Nov

Controlling technology, improving health, cutting cost – not as hard as you may think

Posted by Joe Paduda on Monday, November 9th, 2009 | Comments

The use – and misuse – of technology in medicine is not only a major cost driver, it is also a major cause of unnecessary pain and suffering.
Far too many carotid endarterectomies were performed in a misguided effort to reduce
If we are to have any hope of slowing down the rate of increase in medical costs, we have to stop the abuse of unproven and potentially harmful technology.
WorkCompCentral [sub req] has a great piece on a program run by the State of Washington that does just that. The Health Technology Assessment program “assesses various devices, procedures, medical equipment and diagnostic tests, then issues recommendations that public payers must follow[emphasis added]. Those public payers include the Department of Labor & Industries, which runs the state’s monopoly workers’ compensation program.”
According to an article in the New England Journal of Medicine, HTA determines reimbursement on these technologies for programs including:
“Medicaid, the workers’ compensation program, the state government employee benefit plan, and the corrections department [which] provide $2.9 billion in benefits annually to approximately 773,000 Washington citizens through direct fee-for-service plans”
Before the wingnuts start spouting about death panels, know that the HTA has been widely accepted by politicians from both parties, it passed with a single ‘nay’ vote in 2006, supported by both the state Hospital and Medical Associations, and while individual conclusions may draw opposition, the program itself is viewed very positively.
The process is rigorous. According to the NEJM;
“The program’s assessments are based on a thorough, systematic review of the evidence related to the effectiveness, safety, and cost-effectiveness of a product or service, with each type of evidence examined separately. After considering the “most valid and reliable” evidence on all three of these dimensions, the health technology clinical committee — which must be made up of practicing clinicians — arrives at one of three recommendations: covered without conditions, covered with conditions (such as criteria defining medical necessity), or not covered. The entire process must be transparent.”
HTA is important because it shows what can happen when government intervenes intelligently and carefully. So far, HTA has rendered opinions and set policy on:
* Arthroscopic surgery for osteoarthritis of the knee. (Not covered.)
* Discography for uncomplicated degenerative disk disease. (Not covered.)
* Implantable drug-delivery systems for chronic, non-cancer-related pain. (Not covered.)
* Lumbar fusion for uncomplicated degenerative disk disease. (Covered, with conditions.)
* Upright or positional medical resonance imaging. (Not covered.)
* CT colonography. (Not covered.)
* Pediatric bariatric surgery. (Not covered for patients 18 or younger. Covered with conditions for patients between the ages of 19 to 21.)
These actions have reduced costs by over $20 million since its inception three years ago.
What does this mean for you?
Payers should look closely at following Washington’s lead.

Nov

The Public Option in Workers Comp

Posted by Joe Paduda on Wednesday, November 4th, 2009 | Comments

Thanks to the good folks at Workers Comp Insider, I learned of an intriguing study conducted by Conning and Company that concludes (in part) that private work comp insurers don’t perform as well as public ones.
Here are a couple of excerpts from the article in Insurance Journal:
– 25 public and quasi-public workers’ compensation insurance plans perform better financially than the private market in a number of performance categories and at least as well when it comes to the bottom line.
– public workers’ compensation providers tend to have higher losses than the workers’ compensation insurance industry as a whole, they more than offset those losses with lower expenses, higher investment returns, bigger dividends to employers and better injury prevention efforts.
– through more stable reserves and superior investment income, state funds have managed to achieve operating income on a par with that of the workers’ compensation industry as a whole.
– Spurred by their mission that includes improving safety and their state’s economy, state funds blunt the impact of bigger losses through concerted loss prevention efforts. As Jablonowski put it, “They are able to convert the marginal and poor risk into something better.”
The public providers offer employers significantly higher dividends, which provide an incentive for businesses to adopt safety measures. These dividends can also create a competitive advantage and build customer loyalty, according to the study.
Congratulations to the good, hard-working, effective folks at SCIF in California, Texas Mutual, NYSIF in NY, the North Dakota state fund, Beacon Mutual in Rhode Island, and the rest of the state funds. While all is not perfect, and as Peter Rousmaniere has pointed out, often quite a distance from perfect, some of the findings of the Conning study are illuminating.
I’m also thinking the study should be carefully reviewed by Federal legislators, as the conclusions may help inform the discussion about the public option in health reform. I’d point to them to this quote:
“When you look at the entire insurance world, there are obviously insurance companies in the private world that do a great job of loss prevention control,”[the study’s author said] “But the unique thing about funds is that they all do it. Twenty-five of them and they all do it. So it’s not a random sample; it’s a sample that suggests that this group puts an emphasis on loss prevention control.”
That’s exactly, precisely what we need to do with health care – prevent preventable claims that lead to high costs and lousy outcomes.
What does this mean for you?
Once again, the health insurance world can certainly learn something from workers’ comp.

