Surgeons and carpenters

A very interesting post from a surgeon defending his profession from an attack by someone stating that surgeons are no different from carpenters plumbers and engineers.
Those of us on the payer side of the table would do well to remember that there are passionate, highly intelligent, motivated and great people on the “other” side. Perhaps we should make that table round instead of rectangular?
What does this mean to you?
We are in this together, and insulting comments, intended or not, damage our mutual desire to deliver for our mutual customers.


Emergency department usage increases

There has been a substantial increase in the use of emergency departments in recent years. A new report from the Centers for Disease Control indicates the number of ED visits reached an all-time high of 114 million in 2003.
The increase was attributed to adults, and more specifically Medicaid recipients who used EDs four times as often as those with private insurance. One of the report’s editors noted that the ED has become the provider “of first resort” for many of the poor and uninsured.
With the present political wrangling over the future of Medicaid and the uninsured, this report points out one of the most troubling aspects of the “delivery systems” used by the poor. Care delivered through the ED is typically more expensive, time-consuming, and less coordinated than care delivered through a primary care provider. Tests and imaging are often duplicated, there are often problems with continuity of care, and patients with chronic conditions seek care for acute episodes in the ED rather than through their primary doc.
It is impossible to calculate exactly how much money is wasted in this process, but it is certainly in the billions of dollars.
Clearly the industry needs to do a better job of directing patients to appropriate levels and locations of care. Having been involved (albeit years ago) in a state Medicaid reform effort, I have some understanding of the problems involved. However, it is clear that the quality of care delivered is too low and the cost of that care is too high when it is provided at an emergency department.
What does this mean for you?
Redouble efforts to direct patients to primary care. Work with providers to set up streamlined primary care access next to the ED. Yes this is a big problem with lots of issues, but we can’t afford to not address it.


HMO profits up 33%

Although health plan profits were up substantially in the first 9 months of 2004, only five companies were responsible for over half of those profits. Weiss Ratings’ (along with Fitch, my favorite rating firm) analysis excluded Kaiser, which had gains of $1.2 billion primarily from a regulatory change.
Four of the top five were HMOs owned by Blues plans, with the leader Blue Cross of California posting over $400 million in profits for the period.
Even more notable was the overall improvement in the industry’s financial condition, Weiss upgraded 65 HMOs and only downgraded 3. This improvement was driven by a 33.6 percent increase in profitability.
Other reports indicate the decline in the rate of medical inflation coupled with increased premiums have been largely responsible for the improvements. United HealthGroup, Coventry, Aetna, and others have all reported this “decrease in the rate of increase”.
Good times never last; consolidation in the industry has led to its’ present oligopolistic condition. Thus, health plans have three choices if they are to grow – take market share by cutting price; acquire other health plans; or seek other sources of revenue. Actually, there is a fourth – seek to reduce “cost of goods sold” by reducing reimbursement to providers, but this is highly unlikely to succeed.
The pace of acquisition will likely slow for the simple reason that there are fewer health plans to acquire. Potential candidates include Coventry, but their high-flying stock price likely precludes any move in the near future.
Plans are actively and aggressively, seeking new sources of revenue. The move into workers comp network rental by Aetna and Wellpoint are but two examples. However, it is highly unlikely that there is enough revenue in the ancillary lines to please the Street’s demands for ever-increasing growth.
That leaves price cutting. Yes, all will claim they will never repeat the mistakes of the past, and most will do so anyway. Good times never last, especially in the insurance industry.
What does this mean for you?
Three things.
1. If you are a provider, watch the new contract offers carefully.
2. If you are a workers comp payer, lock these new entrants into long term contracts with significant exit penalties – their interest will likely wane when they figure out how little money there is in workers comp, leaving you high and dry.
3. If you are an analyst, monitor pricing and medical inflation, especially the components of inflation (frequency and utilization) more than unit price. That is where renewed inflation will first appear.


Generalists v specialists

Roy Poses MD has posted an insightful, brief, and trenchant look at the trend for new physicians to select specialties other than internal medicine, family practice and the like.
To quote Dr. Poses,
“However, as demonstrated by the issues discussed on this blog, not only are generalists at the bottom of the economic pecking order, they seem particularly impacted by the huge rise in health care bureaucracy, and particularly vulnerable to challenges to physicians’ professional values instigated by large organizations lead by leaders with conflicting interests. They will need more than new “chronic care models” to survive these threats.”
The continued trend to more highly compensate specialists is driving physicians to select specialties. The root of this is compensation, followed closely by the hassles inherent in today’s managed care bureaucracy.
What does this mean for you?
For once, this is simple – the more specialists, the more specialty care, the more expensive the care, the higher the medical expense.


