Author: Joe Paduda

Dec
17

Health reform – Pollyannas v Reality

Posted by Joe Paduda on Wednesday, December 17th, 2008 | Comments

I’ve been rather negative about the chances we’ll see major health care reform next year. That doesn’t mean the new Congress and President won’t address significant issues – expect major efforts to change physician reimbursement, enable HHS Sec-to-be Daschle to negotiate with big pharma, slash the Medicare Advantage subsidy, invest in Health IT and expand SCHIP coverage. These are really really big issues, and taking action on more than a couple would, in any other year, be seen as major change.
I’ll bet most of these initiatives will pass, making 2009 the most significant year for health legislation since 1964.
But the voices calling for a huge overhaul of the American health care delivery and financing system won’t be happy unless its a top to bottom overhaul of the entire delivery and reimbursement system. Methinks these well-meaning folks will find themselves unsatisfied, the victim of inflated expectations.
That would be unfortunate, to say the least. We’re moving in the right direction, there is significant momentum, and focus is on the right areas. What we don’t need is a pell-mell rush to pass universal coverage and worry about costs later.
There’s an old adage – if you don’t have time to do it right in the first place, what makes you think you’ll have time to fix it later?
If we screw it up on the front end, we’ll have zero political capital to clean up our mess.

Dec
16

Doing harm by doing good

Posted by Joe Paduda on Tuesday, December 16th, 2008 | Comments

I’m a baseball fan. Weekend mornings I always listen to Ed Randall, one of the more knowledgeable and listen-able baseball analysts; he really knows the game and has a style that is modest yet insightful. For years Mr Randall has been a tireless advocate for prostate cancer screening, and by his efforts he has likely encouraged thousands of men to get tested.
As much as I admire Mr Randall’s expertise in baseball and desire to do good, he’s really doing a disservice to public health. While his efforts undoubtedly result in an increased early diagnosis of many cancers, they are also increasing costs, scaring many men and their families, and likely harming a portion of men who follow his advice.
In his quest to get as many men tested as possible, Mr Randall is causing as least as much harm as good.
First, a little background about prostate cancer. According to the National Cancer Institute, between 27 percent and 37 percent of men between 55 to 74 years of age have prostate cancer. It is a very slow growing cancer; most men who have it end up dying of something else.
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.
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. (if you test negative, there’s only a one-to-two percent chance you still have prostate cancer.) Of course, those who test positive worry about the result, and think they may well have cancer. I don’t know how to place a value on peace of mind, but anyone who has worried about a positive cancer test certainly knows how scary it is. (
When an abnormal P.S.A. level is discovered, most often the next step is a biopsy. Which are often inconclusive. Tissue from a negative screening may have come from parts of the prostate that are free of cancerous cells. If a cancer is found, an operation may not be necessary; remember this cancer grows so slowly most victims die of something else. So, you get an operation, what’s the big deal?
The big deal is 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.
This doesn’t mean testing is futile or pointless. There are undoubtedly many men who would have never discovered their cancer until it had progressed quite far; the men in this group have to thank people like Mr Randall – on a personal level, he has undoubtedly helped save them. But there’s a societal cost for that benefit. Here’s one physician’s view (from the NYTimes):
“I’m a little worried we may look back on the prostate cancer screening era, after we learn results of clinical trials, and see that we’ve harmed a lot of people without doing them good [emphasis added],” said Dr. David Ransohoff, a professor of medicine and cancer screening researcher at the University of North Carolina at Chapel Hill. “By being so aggressive with so many people, did we do the right thing? I don’t know that it’s going to turn out that way.”

