Jan

Think your hospital bill was high?

Posted by Joe Paduda on Tuesday, January 31st, 2012 | Comments

A hospital bill for $44 million showed up in Alex Rodriguez’ mailbox a couple weeks back.
Although Alex is a resident of New York, he’s not “the” A-Rod, but even the A-Rod who wears pinstripes to work at Yankee Stadium would have been hard-pressed to come up with the $44,000,000 ostensibly owed to Bronx Lebanon Hospital.
Of course, it turned out to be a “billing error”…but I’m probably not the only one who didn’t think the amount wasn’t theoretically possible.
After all, hospitals have been charging patients more and more for the same procedures over the years; the average charge submitted to CMS for Medicare zoomed from around $500 in 1996 to almost $2000 in 2008.
While I haven’t heard of a real bill hitting eight figures, I’m sure there’ve been some that have come close; seven figure bills are much more common than they used to be, with most of my clients getting one or more a year. Carol Gentry of HealthNews Florida reported last year that the estate of a penniless woman was billed $9.2 million by Tampa General Hospital…this case was a mess, complicated by a nasty family dispute, Medicare rules, and legal proceedings.
Here’s hoping you aren’t the first to get a “real” $44 million bill…

Dec

Higher health care costs and taxes or free market principles – pick one

Posted by Joe Paduda on Thursday, December 15th, 2011 | Comments

Do you want to spend more taxpayer dollars on Medicare? For care that is demonstrably more expensive?
That’s the question before us, and one that (I hope) we can discuss collegially.
Here’s the issue. The House passed legislation that would overturn part of the health reform(known as Section 6001) bill by requiring Medicare reimburse care delivered by new or expanded doctor-owned hospitals. According to the Congressional Budget Office this change would increase federal spending by $300 million over 10 years; undoubtedly private health care costs would also increase, probably by more (cost per day is higher in the private sector).
The bill doesn’t prohibit building new or expanding existing facilities, it just affects Medicare’s certification of new or expanded facilities. New/expanded physician owned facilities can still get certified but there are very stiff requirements currently in place intended to limit building to areas that are truly underserved.
There’s abundant research indicating physician-owned hospitals cost more, treat more, and tout better outcomes because they tend to treat healthy patients with good insurance coverage.
Here’s a series of quotes from Economic Trends:
– the entrance of [physician owned hospitals] POHs and limited-service hospitals to communities is associated with significant growth in total hospital volumes and total hospital spending (Lewin Group, 2004).
– In a related study, Mitchell (2007) found that the entry of a physician-owned orthopedic hospital between 1999 and 2004 drove up market area utilization of complex spinal fusion procedures by 121 percent.
By the end of the period, Mitchell concluded that 91 percent of orthopedic procedures were performed in POHs with the residual nine percent being completed by full-service community hospitals. [orthopedics is one of the most profitable areas of care for all hospitals, by removing these procedures from community hospitals the POH reduced the community hospitals’ margins and likely drove outcomes down]
– In addition to reducing community hospital utilization, it has been concluded that POHs generate higher costs for health care in an area. For example, an analysis by the Medicare Payment Advisory Commission (MedPAC) found that heart, orthopedic and surgical specialty hospitals had higher inpatient costs per discharge than community hospitals (Lewin Group, 2004).
Yes, construction would generate jobs – in the trades over the short term and in the health care sector over the longer term. That’s good – for the investors, owners, and employees.
But these facilities also increase Medicare’s costs, while forcing other facilities to cost-shift to private insureds to make up for lost margin.
What does this mean for you?
Depends on what you want: A “free market” or higher taxes and higher group health premiums?

