Jul
9

Is rating the “best” hospitals “good”?

US News’ annual rankings of the nation’s “best” hospitals by specialty is out, and hospital execs and PR staff around the country are either studiously ignoring the release or aggressively trumpeting their selection. Expect to see more billboards, especially around Baltimore, where Johns Hopkins got the top rank, Rochester MN (Mayo Clinic), Florida and Ohio (Cleveland Clinic).
There are several good things about this highly public presentation of “quality”. First, it gets people’s attention. Second, it gets hospital execs’ attention. Third, it provides a somewhat objective review of providers’ quality. Any time the industry is forced to focus on quality, however defined, that is a good thing. While we can, and I will, argue that one set of criteria is flawed, or another is somehow unfair or biased, in the larger scheme the attention paid to “quality” is just as, if not more, important than the actual criteria used. I’m sure I’ll get some heated email on this, but the point is we do not pay enough attention to “quality”, so any device, however cumbersome, that increases focus on quality is good.

Continue reading Is rating the “best” hospitals “good”?


Jun
29

Surgical implants – who’s paying?

Physicians choose surgical implants and devices, hospitals order and pay for them, patients get whatever the docs choose, device manufacturers make lots of profits, and payers foot the bill. A process that is seemingly designed to completely avoid any price sensitivity, and the results to date have shown that there is remarkably little concern about cost on the part of the doc or patient, and at least to date, little ability to reduce costs on the part of the hospital, or payer.
A column in today’s New York Times describes the results of an analysis performed by investment firm Sanford Bernstein (registration required) which compared the costs of surgical implants (artificial hips, knees, etc) at 100 hospitals. Many of these institutions thought they were getting preferential pricing, but the results of the study show that their costs may have been substantially higher than other hospitals’.
The net of the article is that the days of price opacity in surgical implants is likely coming to an end; the research, combined with inquiries by regulators and the US Justice Dept. will shine a blinding light on the arcane world of implant pricing, likely bringing to an end the annual 8% price increases.
There is a subtlety missed in the article, which pertains to the small but important role of the workers comp payer. Sources indicate that a substantial portion of surgical implants are covered by workers comp, a portion much greater than the miniscule overall market share of comp (about 2% of all medical dollars are spent on comp, but figures indicate over a third of surgical implants are paid for under workers comp).
In comp, specifically in DRG states like New York, the cost of the implant is added to the DRG cost, which can increase the cost of the care by 50-70%. Therefore, the wounded parties in comp are not the hospitals (who typically price these procedures on a bundled basis in the group health and Medicare worlds and thereby absorb the cost) but the WC insurers.
What does this mean for you?
More light shining on the murky world of medical costs and procedures is always welcome; be sure to make sure you understand how the bundling and unbundling applies to your contracts and reimbursement.


Jun
22

How does physician income drop while costs increase?

Everyone’s losing in America’s health care mess. Premiums for family coverage are doubling every ten years, and will hit $20,000 per family per year before 2015. While insurance costs are going up, physicians are actually making less. Physician income decreased 7% (registration required) in real terms from 1997 to 2003. Specialist earnings dropped the least (2%), while primary care docs saw a 10% decline. And Medicare reimbursement rates will likely decline in nominal terms in the near future.
The data, from a study by the Center for the Study of Health System Change, seem at odds with the daily torrent of reports on exploding health care costs. If health care costs and insurance costs are rising, how could docs be making less?
There is good news buried in CSHC’s report – the amount of time physicians spend actually treating patients has increased significantly, while the time devoted to administrative tasks has declined.
It appears the answer lies in declining reimbursement rates. These hard-working docs are spending plenty of time (over 45 hours a week) with patients, but their reimbursement rates have not kept pace with inflation. For example, Medicare has increased fees by 13% during the study period, while the underlying inflation was 21%. And, private payers’ reimbursement declined from 143% of Medicare’s rate in 1997 to 123% in 2003.
So, clearly physician income is not a driver of medical inflation. One driver appears to be the increased volume of tests performed; utilization in this area was up at a 6% annual rate over the study period.
But the real driver appears to be higher utilization of physician services (more docs doing more stuff), and, slightly less important, a significant increase in hospital and facility costs.
Oh, and drug costs continue to rocket skyward…
What does this mean for you?
Higher costs, lower incomes = unhappy consumers and providers does not = change…yet.