Dec
15

Why health reform will be so tough

Posted by Joe Paduda on Monday, December 15th, 2008 | Comments

From the world of workers comp comes a crystal clear picture of what’s wrong with America’s health care system, and how difficult it will be to get it right.
WorkCompCentral has a piece this morning about California’s proposal to not recommend topical analgesics – creams and ointment that are compounded at the pharmacy.
The pharmacy community doesn’t like the proposal, claiming “there’s [sic] prescriptions for these medications, patients have been getting relief, and we think that they should continue to be reimbursed for the medications that are being prescribed for them”.
Opponents of the proposed language also noted that it “conflicts with the DWC’s written policy stating that only “evidence-based, peer-reviewed research concerning the efficacy of a treatment can be the basis for recommending or not recommending a treatment.”
I’d suggest the opposite is the real issue – there is no evidence-based peer reviewed research documenting the effectiveness or efficacy of compounded medications. The pharmacists want to be paid for preparing and dispensing a medication which has not been shown to work. And they are pulling out the lobbyists and PR folks and ‘inhouse experts’ in an attempt to get California to back down.
Further. compounded medications are outside the scope of the the FDA’s authority.
About a third of US health care dollars are spent on treatments that are likely not effective. One has only to look at the history of MRIs, carotid endarterectomy, and angioplasty to identify billions of dollars that have been wasted on treatments that did not help, and may well have harmed, thousands of patients. These treatments, devices, and providers make money for their purveyors and manufacturers, dollars that they are loathe to give up.
Yet the approval process for these treatments/drugs/devices is is almost laughably low. Here’s how a UK researcher put it:

“the FDA dossier showed that the average improvement produced by drugs introduced in the 1960s was 17%, whereas with the drugs introduced in the 1990s it was 16%![emphasis added]…If one looks at the medical interventions we have for many diseases, whether they be psychiatric or neurological disorders, cancer, cardiovascular or respiratory or gastrointestinal problems, or almost any type of illness other than bacterial infections, what evidence-based medicine shows is that, as my colleague found, many of our interventions are pitifully inadequate. Our studies, although beautifully conducted, have been done on patient populations that bear only a limited relationship to those patients we actually see. The number needed to treat to achieve one success over and above that which could be achieved by placebo may be 10, 20, or even as high as 50. Thus, the trials actually give us almost no guidance as to the likely outcome of an intervention in the individual patient who sits in front of us. For many conditions, therapeutic effects are so small that neither the patient, nor the relative, nor the doctor is likely to be able to recognize any differences in the patient’s state as a result of our intervention. We pride ourselves on our large, well-conducted, immaculately analyzed trials that give significant results. But we have forgotten that we need to conduct such enormous trials only because our interventions are so minimally effective. If we were making a really large difference to the outcome, small trials would suffice and provide clearly significant results.”
That’s one side of the argument. Here’s the other.
I give you the condition known as ‘chronic lyme disease’. This tick borne ailment is pretty common in my area (central coast of Connecticut), in fact I live about twenty miles from Lyme. Walk down the main street in Madison and chances are you’ll encounter at least one person who has had recurrent Lyme disease – the mechanic, artist, college student, mom. Yet try to find a doctor who will treat chronic Lyme and you’ll find very few who will risk their reputation and medical license, as several physicians have been disciplined for just that.
The battle over chronic Lyme (and it is a battle) has been brutal, nasty, and vicious. Nay sayers claim no such disease exists, and cite research and articles in prestigious publications such as the New England Journal of Medicine as support for their opinions. Their opponents decry the poor quality and selective nature of that ‘research’, accuse the authors and study leaders of conflicts of interest, and note the successes – patients treated for chronic Lyme that get better.
Anecdotally, I know at least a half-dozen friends and neighbors who have suffered from some condition that robbed them of their energy, caused great pain, and prevented them from doing many of the things the rest of us take for granted. After extensive treatment (we’re talking over a year) with antibiotics, all have gotten better. Much better.
It is abundantly clear that medicine is an art as much as a science, and art is, as famously described, in the eye of the beholder.
And that’s one reason health reform, which must attack cost, will be so very difficult.

Dec
12

Networks in Texas – what are the results?

