Insight, analysis & opinion from Joe Paduda

Oct
18

Race, genetics, and medicine

A fascinating article about the role of genetics, race, and societal interactions is in today’s New York Times. Before you blow this off, consider the following points.
1. so-called “personalized medicine” is touted by some as the next big breakthrough in medicine, using genomics to customize therapies for individuals
2. there has been a considerable increase in the investment in and marketing of drugs that are targeted to distinct “racial groups”.
3. there is some evidence that this makes sense, and other evidence that it makes no sense whatsoever.
4. the push to unravel the human genome is both supporting and detracting from the “race-based drug development” effort.
5. billions will be invested in research in these areas


Oct
18

Workers comp info links

My colleagues at Workers’ Comp Insider have posted a helful list of research, calculation, and analytical tools on their site. They include reinsurance and health insurance glossaries, safety information, and Bureau of Labor Statistics links.
There are several other insurance, managed care, and workers comp links and info sources on the sidebar of Managed Care Matters as well.
Worth a bookmark for those times when you need the answer and can’t find it anywhere else.


Oct
17

Work Comp 2004 financial results

Workers compensation insurance results are in for 2004, and the numbers look strong. The overall operating ratio improved to 93.7, up from 98.4 in 2003 and 100.3 in 2003.
(The operating ratio is simply total expenses/(total premium plus investment income))
The positive results, reported by John Burton’s Workers Comp Resources, were driven by a significant improvement in overall claims expense, with the claims ratio at 68.4, a ten-plus point improvement over the prior year. The good news on the claims side was counterbalanced by a ten-point drop in investment income performance from 2000 (20.9% return on investments) to 2004 (11.2%).
The net – claims costs are decreasing, investment results are tanking


Oct
14

Pay for performance study results

Fellow blogger DB’s Medical Rants has an interesting take on pay for performance. Citing a study published in the New England Journal of Medicine, the post notes:
“One underlying principle of the pay for performance movement stems from the belief that we can use incentives to improve adherence to evidence based quality indicators. The crux of evidence based medicine (EBM) follows from an examination of high quality data. EBM eschews belief.
This study tries to understand how P4P might influence physician practice. It finds no positive impact. Rather P4P may simply be a scheme for rewarding high performers…
However, as I hear the debate, most proponents see P4P as a means to improve quality. This article argues against that.”
Changing physician behavior is a windmill that has absorbed billions of dollars and millions of hours of tilting, with little evidence of impact. While the objective is noble, the business case is highly suspect.
What does this mean for you?
Identify the best performing physicians and direct your patients to them. Let others shatter their lances.


Oct
13

ACOEM Survey on providers and payers

ACOEM, the American College of Occupational and Environmental Medicine, is reaching out to payers – TPAs, employers, insurers, managed care companies, to find out about their interests, priorities, and views on occupational medicine.
The “conversation” between payers and providers is usually limited to voice mail, email, and fax, with the occasional mutterings under one’s breath. Here’s a chance to help improve the dialogue.
If you are involved in this area, take the time to fill out their survey.
Here’s more information.
“Effective occupational medicine: opinions wanted
Want to have an impact on the future of occupational medicine? Do you purchase (or influence the purchase) of occupational medicine services for your organization? Do you manage relationships with medical service providers for your company? If so, the American College of Occupational & Environmental Medicine (ACOEM) invites your opinion via an online survey.
The purpose of the survey is to assist the American College of Occupational and Environmental medicine (ACOEM) in learning more about the current practices, priorities, and point of view of those who pay for and use occupational medical services. In particular, ACOEM wants to learn how company managers and executives in organizations are currently viewing a few major issues in organizational and occupational health. ACOEM also wants to hear what companies look for when choosing physicians to provide either hands-on or consulting medical services for their workers compensation and disability programs.
The survey is being conducted by Crescendo Consulting Group, a national research and consulting firm based in Portland, ME. Results will go directly to Crescendo Consulting Group to preserve anonymity.
The survey should take less than 15 minutes of your time, and individual responses will be confidential. In exchange for participation, ACOEM will provide an executive summary of results to any participants who supply contact information. ”


