of a corporate directive or faceless superior’s decision or lack of business or tax revenue.
Whether it’s personal or professional, there’s something very different about this economic recovery. Just beneath the surface of the Occupy Wall Street and Tea Party movements is a palpable fear, a desperate sense that “I could be next”. This isn’t about assigning blame or lamenting missed opportunities or decrying failed economic policies, it’s about trying to understand what’s happening, why, and what we can do.
Because there’s something structural going on, something much deeper than we’ve been able to explain.
We know there are far more people looking for work than jobs available for workers – according to WCRI’s Rick Victor the total number of jobs we’re going to create over the next decade is about 3.5 million, matched against around 25 million potential workers. Between the newly unemployed (a declining number, thank goodness), the long-term under-employed (those working fewer hours or at part time jobs and/or for lower wages), and long-term unemployed (those out of work for six months or more) and those with some partial disability that prevents them from working at their past position and limits their attractiveness to new employers, the population without work today totals around 15 million.
While I’m far from a labor economist, there are a few trends I’ve been following that provide some insight into what’s happening.
1. State and municipal workforces are declining, disproportionally hitting minorities and removing “middle class” jobs with excellent benefits from the available supply. This trend is well-established, having begun in mid-2008.
2. Construction – especially housing construction – continues to suffer, and will likely not recover. As people move from exurbs into close-in suburbs and back to cities, there’s little demand for – and a huge oversupply of – single family tract homes.
3. Increasing automation – in the name of efficiency and higher quality in manufacturing – has sucked huge numbers of jobs out of the economy (Five million over the last decade alone, driven in large part by automation). Factories that used to need hundreds of workers now need a few dozen, and the jobs that are gone are usually at the middle skill levels – above laborer but below highly skilled machine operator.
4. A woefully low level of investment in infrastructure – whether it be new or maintaining existing transportation, energy supply and communications – means there are few jobs for out-of-work construction workers, and low demand for machines and materials needed to build and maintain infrastructure.
A deeper discussion of trends and a utopian vision of a solution comes from a well-regarded sociologist, Herbert Gans, who writes “the current jobless recovery, and the concurrent failure to create enough new jobs, is breeding a new and growing surplus pool. And some in this pool are in danger of becoming superfluous, likely never to work again.”
So, what does this mean for health care?
Well, if you don’t have a job, you aren’t going to have employer-based health insurance. And you probably can’t afford COBRA, so you are likely going to either a) go without insurance, or b) enroll in Medicaid. If it’s ‘a’, then if and when you need health care, the providers are going to have to charge others more to pay for your needs.
If it’s ‘b’, then taxpayers are going to have to pay more for your care, while providers are going to charge other payers more to make up for the shortfall between what it costs to provide that care and what Medicaid pays (it’s not this simple but close).
If you’re an injured worker due to an occupational injury, it is going to be hard to find a new job – which will add cost due to an extended disability duration.
I’m no Luddite, but I am a realist. Unless we get our economy moving – which will require heavy investment in infrastructure – we aren’t going to see much improvement in employment over the near to mid term.