Ambulatory Surgical Centers’ future

So-called “specialty hospitals“, facilities typically owned by for-profit firms and/or practicing physicians, have been the subject of much debate by the Centers for Medicare and Medicaid Services (CMS). Now, it looks like CMS will continue their ban on new facilities at least until the end of the year (and just possibly till 1/1/2007) while they study their impact on cost, quality, and the full service hospitals they compete with.
Specialty facilities focus on a relatively narrow branch of medicine (e.g. spine, cardiac, orthopedics, cancer), are often owned by a partnership including the physicians admitting patients and a for-profit corporation, and rarely have an Emergency Department, overnight stay capacity, or trauma units. What they do have is state-of-the-art facilities, excellent “customer service”, efficient management, and lots of profit potential for the owners.
At issue with CMS is the definition of hospital and whether the specialty facilities meet the CMS definition. This is important because reimbursement is typically better for “hospitals” than for non-hospital facilities (many of these specialty hospitals would likely be classified as ambulatory surgery centers which receive lower reimbursement).
According to Congressional Quarterly,
“The (CMS specialty hospital internal) review also could lead the agency to require some specialty facilities to add emergency departments, which “ten[d] to attract Medicaid and other low-income patients,” CQ HealthBeat reports (CQ HealthBeat, 5/12).
California HealthLine also reports “In addition, CMS is expected to adjust Medicare reimbursement rates for all providers to better reflect the severity of patients’ illnesses, which could lower reimbursement rates for some specialty services.”
Congress appears to favor allowing new specialty hospitals into the CMS provider world, with House Energy and Commerce Cmte Chair Barton (R TX) noting he considers McClellan’s action to be a reasonable compromise.
“The rise of specialty hospitals will press traditional community hospitals to become leaner, faster and better,” he said (AP/Las Vegas Sun, 5/12). Speaking in response Democrats’ concerns about physician self-referrals, Barton said, “The real fight … here is not about quality of care,” adding, “It’s about control and ownership.” He said that banning specialty hospitals goes “against everything in the American culture that says specialization is good.”
What does this mean for you?
As the Centers for Medicare and Medicaid Services (CMS) goes, so go commercial payers. The moratorium on specialty hospital construction has served to halt, or at the least reduce, the number of new facilities seeking licensure throughout the country. If CMS moves forward and allows new construction, watch for changes in reimbursement.
It is possible, and some say likely, that reimbursement levels for these facilities will be lower than for full-service hospitals. As many commercial and state (e.g. workers’ comp and auto liability) fee schedules and reimbursement contracts are based on CMS’ Medicare rates, there will likely be a significant impact on the volume of services delivered through these facilities and the price as well.


More on cheating docs

Gary Schwitzer has posted a quick item in his blog providing more detail about the financial benefits to physicians of “leasing” imaging services. For those who missed the article in the Wall Street Journal, Schwitzer’s blog has a link and excerpts.
The net – a physician referring two MRIs per day would net over $120,00 annually.
What does this mean to you?
Hmmmmm, some perverse incentives to increase imaging utilization, perhaps? A more subtle way to cost-shift, to capture more income to offset lost income due to reduced Medicare reimbursement? Outright fraud? or all of the above?


Medicare cuts in MD reimbursement

California HealthLine has an excellent roundup of Medicare news. Most significant is their take on physician reimbursement, which is slated to be cut by 4% on 1/1/2006. Lawmakers appear to be interested in rescinding the cut, which would be consistent with their actions the last time Medicare physician reimbursement cuts were slated to take place.
Expect changes late in the year or early next – I know, early next year would be after the cuts are scheduled to take effect. The political winds are moving in that direction, with the AMA and AARP staking out positions (no surprises there)
What does this mean for you?
1. With most state WC and other fee schedules tied to Medicare rates, cuts in physician reimbursement will directly affect payouts in these lines of insurance.
2. If Congress does not act until early next year, companies tasked with implementing fee schedule changes will find themselves burning the midnight oil to build fee schedule tables that can meet either eventuality -cut or no cut.
3. PPO discounts are often pegged to Medicare, so their revenues will either increase or stay the same, depending on what Congress does.
4. And most important, a decrease in reimbursement will lead to more physicians dropping out of Medicare, Medicaid, and any reimbursement program tied directly to Medicare. Today physicians ask for, and receive, reimbursement higher than the state fee schedule in WC in Massachusetts. Florida raised its fee schedule from 87% of Medicare (on average) to 114% in large part due to physicians refusing to take the lower reimbursement. Early evidence is physicians are returning to the system, and utilization has not increased.
Editorial statement – price controls simply do not work. When will the politicians, managed care “experts” and PPO companies learn this?


