My firm, Health Strategy Associates, has conducted a survey of prescription drug management each year for the last five. I’m well into the survey portion of the Sixth Annual Survey, and here are some preliminary findings.
1. Drug cost inflation appears to show signs of rebounding after five years of decreases in the rate of increase. The data is by no means complete, but most of the respondents to date reported cost inflation was higher in 2008 than the previous year.
2. More respondents are tracking their first fill capture rate this year than last. There appears to be a significant focus on this metric, based at least in part on the sense that the earlier the PBM can get involved in a claim, the more likely it will be able to minimize over-prescribing and inappropriate dispensing.
3. Respondents are more aware of the actual strengths and weaknesses of specific PBMs than they were in the past; the buyers with strong knowledge of and experience in this niche are pretty savvy.
4. The primary cost driver remains utilization – too many of the wrong type of drugs dispensed by too many physicians, especially for pain.
5. Clinical management programs are increasingly important to payers (see 5. above), and they are getting smarter about these programs, what works and what doesn’t, and why. Marketing pitches aren’t cutting it any more; these folks want to see programs in action, study the reports, and understand the logic.
The report will be out next month. If you’d like to download copies of the previous reports, click here.


Drug Trends in Workers Comp

Workers comp PBM and medical services company PMSI released its annual Drug Trends Report at RIMS earlier this week. I noted a couple highlights in an earlier post; you can download a copy here.
One of the more notable findings is the increase in the rate of inflation in drug costs, this coming after several years of decreasing inflation rates. A key contributor was per-script price increases which amounted to 6.1% in 2008.
There’s lots of good information in the Report, and you can’t beat the price.
My firm will be conducting the Sixth Annual Survey of Prescription Drug Management in Workers Comp next month; this survey focuses on tools and techniques employed to manage costs as well as payer executives’ views on cost drivers and PBMs.
For the fourth consecutive year the Survey is sponsored by Cypress Care.
Send an email to infoAThealthstrategyassocDOTcom if you’d like a copy of the report.


The horrors of effectiveness research

Horrors! Those big-government Democrats are at it already, actually trying to get taxpayers to fund medical effectiveness research!
How dare the government actually fund research. The nerve! The gall! The (sputter sputter) utter brazenosity! (I know it’s not a word but it fits)
Why, doctors would actually know what works and what doesn’t! Care would improve, costs would drop, people would be healthier, there would be fewer medical errors; oh, the horror of it all!
And worst of all, taxpayers would get better results for their tax dollars!
Everyone knows there is just nothing more to learn about medicine, disease, physiology. We have learned all there is to know, and any money spent on effectiveness research would be wasted.
That, and the government might actually use that information to decide what types of care to pay for, and what types will not be reimbursed. Wow, what a concept. Why would the government ever contemplate basing reimbursement on effectiveness?
We would never want the government to be careful how they spend our tax dollars. Why, we never want to use taxpayer dollars to study the effectiveness of, say, military equipment. Or air traffic control. Or emergency preparedness. Or flood control. No, we should just pay vendors for any services they provide, regardless of whether or not those services actually work.
OK, forgive me for the over-the-top sarcastic rant. I’m completely disgusted with the hypocrisy of the libertarian right; those who have screamed for years about the ineffectiveness of government, ranting nonstop about how government can’t do anything right, yet are now screaming even louder as government attempts to make sure they are responsible stewards of the public’s funds.
Here’s an example from the health care experts at the National Review. “The [stimulus] bill provides $1.1 billion for a new program of comparative effectiveness research. The idea is to study medical practice patterns, new products, and new technology to determine what is “cost effective.” In the UK, a similar program run by the National Institute for Clinical Evidence (NICE) is used to deny payment by the government for certain drugs and procedures that are said to be “cost ineffective.”
Democratic lawmakers will deny that rationing is their intent, but that is not credible. Why create a government program to study what’s cost effective if not to use the information to inform payment and coverage decisions?”
Notice the use of the scary word ‘rationing’ to define appropriate coverage and payment. Using the author’s (James Capretta) reasoning, Medicare should pay for voodoo, cancer treatment with peach pits, snake oil, rhino horn, and universal cancer vaccines.
Why, not paying for these ‘treatments’ would be ‘rationing’…at least according to Capretta.
Capretta has zero experience in the real world of health insurance. Insurance companies make decisions every day to not pay for treatments that have been proven ineffective. If Mr Capretta had ever worked in the insurance or health care industries, he would know that. But he hasn’t.
That’s not ‘rationing’, it’s good business. Would you not want your government to only pay for services that work?