Posted by Joe Paduda on Friday, December 12th, 2008 | Comments

Back in September the good folks at the Texas Department of Insurance published a most interesting report (shows what a geek I am) – the 2008 Workers’ Compensation Network Report Card. Let’s start with the overall numbers.
Medical costs were about $130 lower for the Texas Star network (a Coventry product) than for the other networks (with non-network claims second least expensive, and all other networks more expensive(!)).
There’s a lot more here, but I’m going to focus on one page in particular – 15 (23 in the pdf file).
More specifically, the top half of that page. It shows (adjusted) average hospital cost per claim, six months post injury, for non-network and several networks. The Texas Star Network’s hospital costs are 5% higher than non-network costs. Corvel’s network costs are significantly higher than Texas Star, and only slightly lower than all the rest of the networks included in the analysis (except Liberty, which has the lowest costs in the study group). Digging deeper into the report, one finds that Texas Star’s higher hospital expense are due to inpatient hospital stays, which are about $3000 more than non-network costs.
By comparison, Corvel’s inpatient costs are a rather stunning twice as high as Texas Star, and over five times higher than Liberty’s HCN.
Like any report, the results generate as many questions as answers. Here are a few of the more intriguing.
Why are Texas Star’s hospital costs higher than non-network?
Texas’ comp regulations require networks include hospitals. Hospitals know this, and according to sources, most refuse to offer any discount, with many forcing networks to pay above the fee schedule. The Texas Star network is priced at around $12 per bill (not including bill review services) or $110 per claim. Thus, the additional cost of using the network is both the access fee, and the ‘premium’ paid to the hospital for the privilege of having them in the network.
Why are Corvel’s inpatient hospital costs so high?
The Corvel numbers look awful, but they have far fewer claimants treated in facilities (a third less than Texas Star, and even fewer than non-network claims). Corvel’s inpatient utilization is very low; most hospital-based care (it appears) is delivered in ambulatory surgical centers and other types of facilities (p. 32). But, the volume of outpatient facility care is off-the-charts higher than non-network claims or any other network’s results.
Which setting delivers the lowest cost per claim?
Too early to tell. Remember, these data are from six months worth of bills. All the expensive claims take years to develop, so we won’t know what the results are for some time. That said, a good chunk of hospital bills hit in the first year of a claim as the acute phase of the injury is treated. While we don’t know what the ultimate result is, it could well be that the inpatient hospital picture doesn’t change much over time.
And what does this mean for you?
Follow this closely, and watch claim development for non-network v network claims. The numbers should start to diverge in favor of networks.

Dec
11

When claims counts drop, these folks yawn

Posted by Joe Paduda on Thursday, December 11th, 2008 | Comments

This has been a work-comp intensive week, for mostly the wrong reasons (little good news to report, little innovation, you know, typical WC…)
I’ll close this overly long trip down WC way with good news – about which vendors will flourish in the coming tough times for WC managed care.
With the number of claims likely to drop precipitously in 2009, the folks least at risk are those least dependent on a continuous flow of new claims. As claims age, the need for hospitalizations, surgeries, MRIs, and frequent and extensive physician visits and procedures drops off. Physical therapy also declines, or at least should if it is managed appropriately (PT should be focused on return to functionality and not palliative services). What’s left is the type of services needed to keep long term claimants, with what have become chronic conditions, as comfortable as possible. Realistically, these folks are not returning to work, so the need for functionality-improving treatment has been replaced with symptom mitigation.
That would be the purview of home health and pharmacy companies, as well as the non-commodity DME (durable medical equipment).
NCCI has published a study documenting the change in medical services over time. Notably, the study, Relative Cost of Medical Services By Age of Claim and Accident Year, shows that pharmacy, supplies, home health, and DME costs go from a relatively small part of the medical dollar in the initial year after the claim is incurred to almost 50% of medical expense for claims more than four years old.
There’s another positive indicator for the purveyors of chronic condition services – there’s some evidence that during recessions, severity increases as claimants stay out on disability longer. Some may not have jobs to return to, others may not be able to find new jobs, but regardless of the cause, claims appear to persist.
These two factors, coupled with the rule-of-thumb that a third of medical dollars are spent more than three years after the date of accident, means there will be lots of dollars spent for ‘chronic care purveyors’ services for years to come.