Jun
19

Ohio’s BWC to cut payments to hospitals

Ohio’s Bureau of Workers Compensation will no longer be subsidizing indigent care at the state’s hospitals. The recent announcement that BWC is cutting reimbursement for inpatient care to Medicare plus 15% is one of the positive outcomes of the Hydra-headed scandal at Ohio’s Bureau of Workers Compensation.
And it appears likely that BWC will next cut payments for outpatient services, which make up a much larger slice of the medical expense pie.
Ohio joins several other states, including Pennsylvania. Connecticut, Rhode Island, California, and Maryland, all of which base workers comp reimbursement on Medicare costs plus a percentage.
Notably, the press has been somewhat neutral in its coverage of the change, with a recent editorial allowing that the reduction will simply result in cost-shifting to other payers. That is an inevitable result; however there is no logical, ethical, or legal requirement that the state’s employers pay for the inefficiencies or hospitals or society’s failure to provide insurance for all citizens.
Work comp has been a very profitable line of business for the state’s hospitals, generating over a half-billion dollars over a seven year period. That figure covers both inpatient and outpatient care, with outpatient significantly larger.
What does this mean for you?
On a micro level, lower costs for workers comp in Ohio; on a macro level another push for universal coverage.


Jun
12

More reimbursement nastiness

Reimbursement policy has long been one of the more misused means of managing the cost and quality of care. Providers and payers have long fought over risk withholds, capitation, per diems, case rates, and their kin, all in an effort to maximize, or minimize, payout.
By fighting over these issues, the parties are getting no closer to a resolution, and are doing themselves no favors. Instead of this no-win battle, providers and payers should be focusing on the real problem – the un- and under-insured.
But first, the detail on this squabble. The latest trend comes out of California, where Wellpoint has decided to pay docs less for performing colonoscopies in hospitals than in their offices or ambulatory centers. The cut in reimbursement for hospital-based procedures is about 20%, while the increase for non-hospital-based services is 5%.
Readers will no doubt be shocked to hear the hospitals are crying foul, using patient safety as the instrument to bludgeon Wellpoint. Unfortunately, this dispute breaks no new ground in the care v cost dialogue, with CA Hospital Association president Duane Dauner saying “Health plans shouldn’t force doctors to make patient-care decisions based upon money.”
The response from Wellpoint was predictable; “It’s really litigation over dollars, not patient safety,” WellPoint spokesman Robert Alaniz said”, noting that hospital-based colonoscopies could cost “up to ten times” more than non-hospital services.
Without data on actual quality outcomes and specific cost differentials (something a little more specific than “up to ten times more expensive”), it’s hard to cut thru the sound bites. That said, I’m having a tough time with Dauner’s statement that health plans should not ask docs to factor in cost when considering patient care decisions. That’s the attitude that has gotten us to where we are – runaway costs are due in large part to the “buyer’s” ( the physician exerts the most control over the buying decision ) complete lack of concern over costs.
There is a separate issue here; hospitals continue to rely on overpayments by private insurers such as Wellpoint to pay for the underpayments of Medicaid and nonpayments by the uninsured.
If providers and payers addressed the underlying disease state (access) instead of fighting over the symptoms (payment differentials) they might actually have some chance of getting to a solution. Instead, they insult, degrade, and denigrate each other, eliminating any chance for constructive dialogue.
When do the adults take over?


Jun
7

Ohio hospitals’ misguided complaints

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


Jun
5

CMS data release – and their point is…?

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


May
31

UHC fighting the wrong battles

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


May
30

Physician income, priorities, and the free market

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


May
26

Concentra to announce major deal in Q3

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