What does this mean for you?
Everyone knows government is the problem; how dare they try to be part of the solution?


The Ingenix settlement – you wanted details…

The phone and email has been buzzing today. So has the blog-o-sphere, at least among those bloggers who follow this. Both of us.
Today’s follow up announcement by Ingenix’ parent UHC revealed the giant health plan will pay $350 million to settle a class action lawsuit directly related to the use of the Ingenix UCR database. This brings the total (to date) cost for legal settlements to $400 million after yesterday’s NY settlement. Here’s the key language from UHC’s statement today.
“UnitedHealth Group (NYSE: UNH) announced today that it has reached an agreement to settle class action litigation related to reimbursement for out-of-network medical services. The agreement resolves class action litigation filed on behalf of the American Medical Association (AMA), health plan members, health care providers and state medical societies.
Under the terms of the proposed nationwide settlement, UnitedHealth Group and its affiliated entities will be released from claims relating to its out-of-network reimbursement policies from March 15, 1994, through the date of final court approval of the settlement. UnitedHealth Group will pay a total of $350 million to fund the settlement for health plan members and out-of-network providers in connection with out-of-network procedures performed since 1994. The agreement contains no admission of wrongdoing.”
The real problems with the Ingenix UCR database weren’t the subject of much discussion in the settlement documents or the various analyses of the settlement. But underlying the case are some significant problems with the database, how it is put together, and its uses. These issues were highlighted in the Davekos case in Massachusetts, and are discussed in the court record. Among the problems are:
– the accuracy and consistency of the underlying data is questionable. Ingenix cannot assure that the entities (health plans and claims administrators and insurance companies) that supply the data that Ingenix uses to determine what usual customary and reasonable charges are in specific areas are all using the same criteria, are coding consistently and accurately, and are aggregating the data in the same way.
– Ingenix may not always have enough charge data to provide a statistically valid sample for every CPT code. In that case, it appears that Ingenix may aggregate data from similar codes to produce a large enough sample. The potential issue with this work-around is obvious. In some instances, Ingenix actually called medical providers in specific areas where it did not have enough data to ask what they would charge for specific procedures. Thus they were combining telephonic survey data with actual charge data in their UCR databases, a commingling of very different data from very different sources with varying reliability.
– Ingenix itself defines the sociodemographic region boundary lines that are used to determine which charges are relevant for which geographic areas. In the Davekos case, the court appeared to be concerned when Ingenix could not give a defensible rationale for the logic or process they used to determine the boundaries for charge areas.
– Ingenix scrubs the data to extract charges that they decide are outliers for reasons that appear to be subjective. It also appears Ingenix removes high end values but not low end outliers. If this is the case, it would likely skew the charge data towards the lower end.
Those are some of the details behind the Ingenix UCR settlements. As to what will happen next, Bob Laszewski’s perspective provides insights as only he can.
What does this mean for you?
If you are using the Ingenix UCR database, you may want to look for other options.