Nov

States can deliver low work comp premiums and high benefits

Posted by Joe Paduda on Monday, November 2nd, 2009 | Comments

A few states deliver high levels of benefits to injured workers at low premium rates, and a few deliver low benefits at high premium rates. Peter Rousmaniere’s assessment of each state’s work comp system not only tells us which states fall into which categories, but provides insights into the ‘why’ as well.
For example, NJ NY and Montana have the highest work comp insurance costs, but very low benefits. And Massachusetts is at the opposite end of the spectrum, with low premiums and high wage replacement benefits for injured workers. (Mass doesn’t treat providers nearly as well, as the Mass fee schedule is among the lowest in the country, while medical costs are not)
Peter delves into the whys, and among his findings are:
– five states deliver both low premiums and high wage replacement benefits (IA AZ VA NV MA)
– five states are the polar opposite, with high premiums and low benefits (AK CA NJ NY MT)
and then there’s the majority of states which fall in between costly/poor benefits and cheap insurance/good benefits.
Peter also notes that there is a wide disparity among states in median duration of disability, ranging from 4 days in the best states to 12 in NY.
While some states seem stuck in a dysfunctional morass, making little progress, California’s recent success in dramatically reducing premiums and costs should encourage all state legislators to get cracking. Reform can be done, even in a state as large and diverse as California. Montana, which is tiny by comparison and much more homogeneous, should find reform a much less difficult task.
What does this mean for you?
Find out how your key states are ranked, and you may well find where you’ve got problems in your comp program.