Cheating docs

One of the more distasteful practices in the medical profession is the subject of an article in today’s Wall Street Journal. The practice is so-called self-referral of patients by a physician to an imaging facility where they stand to gain financially. Yes, there are laws against this. Yes, physicians and business folks make lots of money thinking up creative ways to circumvent these practices.
This is one of the more creative I have heard of. To quote the Journal;
Imaging centers “structure referral deals as leases, under which physicians, each time they send over a patient, are renting the scan center’s facilities and employees.” The physician then bills the insurance company whatever rate they deem appropriate, and receives payment directly.
Imagine what they could accomplish if they worked to create value and better health, instead of thinking up ethically-challenged ways to generate even more physician income.
What does this mean for you?
If you are contracting with physicians, be very careful about the language re self-referrals; although many tend to turn up their noses at the mention of contract law, this is a great example of why the details are critical.
If you are evaluating an upsurge in diagnostic imaging, tie the referrals back to referring physicians, and look for any sudden increases. Then, have a talk with the doc.


Medicare pay for performance gets a push

Even though it’s just a small one, it is stilll significant. Rep Nancy Johnson (R) CT (my home state) is promoting a drastic change in the way Medicare pays physicians. Rep. Johnson is calling for a pay-for-performance scheme to replace Medicare’s fee schedule arrangement.
Details below, but in case you can’t read that far, think of this.
1. many state workers comp fee schedules are based on Medicare’s. What are the implications for state programs?
2. Group health reimbursement is often tied to Medicare as well…
3. Medicare is based on paying for services needed for and delivered to a population that is over 65. If the reimbursement arrangement changes, and it factors in some kind of “performance” metric, will it even be possible to adapt that to younger populations?
Now that your head hurts, here’s the details…
According to California HealthLine;
“Johnson said that, although physician performance measures and systems to collect data on performance are not perfected, lawmakers must move to address the issue because of scheduled reductions in Medicare physician reimbursements over the next several years. Elimination of the SGR (Sustainable Growth Rate) system “is the only possibility,” Johnson said, adding, “It’s unfortunate that we have to do this two years in advance of the technology.”
Johnson also indicated that lawmakers could enact “a one-year fix of physician payment while a more permanent system is being designed,” although she hopes to enact permanent revisions to the Medicare physician reimbursement system this year, CQ HealthBeat reports. She estimated that the replacement of a 1.5% reduction in Medicare physician reimbursements for fiscal year 2006 with a 1.5% increase would cost $11 billion over five years.”


Ban on specialty hospitals may be extended

Two reports on so-called “specialty hospitals” were released yesterday in hearings on Capitol Hill. The Medicare Payment Advisory Commission’s (MedPAC) report calls for an extension of the ban on construction of new specialty hospitals. For those who have not been keeping up on this rather esoteric (but critically important) issue, there has been a Federal ban in place preventing the construction of these facilities, which are typically for-profit and partially owned by the physicians practicing at the facilities.
The rationale behind the ban was a concern that these facilities were “skimming” the profitable patients, leaving tertiary and primary hospitals the indigent, Medicaid, and less-healthy patients. According to California HealthLine, the report addressed this concern directly, noting:
“The MedPAC report, presented to the Senate Finance Committee on Tuesday, states that physician-owned specialty facilities could “corrupt clinical decisions and lead to inappropriate care.” The report also said that, relative to full-service hospitals, specialty hospitals generally treat healthier patients, focus on higher-cost procedures, treat fewer Medicaid beneficiaries and do not have lower costs.
The report recommends that Congress recalculate Medicare prospective payments to acute care hospitals to more accurately reflect the cost of care and prevent financial incentives for hospitals to select healthier patients (CQ HealthBeat, 3/8).
MedPAC’s findings were not entirely echoed by a CMS report presented at the same hearing. (Source California HealthLine)
“CMS “unexpectedly released” its preliminary report on specialty hospitals. Thomas Gustafson, deputy director of the CMS Center for Medicare Management, said the CMS study shows “measures of quality at [physician-owned] cardiac hospitals were generally at least as good and in some cases better than the local community hospitals.”
In addition, “[c]omplication and mortality rates were lower at cardiac specialty hospitals even when adjusted” for patient-sickness levels, he testified. CMS conducted its study by examining six markets, which represent 11 of the 59 cardiac, surgery and orthopedic specialty hospitals approved in 2003 as Medicare providers.
The CMS report also found that doctors who have invested in specialty facilities do not refer patients exclusively to the specialty hospitals but they do refer a greater share of patients to specialty facilities than to full-service hospitals. ”
Out here in the real world, there is evidence that specialty facilities do skim the patient pool. A full-service, multi-hospital health care system (client of Health Strategy Associates) has been losing patients to a physician-owned ambulatory surgery center for over a year. Anecdotal information strongly indicates that the patients seen at the doc-owned ASC are more likely to be privately insured or covered by workers’ comp (a profitable payer in this state).