Oct
13

Revolution Health announces its management team

Revolution Health’s recent announcement of six acquisitions has been covered here in the past; now news is out regarding the management team that will lead the Revolution Health’s new company into the future. What puzzles me is the management team’s complete lack of provider, payer, or managed care experience. Heavy on internet start-up, tech, consulting, and experience “knitting together a variety of companies into cohesive operating units”, the team seems strikingly light in real world experience.
With Steve Case, Colin Powell, Jim Barksdale, Carly Fiorina, and Steve Wiggins (the only one with extensive health care experience in any sector) on the Board, one would have expected to see slightly more, or perhaps much more, real-world expertise to balance the lofty thoughts of the leadership with knowledge gained from time in the trenches.
Alas, such is not the case (no pun intended). Much attention is being paid to the consumerization of health care, with consumer-directed health plans, empowering consumers, getting consumers to take responsibility, etc. Now, the entity launched with the most fanfare looks like an amalgamation of second and third-tier companies overseen by a star-studded board and managed by folks with little experience in the actual real world of buying, delivering, or managing health care.
The CEO, John Pleasants, comes from the internet world, with extensive experience with Evite, Match.com, and CitySearch. The head of the Community Health Information division’s most recent experience is as boss of Wondir, a search engine for community health information. Don Hackett of the Information Portal Division worked with drkoop.com, and the ill-fated Physician Computer Network. The new head of research comes from Fannie Mae where she worked in the office of the Chair (who is now on the Board of RHG).
Surely the advocates of consumer-driven health care can come up with something better. Health care is an incredibly complex, multi-faceted industry that operates by a distinct set of rules and motivations, with extremely powerful and deeply entrenched stakeholders exerting control over the delivery, funding, operation, and regulation of the business.
What does this mean for you?
Likely not much.


Oct
12

Health plan rate increases in 2006

Two consulting firms are indicating health plan rate increases will be between 8.4% and 9.9% in 2006. While this is somewhat lower than increases in recent years, the impact will be felt by both employers and employees, who can expect to pay more for their share of the premium than they did this year. And, the premium increases do not reflect the increased costs borne by employees due to higher deductibles and co-pays.
According to Hewitt, employees will receive an average wage increase of 3.6%; for those making $40,000 annually, 23% of that increase will go to pay their increased premiums. On average, employees will be paying $1,612 towards their health insurance costs. Out-of-pocket costs also will increase as deductibles and co-pays rise, making the average employee’s total expenditures in 2006 a record high $3,136. This is 12% higher than 2005.
Interestingly, PPOs will see the lowest percentage increase amongst plan types. According to Insurance Journal’s report on the Hewitt Study;
“On average, Hewitt forecasts that companies will experience 2006 cost increases of 9.5 percent for preferred provider organizations (PPOs), 10 percent for health maintenance organization plans (HMOs), and 10.5 percent for both traditional indemnity and point-of-service (POS) plans.
That means, from 2005 to 2006, the average cost per person for major companies will increase from $7,048 to $7,752 for HMOs; $7,374 to $8,075 for PPOs; $7,322 to $8,091 for indemnity plans; and $7,849 to $8,673 for POS plans.”
Hewitt also noted that many of the companies they are working with that have implemented consumer-directed health plans have seen flat renewals or even declines.
While this sounds great, remember that many of these plans include an increase in the deductible of from $1000 to $5000. Clearly, benefit design can and does have a major impact on renewal rates; it has for fifty years and the onset of these so-called “innovative” plans simply reinforces that fact.
A survey by Milliman and Robertson indicates that many health plans and insurers are entering the CDHP market; in their annual survey, 93% of respondents who answered the questions regarding CDHPs (not all of the survey respondents did) said they plan to offer an HSA or HRA (health care reimbursement) account program coupled with a high deductible insurance plan.
While that sounds great, only 2.5% of 2005 commercial health premiums are for CDHP programs; respondents expect this to be over 5% in 2006.
What does this mean for you?
Higher premiums, a relatively smaller paycheck, and no help in sight.