Oct

Syracuse University – the new home of UCR

Posted by Joe Paduda on Friday, October 30th, 2009 | Comments

We now know who will replace Ingenix as the nation’s provider of usual, customary and reasonable (UCR) data; we also know when (by the end of 2010). As to the how, that’s a bit less certain.
Syracuse University will be the home of a non-profit data house’ to be called FAIR Health (Fair and Independent Research Health); Cornell, Upstate Medical Center, SUNY Buffalo, and the University of Rochester will also contribute (got to spread the largesse around). (full disclosure – Syracuse is my alma mater)
The new entity will be funded at least in part by the $100 million NY Attorney General Andrew Cuomo has gotten in settlements from Ingenix’ UCR database customers. In addition to Cuomo’s successes, Ingenix’ parent company, UnitedHealth Group paid $350 million earlier this year to settle a class action suit, and other legal action is continuing which Cuomo expects to add to the $100 million total. The cash will be used to develop the database and set up a mechanism to deliver data to payers and consumers via a website. This last is a great idea – providing health care consumers and providers with access to UCR data should help promote transparency and enable price comparisons by consumers and price competition by providers.
FAIR will be headed up by SU Professor Deborah Freund, an expert in health economics, Distinguished Professor of public administration and economics in SU’s Maxwell School and Senior Research Associate at Maxwell’s Center for Policy Research. Dr Freund has a wealth of experience on the academic side of health policy and economics and has published on a wide range of topics in those fields.
I’ll see if I can stop in for a chat when I’m back up on the Hill in January for another alumni meeting.
The timetable seems…aggressive – there’s a lot to do to avoid some of the problems that plagued Ingenix’ MDR and PHCS databases; non-existent quality control on source data and inadequate volume of data in some areas are just two of the problems that led to the settlements. While Freund et al at FAIR may want very much to provide comprehensive, clean data that covers all procedures delivered by all providers, they don’t control the quality, accuracy, and consistency of the data collected by health insurance companies and other payers. And after the Ingenix debacle, they sure want to be absolutely positively comfortable with their data before they release it to the public.
My guess is the website and initial data will be up and running by the end of next year, but it won’t be comprehensive. Even if FAIR is able to come up with standards and a rigorous QA process, it will take more time for payers to develop and implement processes to ensure the data they provide FAIR meets those standards.
And you can bet your last hundred million that no payer is going to send data they aren’t absolutely sure is up to snuff.
What does this mean for you?
Good news, as the new UCR provider will help reduce payers’ exposure.
Health plans have a new vendor to work with – on the vendor’s terms.
Over the longer term, there’s another ‘outcome’ – Health data quality is about to go under the microscope, and the view may be pretty ugly. Healthplans and other payers may well have to upgrade their technology, training, and staffing to meet FAIR’s demands
Background
For those who don’t follow these things on a daily basis (hard to believe I know), some background. Years ago, the health insurance industry’s lobbying and service arm (HIAA) aggregated and compiled physician charge data as a service to its members. HIAA collected the data and fed it back to members, who then used the data to determine how much they should pay providers in specific areas for specific services (services defined by CPT codes). HIAA was taken over/disappeared about a decade ago, and Ingenix took over the aggregation and distribution of the data, which has become known as “UCR” for “Usual, Customary, and Reasonable”.
For about ten years, all was fine, at least as far as most insurers were concerned. Sure, physicians complained at times and consumers railed about the low reimbursement paid by companies citing their UCR, but the complaints didn’t really make any difference until Cuomo got involved. The problem arose when a few folks in New York complained about the amount they still owed providers after their insurers had paid their portion – according to Ingenix’ UCR. After a lengthy investigation, Cuomo found reason to charge UHC and other insurers, and that action ultimately resulted in this settlement.

Oct

How horrible is Medicare?

Posted by Joe Paduda on Tuesday, October 27th, 2009 | Comments

Depends on who you ask. If you ask group practice administrators about how Medicare compares to the private insurance industry, it is pretty darn good – in several categories, Medicare Part B is rated higher than any other large payer.
That’s partly due to the lousy performance of some of the private insurers, but administrators actually rate Medicare’s responsiveness, transparency, prompt payment, and overall administrative functions highly.
Yes, you read that correctly.
On a five-point scale, with 5 the highest rating, the much-maligned and oft-decried public plan for the aged has an overall satisfaction rating of 3.6, with Aetna at 3.1 and UnitedHealthcare bringing up the rear at 2.5.
Medicare was considered the most timely responder to inquiries, with Aetna second and UHC at the back of the pack; the same standings hold for accuracy and consistency of the payer’s responses to questions, speed of payment (Medicare 4.1, Aetna 3.5, UHC 3.1), disclosure of payment policies, and claims appeal process (Aetna was excluded from the report).
Medicare doesn’t appear on the list of questions regarding satisfaction with the contracting process, except in the ‘willingness to disclose the fee schedule’ category, where it is again rated at the top. This isn’t surprising, as CMS is not engaged in ‘2-way good-faith negotiations’ nor do practices have ‘leverage during the negotiation process’. I don’t know if responders didn’t ask about Medicare or if Medicare was ranked at all; I’ll let you know when I hear back from the Medical Group Management Association (MGMA), the organization that conducted the study.
As with any study or survey, you can find data to support any perspective.
That said, the ratings of the health plans are generally consistent with those reported by the Verden Group, an independent firm focused on helping providers deal with managed care organizations.
Aetna received top marks for clarity of communications, and was rated the most ‘provider friendly network’ by respondents to the Verden Survey in 2008.
As the public option becomes possible once more, and opponents lament the inefficiency, lousy service, and incompetence of the faceless bureaucrats that run Medicare, it is helpful to know what the people on the other end of the transaction think.
If you listen to them, on a number of fronts, Medicare’s a darn sight better than most of the private insurers they have to deal with