Misleading managed care headlines

Last week a study hit the wires indicating that managed care plans did not have better outcomes for carotid endarterectomies (CEs), a surgical procedure ostensibly intended to reduce the risk of stroke.
Here’s the headline from UPI – “No managed care link for stroke-prevention”.
A quick read of the headline and abstract leads the reader to the conclusion that managed care is ineffective. But there’s much more to it than the headline and brief synopsis. For starters, the data was ten years old. It was from one state (NY), that is not exactly known as a hotbed of managed care. And it lumps all kinds of ‘managed care’ – from group model HMOs to PPOs under the same category.
And the study’s conclusions are muddy. In fact, there had been a good bit of research into the procedure itself (it involves cleaning out the carotid artery (the big one in the neck that bad guys are forever threatening to cut in movies), and the data used indicated “the rate of inappropriate surgery dropped substantially from 32 percent in 1981 prior to the RCTs [randomized controlled trials] to 8.6 percent in 1998/1999 after publication of the clinical trials [by AHRQ].” Clearly, medical practice had changed dramatically over that period, due primarily to publication of data indicating the procedure “reduced the risk of stroke and death compared to medication alone among carefully selected patients and surgeons.”; the research also showed many patients did not benefit from the surgery.
It wasn’t that simple. In fact, the surgery rate had dropped in the mid-eighties after publication of research indicating the procedure had high complication risks. A decade later, additional research seemed to show that CEs did benefit some patients, and the rate shot up again, only to start a gradual decline.
What happened? Generally accepted medical practice changed. Was the rate different within “managed care’ plans? No. But why would it have been?
I worked for large managed care/health plan companies during the late eighties and early nineties, with responsibilities in customer reporting and managed care product development. We all knew there were probably too many carotid endarterectomies performed, but we didn’t really know which ones were inappropriate. The indications were rather uncertain, and it did appear the procedure helped some patients. What was not clear was which patients would benefit and which would likely not. The ‘choice’ we made was to encourage/mandate/require second surgical opinions (at that time the state of the art in managed care) to ensure the patient got at least one other physician’s views on the potential risks and benefits. There wasn’t much in the way of clinical guidelines that we could use to deny the procedure outright, and the legal risks of a denial were so high that this option was never seriously considered.
Truth be told, the managed care firms I worked for had little ‘control’ over medical practice. Sure, we had contracts with physicians, but our influence was minimal – we were ‘two inches deep and a hundred miles wide’. With little ‘market share’ in any one physician’s office, it was unlikely most of ‘our’ docs would pay much attention to directives from one of our Medical Directors. We did notice that our rate of surgeries was dropping, but did not have the data to know if this was occurring across the board and thereby due to our efforts (I’m pretty sure we took credit for the decrease…) or was driven by external factors.
Contrast our very loose ‘managed care’ with the much different model exemplified by group and staff HMOs – Kaiser Permanente, Group Health of Puget Sound, HIP, etc. I don’t know what the group/staff model HMO rates were, but I’d bet they were lower than my employers’.
In retrospect, it is obvious that external factors were the reason for the decline in my employer’s number and rate of carotid endarterectomies. In retrospect.
What does this mean for you?
There’s far too much superficiality in the press, superficiality that can distort public views of managed care and the effectiveness thereof. In this case, the headline, although nominally accurate, is highly misleading.


Doing harm by doing good

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.”


Why health reform will be so tough

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.


How much are we spending on orthopedic implants?

According to market research firm Supplier Relations LLC, the total US surgical appliance and device industry’s revenue for the year 2007 was “approximately $30.4 billion USD, with an estimated gross profit of 46.15%”.
Note that this total includes more than just implantable devices – sutures, surgical dressings, and prosthetics and other stuff are also counted towards the totals. Without buying the report for $600, you won’t know exactly how much is spent on which categories. But research indicates the orthopedic and surgical device share of the total has been quite significant – well above 50%.
The growth of the implant market has been marred by allegations of illegal kickbacks, sleazy business deals between manufacturers and physicians, and hugely inflated prices to payers.
That hasn’t slowed the market.
Another report (more specific to orthopedics) predicts total implant demand will rise “9.8 percent annually to $23 billion in 2012. The four major product segments — reconstructive joint replacements, spinal implants, orthobiologics and trauma implants — will all provide strong growth opportunities.”
But the big growth will come from spine. According to an excerpt from the report,
“Spinal implants will show strong growth due to advances in product technologies and related surgical techniques, coupled with an increasing prevalence of chronic back conditions. Fixation devices and artificial discs used in spinal fusion and motion preservation surgeries, especially procedures for the repair of vertebrae and replacement of degenerative discs, will account for the largest share of the market and best growth opportunities.”[emphasis added]
What does this mean for you?
Higher costs with uncertain results.