Dec
9

National health reform – implications for workers comp

Posted by Joe Paduda on Tuesday, December 9th, 2008 | Comments

I’ve gotten several queries about the future of work comp if/when health reform occurs. The real answer is – no one knows. But I’m happy to take an educated guess.
I very much doubt comp will be directly impacted by or addressed in any health reform bill. It is going to be difficult at best to pass health reform legislation; adding comp is unlikely to increase support but would almost certainly drive work comp stakeholders to lobby against the bill. There’s just no upside for including comp in health reform.
Back in the Clinton health reform days, comp was part of health care reform, where it ran into objections (most warranted) from employers, industry types, insurers, and providers. Work comp was addressed in Title X, which “would have required that employees receive all of their health care through the same insurance plan, regardless of whether the injury or illness occurred at home or at work.” For lots of reasons, this was a non-starter.
President Elect Obama may well have learned from his future Secretary of State’s errors: nowhere do the words ‘workers compensation’ or similar terms appear in President Elect Obama’s website, policy papers on health reform, or in the several speeches he has made on the subject.
Finally comp is not linked to/mentioned in the Baucus plan, Wyden/Bennett Healthy Americans Act, or on Sen. Kennedy’s policy pages. These should be viewed as drafts of final bills; if policymakers were actively considering incorporating work comp it is likely we’d have seen it appear in one or more of these bills.
What does this mean for you?
Don’t expect to see work comp directly addressed in reform legislation on the Federal level.
But, any reform initiatives will undoubtedly affect workers comp. Here are a couple specifics.
Physician reimbursement
The fall will be highlighted by a debate over Medicare physician compensation. With docs scheduled to see their reimbursement drop by around 20% in 2010, the caterwauling will be heard loud and clear inside the Beltway. Don’t look for a major policy change, but rather something to satisfy the physician community and build a little equity for the future. My sense is CMS will increase reimbursement for E&M codes (cognitive services). Almost all WC fee schedules are based on Medicare, so any change in Medicare directly and immediately impacts comp reimbursement. Watch Capitol Hill carefully; if Congress passes legislation signed by future President Obama affecting Medicare reimbursement, clinic companies may be big winners.
This will also be good news over the long term for comp in general. Good work comp medical care requires physicians to spend time listening to patients, and talking with employers, adjusters, and case managers. Docs don’t get paid (at least not adequately) for this time, therefore any increase in reimbursement for office visits will encourage docs to spend time with claimants instead of doing procedures. Well, at least not discourage doctor-patient discourse…
Medical care delivery
If there is a major reform initiative passed, there will likely be fundamental changes in the way health care is delivered, the virtual ‘location’ delivering that care, and the evaluation of care.
And that would dramatically affect workers comp.
Today, health care is delivered episode by episode; diagnosis, care plan, treatment, assessment, and repeat steps 2-4 until the situation is resolved. This episodic model of care will (over time) change to one based on functional outcome management – care focused on returning the patient to functionality, and maintaining that functionality.
This will be in large part driven by the growing influence of chronic care and need to develop a better care model to address chronic care, one that will heavily emphasize patient education and monitoring. It will also require a different ‘location’ of care – the medical home.Dr Kathryn Mueller of the University of Colorado sees the medical home model as a big part of the solution in workers compensation, as the medical home may well be the dominant model for delivery of care throughout the health system in years to come. Studies indicate the home decreases medical errors and improves the quality of care delivered. Notably, the medical home model is NOT a primary-care gatekeeper model – but rather a model wherein the physician is tasked with and responsible for coordinating care and educating the patient.
Drugs
If Congress calls for the Feds to negotiate drug prices, this will affect comp in one of two ways. Either comp payers will be able to piggyback on the Feds’ negotiated rates, in which case per-pill prices will come down, or (more likely) comp payers find their per-pill prices increase due to cost shifting.