Oct

What you missed on MCM

Posted by Joe Paduda on Wednesday, October 14th, 2009 | Comments

For at least a couple weeks, many of the 1642 people who subscribe to MCM didn’t receive notices when new posts went up. It looks like we’ve figured out the problem (electronic fingers crossed), so here’s what’s been on the blog while we were in a technical hiatus.
Yesterday I opined that the recent AHIP/PwC report is more right than wrong; the report misses a lot – and much of what it misses is less than favorable to the report’s funders – health insurance companies. But the central point is indeed accurate; without a tough, enforceable universal mandate, you can’t force insurers to take all comers without charging more for higher risks or excluding them altogether.
Last week was devoted to the recent report by the state of Texas’ Research and Evaluation Group’s report on workers comp networks. The initial post generated a good bit of dialogue with the report’s authors wherein they clarified a confusing (at least to me and several large payer clients) statement; the follow up post detailed the issue, adn explored another concern; “the report didn’t note that three of the networks are provided by one company – Coventry, which also administers a network that is likely underpinning much of the ‘non-network’ category.”
The ‘Texas Week’ concluded with a post on the larger issue with the report – the fallout in workers comp “C” suites, and the potential damage to managed care.
Two posts the week before covered the AmComp meeting in NYC, with one lamenting the lack of concern about medical costs among work comp execs and another summarizing a talk by industry veteran John Burton.
Before I got all wrapped up in workers comp, i handicapped the health reform odds, saying “If the Baucus bill comes out of committee with unified Democratic support, that tells a lot. And if Snowe signs on, that’s even more telling…The Democrats are almost all-in on health reform; at the end it will come down to some Dems deciding if they’re better off holding their nose and voting in favor or handing the victory to the GOP.”

So far, looks like those Dems are indeed holding their collective nose.
This was preceded by a confession – I’m one of those nerds that actually reads Health Affairs – the latest issue has a great piece on the primacy of price in health care inflation. I don’t necessarily agree, but the authors make a compelling case.
It appears that the problem started just before the end of September; readers can always check the main page, sort by category, or type in key words to find specific posts.
Thanks for the forbearance, and here’s hoping the gremlins are back in wherever gremlins live..

Oct

UPDATE – the Texas report on work comp networks

Posted by Joe Paduda on Tuesday, October 6th, 2009 | Comments

New news on yesterday’s post – turns out that ‘costs’ are not based on billed charges, but on payments. Unfortunately, the report doesn’t make that clear – nowhere in the report does it define ‘costs’ as payments, it does state costs are based on billing data, and in the data sources section it explicitly links cost to billing data.
Here’s where the confusion lies.
On page 2, the report reads “Utilization measures represent the services that were billed by health care providers, regardless of whether those services were ultimately paid by insurance carriers. Duplicate medical bills and bills that were denied due to extent of injury or compensability issues as well as other outlier medical bills were excluded from the analyses. Cost and utilization measures were examined separately by type of medical service…”
Note there is no differentiation between utilization and cost, and no specific definition of ‘cost’. So, perhaps that’s a bit misleading.
But wait, there is another statement that certainly seems to describe how ‘cost’ figures were derived:
In the data sources section (also on page 2), the report reads “Medical cost, utilization of care, and administrative access to care measures were calculated using the Division of Workers Compensation’s medical billing data [emphasis added]. Seemed pretty straightforward to me.
Unfortunately I wasn’t the only one confused; two large payer clients interpreted the statement the same way I did.
My post generated a good bit of excitement at the REG and among stakeholders. Bill Kidd reported on it at WorkCompCentral, where DC Campbell, director of the department’s Workers’ Compensation Research and Evaluation Group, was quoted as saying “”Paduda expresses concern about the results since Coventry covers ‘much’ of the non-network claim population. It’s not clear from his statements [emphasis added] whether this refers to Coventry’s market share in terms of utilization review activities, bill review activities, contractual discounts outside of certified networks, etc.”
I’m not sure where the confusion lies, as I clearly referred to ‘networks’ in the post yesterday…

For example, several of the networks are based on the Coventry work comp network – Liberty, Travelers, and Texas Star (the Star network was designed by Texas Mutual, and is much smaller than the overall Coventry network). There was significant variation among and between these three Coventry networks, variation that may well be due to the relatively small sample size and relative “newness” of the claims analyzed – the claims haven’t developed sufficiently to draw ‘conclusive conclusions’.