Docs are fighting mad, ready for war, and they’ve got big guns

Pundits (myself included) are detecting a sea change on the Hill – the health plans’ power meter is just barely registering while physicians are pegging the needle. If you’re wondering why physicians were so adamantly opposed to the Medicare reimbursement cut, it is because their compensation is barely keeping up with inflation.
Recall that the GOP was going to cut their Medicare reimbursement by 10.6% (while also reducing Medicaid and other Medicare-linked compensation). And this after physicians had gone several years with their income not even keeping pace with inflation.
According to the latest data from 2007, primary care docs enjoyed a 3.35% increase in compensation after inflation (6.3% before accounting for the 2.85% CPI uptick last year). This rather modest increase is way better than their specialist colleagues saw – inflation-wise, specialists broke even. However, specialists’ median income was almost a third of a million bucks, while specialists were just over $182k, so the primary care docs have a long way to go to catch up.
And some of them have a really really long way – median general practice income was $119k, whlle Family practice docs made $129k.
Not bad money, but not exactly huge bucks either. The other part of the equation has to do with job satisfaction – if you love your job, you’re likely to be less concerned with how much you make. But if you don’t love your job, and some damn President/Congressperson is threatening to cut your already low income, while paying big health plans billions more than they should…
Job satisfaction amongst primary care docs is declining. 60% of PCPs (primary care practitioners) would not choose primary care if they got a do-over. 39% would pick surgery or diagnostics, and over one-fifth would not choose medicine.
Looking at changes from 2006 to 2007, the percentage of docs who counted themselves as ‘very satisfied’ declined from 24% to 18%, while those who were ‘very dissatisfied’ went up from 9.4% to 13.2%.
So what do these newly-empowered, angry docs want?
36% want a Canadian-style single payer system.
66% agreed that the “US should move to a market driven system that reduces the role of third party payers.”
(note these were separate questions and therefore don’t add up to 100%)
Yes, working with physicians has heretofore required cat-wrangling skills. And their egos require outdoor meetings as no hall is big enough. And all want more for their specialty and their patients are sicker than average. And they are all better than average.
And they’ve recently found out what they can accomplish when they stop acting like Augustus Gloop and work together.
Thanks to FierceHealthcare for the triggering tip.


Workers comp – the hospital profit engine

Workers comp medical expenses account for less one-fiftieth of total US health care costs – $30 billion(see WC report pdf) out of $2 trillion.
Yet workers comp generates almost one-sixth of hospital profits.
Here’s how the numbers work. About one-third of comp medical payments are issued to healthcare facilities. The average US hospital cost-to-charge ratio (what it costs the hospital to provide a service compared to what they bill for that service) is approximately 31.2%; in comparison workers’ compensation payers reimburse about 55% of hospitals’ billed charges.
Thus workers comp payers pay hospitals 176% of their costs.
(There is another, very big argument over the methodology hospitals use to calculate their ‘costs’, my opinion is there is conclusive evidence that costs are exaggerated and overstated)
In dollar terms, in 2007 workers comp insurers and self-insured employers paid facilities roughly $9.1 billion. $3.9 billion of that $9.1 billion was profit for hospitals.
The entire US hospital industry generated profits of roughly $25 billion, workers’ compensation – which you will remember represents only about 1.5% of total hospital revenues – accounts for approximately 16 percent of all the profits for US hospitals.
Few dispute that workers comp insurers and SI employers should adequately reimburse hospitals. It is equally indisputable that under the current systems, comp payers are paying much more than their fair share.
How much should workers’ compensation payers pay? According to Vincent Drucker of FairPay Solutions, “something between what Medicare pays and the costs + twenty percent that group payers are reported to be paying.” (FPS is an HSA client)
Why are comp payers overpaying hospitals? That’s a subject for a later post.