Oct
11

Single payer in CA

It has been a while since the last significant discussion of conversion of the US health care system to a single payer format; that drought has been ended with the introduction of legislation by Sen. Sheila Kuehl D-LA) calling for a single payer to run California’s health care system.
The bill is a “work in progress”; Kuehl expects to introduce a more comprehensive, thorough bill in the next legislative session. In sum, the bill calls for a single payer funded by a tax surcharge to raise the estimated $184 billion required to cover the state’s citizens. Kuehl claims her plan will result in savings of over $8 billion to employers and families.
The plan would be administered by a single entity, but other health plans would be allowed to offer supplemental coverage.
The chances that this will ever see the light of day? None.
But kudos to the Senator for advancing a radical idea. While other governments and planners tweak around the edges, she has put forth a reasonable alternative, one that may help push the dialogue forward.
What does this mean for you?
A stalking horse or straw-man, your choice.


Oct
10

Katrina’s insured costs at $34 billion

Katrina is now officially the most expensive insured event in US history. The latest figures put insured claims to date at $34.4 billion, significantly higher than the costs associated with other hurricanes or the 9/11 attacks. Adding Rita’s projected expense brings the total for the season to date to about $70 billion.
And this is just the insured losses on claims filed to date. Estimates of future claims from Katrina push the total amount to between $40 and $55 billion.
This was shaping up to be a nicely profitable year for the industry; those profits have disappeared under the waters of these disasters. Pessimists will note that the hurricane season still has some months to run; insurance executives are keeping fingers crossed in hopes that another storm does not make landfall this year.
What does this mean for you?
Costs for all lines of insurance will increase for all renewals in coming months, with the sharpest increases in property and homeowners, especially in hurricane-prone areas and coastal regions.
Reinsurers will get mighty picky about the underwriting underlying their primary insurers; expect to see more limitations and exclusions.


Oct
7

The wild world of workers comp managed care

These are wild times for the workers comp managed care industry. With Aetna’s recent announcement that they are expanding their workers comp network into additional states, it appears the big health plan is becoming a serious competitor for network business. Sources indicate that the Hartford will be announcing expansion of their relationship with Aetna in the near future, with the business moving from First Health.
Liberty Mutual, the comp industry’s 800 pound gorilla, has yet to announce the results of their network selection process, an event that has many in the industry on the proverbial edge of their chair.
CorVel, which has been laying low, keeping under the radar after the adverse publicity from the Broward County School Board debacle is set to announce a major new business relationship; sources indicate it will pertain to provider networks. This announcement may come too late for one of their larger business relationships; the State of Florida is likely to go to bid for their managed care program in the near future.
Gallagher-Bassett has been revisiting their managed care vendor contracts, apparently (at least in part) to eliminate the referral, administrative, commission, and other fees that they have been receiving from the managed care vendors they work with.
First Health is still seeking a head for their workers comp unit; Aetna is as well. Meanwhile, Concentra’s takeover of Beech Street and Occupational Health and Rehab has made the company a more formidable competitor in the network and occ health clinic markets.
Changes to the Texas workers comp laws go into effect (realistically) on the first of the year, and national and regional players are scrambling to prepare. If California and Florida are any indicators, the first entities into the new programs will resemble pioneers – the settlers with the arrows in their backs. Kudos to them for their initiative, and credit to the “fast followers” for waiting a bit to watch how things shake out.
Meanwhile the private equity/venture capital world continues to buzz around managed care companies like bees around honey. There is a lot of attention being paid to these service providers; workers comp managed care is hot now among the investment community.
This is all playing out amidst the ongoing Spitzer/Blumenthal investigations into the insurance industry, sham bids, anti-competitive behavior, and outright fraud.
It all makes for a highly entertaining season.
What does this mean for you?
Significant change brings significant opportunity, along with big risks. Stay tuned; more changes are likely soon.


Joe Paduda is the principal of Health Strategy Associates

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