The net is the report uses payments for all cost calculations. Thanks to Amy Lee and DC Campbell for setting me straight. OK, now that that’s behind us, I’m still not sure what to make of the report’s findings. According to the report, claimant demographics were accounted for, I assume to enable fair comparisons among and between the various networks. Yet the report didn’t note that three of the networks are provided by one company – Coventry, which also administers a network that is likely underpinning much of the ‘non-network’ category.
Consider that Liberty’s average medical costs were lower than non-networks in 4 categories, and Coventry’s in 3, yet the Coventry network was utilized by all three entities. And that’s just one of the findings. Claims in the Coventry network had higher overall medical costs than non-network claims, as well as higher hospital inpatient and outpatient costs. Both Coventry and Travelers network claims had higher inpatient utilization than non-network claims, but Liberty’s was lower. Coventry outperformed non-networks in release to return to work, but Liberty and Travelers underperformed non-networks.
So, what does this mean for you?
It sure doesn’t look like one can draw any meaningful conclusions from the report’s findings.
Kudos to the Texas REG and their supporters for funding and conducting the research. More time for the data to mature, more clarity on definitions, more disclosure about the similarities among the networks being studied, and more discussion about possible reasons for the disparate results from all-but-identical networks and their work will be much more useful.

Oct

Texas’ report on workers comp networks – fatally flawed?

Posted by Joe Paduda on Monday, October 5th, 2009 | Comments

Texas’ Department of Insurance has been analyzing the performance of workers comp networks for the last couple of years, and the latest report has some pretty interesting results.
Unfortunately, those results look to be based on a faulty analysis, making the whole report questionable.
Before we delve into the results, here’s the problem. On page 2, it reads “Utilization measures represent the services that were billed by health care providers, regardless of whether those services were ultimately paid by insurance carriers. [emphasis added].” Thanks to a comp insurer’s managed care exec for the tip – should have caught this myself, but really, who would have thought they’d count ‘charges’ as ‘costs’?
There is little to no correlation between medical charges and actual costs – defined as amount paid. Providers, especially facilities, charge much more than they’re reimbursed. Reimbursement is affected by fee schedules, medical management determinations, network discount arrangements, prompt pay deals, and bundling/unbundling edits, among other factors.
The findings from the report are also somewhat misleading. For example, several of the networks are based on the Coventry work comp network – Liberty, Travelers, and Texas Star (the Star network was designed by Texas Mutual, and is much smaller than the overall Coventry network). There was significant variation among and between these three Coventry networks, variation that may well be due to the relatively small sample size and relative “newness” of the claims analyzed – the claims haven’t developed sufficiently to draw ‘conclusive conclusions’.
I contacted Coventry in an effort to get their take on the report – which at first blush was pretty damning. I was quite surprised to get a call back from one of their execs – as loyal readers know I’ve been trying – till now unsuccessfully – to get Coventry to talk with me for as long as I’ve been writing this blog – which is now more than five years. This is the first of what I hope will be an ongoing dialogue.
We’ll see.
Coventry’s take on Texas’ report was rather limited as it was just released. They were pleased with the return to work results; but noted their medical resutls (which, according to the report, were not good) may have been tainted by seven outlier cases. Perhaps, but the other networks and the non-network results may suffer from the same issue.
More compelling was the Coventry exec’s observation that much of the “Non network” business actually is handled by the Coventry network. That adds a bit of wonder to the report’s first finding: “Overall, networks had higher average medical costs than non-networks.”
I asked the Coventry exec to get back to me asap with a more complete analysis, but I’ll suggest he save the dime. I may be missing something here (and if I am I’m sure you’ll tell me), but I’m hard-pressed to see how anyone can draw any meaningful conclusions from an analysis based on medical charges.
Lest my comments be construed as damning Texas for their efforts – absolutely not. I applaud the Texas REG for the efforts. I don’t know what limitations they have in terms of resources, access to data, or access to payment data. I do know that they are one of the few states making a serious effort at analyzing cost drivers and the impact of managed care programs. I’ve done enough data analysis to understand you’ve got to use what you can, even if it is far from perfect. Here’s hoping the REG continues to improve their analysis.
What does this mean for you?
An object lesson in not jumping to conclusions, and why abstracts and executive summaries can be misleading.