Dec
8

The double whammy = claim frequency and declining employment

Posted by Joe Paduda on Monday, December 8th, 2008 | Comments

The decline in work comp claims frequency is worrying many in the workers comp managed care business – as well it should. As I noted last week, a drop in the frequency of claims will mean fewer cases to manage, bills to process, and provider bills to profit from.
There is an ‘upside’ to the recession – claim duration could go up. That’s likely true. But the second part of our conversation may well be more important.
During a conversation with the head of a large TPA earlier this week, my colleague made the point that during a recession, claim duration may well increase for a couple of reasons – the folks who are still working are likely older (younger workers with less seniority get laid off first) and we older folks take longer to heal, and have other medical conditions that make the treatment process more complicated, longer, and more expensive.
So claim severity (the medical cost per claim) may well bump up as a result of the recession. But, and it’s a big but, there may be a more dramatic drop in the number of claims than anticipated. The key, as the exec noted, is while there has been a decade-plus long decline in the injury rate, the decline in frequency has been somewhat offset by an increase in employment.
While the economy was expanding, more jobs were being created. The increase in the number of people working offset the decline in claim frequency. (Frequency is measured in terms of injuries/illnesses per 100 FTEs, so the more FTEs the more injuries). Now, jobs are disappearing, with a disproportionate loss from jobs that have higher-than-average injury rates – construction (down 780,000 since December 2007), manufacturing (down 604,000), logistics.
The comp managed care industry has been protected from the decline in frequency by growth in employment, but this growth masked the structural, long term decline in frequency. Now that growth has been reversed, there’s a ‘multiplicative effect’; loss in high-injury-rate jobs times a decline in frequency = bad news for (most) managed care vendors.
What does this mean for you?
Tough times for some vendors; some, but not all. Tomorrow I’ll look at which sectors may be less vulnerable.

Dec
7

The 50 million uninsured

Posted by Joe Paduda on Sunday, December 7th, 2008 | Comments

The number of Americans without health insurance will exceed 50 million by next summer.
Friday’s employment news was just what the country needed to hear before a pre-holiday shopping weekend – a loss of over a half-million jobs in the prior month, driving the unemployment rate up to 6.7%.
That’s bad.
It’s actually worse than that. Due to the vagaries of Federal statistical collection and reporting, the unemployment rate appears to undercount the unemployed. Here’s how the NYTimes’ David Leonhardt and Catherine Rampell put it:
The number of people out of the labor force — meaning that they were neither working nor looking for work and that the government did not consider them unemployed [emphasis added] — jumped by 637,000 last month, the Labor Department said. The number of part-time workers who said they wanted full-time work — all counted as fully employed — rose by an additional 621,000.”
The number of people working part time also looks to be growing, as the average work week has shrunk to just over 33 hours.
One of the many unpleasant implications of losing a job is losing health insurance. Sure, there’s COBRA, wherein a newly-unemployed can keep insurance for a year and a half to three years if they pay the monthly premium plus an admin fee. To do that, a family will pay about $1100 a month, a huge chunk out of whatever severance and unemployment compensation the breadwinner(s) are due. For those that still have a job, they still have to get enough hours to qualify for health insurance; the declining hours worked per week stats indicate fewer and fewer Americans will meet that test, and therefore will lose their coverage.
Historically, a one percent rise in the unemployment rate adds about 1.1 million individuals to Medicaid and SCHIP rolls, and another million to the ranks of the uninsured.
Since December, the US has lost 1.9 million jobs and the jobless rate has jumped from 5 percent to 6.7 percent, increasing the rolls of the uninsured by 1.7 million. (Not all of those workers had insurance through their employers, and some will end up qualifying for Medicaid and their dependents may qualify for S-CHIP coverage in some states). Adding those unfortunates to the 45.7 million + without coverage in 2007 gives us a total of about 47.4 million.
My sense is this is the best case scenario. These days there are a lot more Americans working part time, and with more employers dropping coverage, those folks who still work are stuck – they can’t get insurance through the job and make too much to qualify for Medicaid or SCHIP in most states. Anecdotal information from conversations with insurance brokers in Florida, Colorado, and Texas is scary – most are seeing a significant drop in the number of existing customers renewing their plans for 2009, and those that are signing up are cutting benefits and raising deductibles and employee contributions.
With the unemployment rate projected to hit 8 percent by Q3 2009, we can expect the number of Americans without health insurance to hit 50 million by summer.
Apologies for starting out your week on a (very) sour note.