May

Examworks – questions I hope someone asked

Posted by Joe Paduda on Wednesday, May 11th, 2011 | Comments

Update (correction re revenue figures) While flying home from LA yesterday, thru the miracle of airplane wifi I got a note from a colleague stating “MES contributed $13.2 million in revenues in the first quarter of 2011. MES had approx. $129 million in revenues for 2010 (a run-rate of approx. $32 million per quarter).
Am I reading this right??” the net is not exactly, but the earnings report does raise. Few questions.
For those not immersed in this tiny little business, Examworks is a rollup of IME firms, companies that contract with independent doctors to do Independent Medical Exams, primarily for workers comp insurers. Among several other acquisitions last year, Examworks bought MES for some $175 million in cash plus $10 million in assumed debt plus 1.4 million shares of Examworks stock (worth about $25 million) for a total of about $210 million .
If their new acquisition generated about forty million for the first three months of 2010, (deal closed 2/28, so the $13 million was for one month) the obvious question is “was it worth $210 million?”
My colleague was referencing yesterday’s earnings release which was followed by a press conference/call last evening. I didn’t hear the call, so don’t know what was said (will see the transcript by the end of the week). As my investment portfolio demonstrates quite convincingly, I’m no Warren Buffett. But I do know a bit about this business, have helped on a few private equity deals, and can operate a calculator with some facility.
MES’ 2010 EBITDA was about $23.4 million. So, Examworks paid a 11x multiple for MES, a rather princely price. Especially given the Q1 revenue figures.
So, if I was on the call – which I was not – I’d want to ask:

How’s that MES deal?
Have you been able to negotiate more favorable rates with your physicians, and if so, how much lower?
What savings are you seeing from synergies? What kind of synergies have you found?
Here’s hoping someone did.

Mar

Comp medical costs are back on the rise

Posted by Joe Paduda on Tuesday, March 29th, 2011 | Comments

We usually find out about things first when there’s a report out of California; growing facility costs, surgical implants, physician repackaging, compound meds, narcotic usage are among the cost drivers that received wide-spread attention after publicity in California.
Yesterday’s news that medical costs have resumed their seemingly-inexorable rapid climb may be the most troubling revelation yet from the Golden State.
Here’s what CWCI had to say about their review of recent medical cost trends:

The results confirm the findings of the earlier studies, again showing a sharp reduction in medical payments immediately after the reforms were enacted in 2004, followed by a distinct trend of increasing medical payments associated with work injuries beginning in AY 2006 and continuing through the end of the study period. This trend has pushed average medical expenditures per claim significantly above pre-reform levels, with all four of the medical expense categories continuing to rise. [emphasis added

According to CWCI, the growth in medical costs was far outweighed by the increase in medical management/cost containment expenses. That’s concerning, but without these cost containment investments, medical costs would have been much higher.
CWCI again – “Although the utilization review and the Medical Provider Network access fees represent significant, ongoing medical cost containment expenditures for workers’ compensation claims administrators, prior CWCI studies have shown that they are associated with an estimated $12.8 billion to $25.3 billion in medical cost saving between 2004 and 2008. [emphasis added] I would note the terminology is somewhat indirect, cost containment programs are “associated with” the savings. It is impossible to say what would have happened if those programs had not been in place, thus we can only make (well-)educated assumptions.
Which leads to this rather troubling conclusion – despite major reforms, huge investments in what look to be much-more-effective cost containment programs, and ongoing attempts to close regulatory loopholes, medical costs are once again zooming up.
And if its happening in California, a state with pretty strong managed care, it may well be much worse in other jurisdictions.
What does this mean for you?
Do you know where your medical costs are heading?

Jan

Spine surgery in California – some cheese with that whine?