Sep

The role of price in health care cost inflation

Posted by Joe Paduda on Friday, September 25th, 2009 | Comments

I’ve been accused of being one of the few that actually reads the bimonthly journal Health Affairs. Well, guilty as charged, although the pub has a lot more than a ‘few’ devotees. What it does particularly well is challenge core beliefs.
The latest edition focuses on bending the cost curve – a phrase likely to inspire William Safire to dissect it in detail in one of his discourses on language. The idea is to find ways to reduce the rate of growth in health care costs, and this edition has plenty of ideas.
One of the most thought provoking articles contends that price controls are “central to curbing cost growth”. I’m going to comment on the article next week in detail, but here are a couple of points made by the authors.

“out of pocket spending in the United States is roughly twice the OECD median. If some Americans have “Cadillac coverage,” than most workers in Germany or France must have “Mercedes coverage” – and they would likely view many American insurance policies as “Yugo coverage.”
patients in OECD countries average more hospitaldays, more physician visits, and greater consumption of prescription drugs than American patients do. Higher US spending is not primarily explained by greater volume of services.
analyzing data from Massachusetts, David Cutler and colleagues found<, for example, that virtually all of the savings that managed care plans achieved for heart disease treatment, relative to indemnity insurance, came from price reductions./li>

I’ve long believed, and still do, that utilization is a more significant cost driver than price. I’ve seen this time and time again – in data on physician in-office utilization from CMS (up 11% in 2006), in NCCI’s analysis of workers comp prescription drug costs, in analyzing client physical medicine experience, in the correlation between workers comp medical expenses and state fee schedules – or rather lack thereof, and a host of other examples.
What doe this mean for you?
The authors make a compelling case – not just for price as a cost driver, but to always question your assumptions.

Sep

The cost of surgical implants in workers comp

Posted by Joe Paduda on Tuesday, September 22nd, 2009 | Comments

A new RAND study reports California’s employers are paying $60 million more than they should for surgical implants. Not the surgery, or the follow up care, or the facility costs – just the devices themselves.
According to Jim Sams’ piece in today’s WorkCompCentral,

“the state’s fee schedules allow hospitals to bill separately for the hardware that is used in spinal fusion surgeries plus an administrative fee. [lead researcher for the cost-savings project Barbara] Wynn said the resource-based relative value scale that Medicare uses to calculate the appropriate fee for spinal surgery hardware procedures already includes the cost of the hardware, and California’s fee schedule pays 120% of the Medicare rate.
“Passing through WC device costs on top of 120% of the Medicare payment results in paying for the spinal hardware twice, creates incentives for unnecessary device usage, and imposes unnecessary administrative burden,” she said in her report.
Wynn said repealing the rules that allow pass-through charges would save $60 million annually.”

There’s a lot more to the RAND study, but this highlights a big problem area – one much larger than $60 million.

First, why is work comp paying 20% more than Medicare?
Second, surgical implants are not “one and done”. It is fairly common for patients to have to undergo surgery to replace defective or incorrectly used devices.
Third, the cost of the implant can often push total expense for inpatient care past the outlier limit, making the stay substantially more expensive.
Fourth, the cost of implants is growing much faster than overall medical inflation – one projection has the spinal implant market increasing 16% per year.
What does this mean for you?
California hasn’t fixed this problem yet, despite knowing about it for eight years. And don’t think this is unique to the Golden State (a term likely coined by implant manufacturer Stryker); the use of implants is up all over the country.

Category: Research