Posted by Joe Paduda on Monday, January 31st, 2011 | Comments

WorkCompCentral’s [sub req] Greg Griggs reported the Division of Workers’ Comp’s public hearing last week was dominated by providers complaining about moves to reduce reimbursement for Ambulatory Surgery Centers (ASCs) and spinal implant hardware.
I have a [very] tough time ginning up much sympathy for the ASCs.
First, a quick review. Back in 2004, California’s Division of Workers Compensation (DWC) set payment for ASCs at 120% of Medicare – identical to hospital outpatient departments. The new recommendation is to pay the ASCS at 100% of the Medicare rate.
According to WCC, several of the provider groups attending the hearing stated they would suggest/encourage their physicians not treat workers comp patients because WC is a hassle and the reimbursement cut would be too deep. There’s no question WC is more of an administrative burden than your typical WC case; dealing with UR, complaints from adjusters, employers, and injured workers, documentation requirements and potential for involvement in litigation as well as addressing return to work are all present in comp – and not in Medicare.
And that’s precisely why physician reimbursement in comp, is higher than for Medicare – the docs, and their staffs, are the ones dealing with those issues. They should be paid more – and in California, as in most other states, they are.
For facilities, it is hard to see why they should be paid more for WC cases than for Medicare – the bricks-and-mortar, tools, staff, supplies and other operating expenses are what their reimbursement covers.
To listen to the ASC owners, any reduction in comp will be catastrophic: here are a couple of their comments as quoted in WCC, with my observations interspersed:
– “the reason I built the Pleasanton surgery center is because hospitals are so inefficient”… under the new FS this physician’s three surgery centers “will have some procedures where it just broke even “and many where there would be a significant loss.”
MCM – If hospitals are “so inefficient”, how can an ASC not be more profitable at the same reimbursement as those ‘inefficient’ hospitals? There’s a logical fallacy here that refutes the physician’s own argument.
– another CEO said “we need to select those parts of the business where we could make a profit, but the reality is a 20% cut is big for any business. The brutal reality is that will impact jobs.”
MCM – with all due respect to the CEO, your profits are employers’ costs. The “brutal reality” is high workers comp costs do impact jobs – especially for employers forced to pay for your profits.
What does this mean for you?
A helpful reminder that workers comp is a zero sum game – excessive reimbursement profits providers and penalizes employers.

Jan

Guidelines – beyond the soundbite and marketing hype

Posted by Joe Paduda on Friday, January 14th, 2011 | Comments

Is medicine science, art, some combination of the two, or something else?
That’s not an idle question.
If you’re trying to get more scientific about how you practice medicine or what services/procedures/drugs/treatments you pay for, you are likely relying on clinical guidelines to help provide a little more perspective, hopefully one based on something other than best guess or generally accepted knowledge or tribal wisdom.
A recent study may well give you pause – the key finding is rather alarming – many guidelines are NOT based on solid research, but on work that is kindly described as rather more superficial.
Published in the Archives of Internal Medicine, the research found “More than half of the current recommendations of the IDSA (Infectious Diseases Society of America) are based on level III evidence [expert opinion] only.” [emphasis added] Note that the research focused solely on IDSA guidelines, which cover a relatively small fraction of all the guidelines in use today. Largely as a result of that conclusion, the researchers concluded “Until more data from well-designed controlled clinical trials become available, physicians should remain cautious when using current guidelines as the sole source guiding patient care decisions.”
This isn’t exactly new news. This from research on guidelines published in The Journal of the American Medical Association over a decade ago “Less than 10% of the guidelines used and described formal methods of combining scientific evidence or expert opinion. Many used informal techniques such as narrative summaries prepared by clinical experts, a type of review shown to be of low mean scientific quality and reproducibility.18 Indeed, it was difficult to determine if some of the guidelines made any attempt to review evidence, as less than 20% specified how evidence was identified, and more than 25% did not even cite any references.”
The risk here is our sound bite-long attention span will lead some to use these studies to discount guidelines in their entirety, ignoring entirely the “Until more data from well-designed controlled clinical trials become available” recommendation.
Truth is there are lots of guidelines based on standards of evidence significantly higher than ‘expert opinion’. The pre-eminent organization in this area, and the one with the most rigorous standards, is the Cochrane Collaboration. And while not all will meet the randomized double-blind control methodology that most believe is the gold standard, many will indeed provide an ample and durable foundation on which to base medical decisions, treatment recommendations, and reimbursement.
With that said, there are organizations that trumpet their ‘guidelines’ as providing the basis for coverage and payment decisions, when a more-than-superficial examination indicates the ‘guidelines’ are built on mighty shaky ground.
The Agency for Healthcare Research and Quality maintains a database of evidence-based clinical guidelines; the listing is not comprehensive as many organizations choose to not submit their guidelines for business reasons. However, while not meeting the ‘gold’ standard described above, the standard employed by AHRQ is far superior to that of “expert opinion only”; AHRQ requirements include “Corroborating documentation can be produced and verified that a systematic literature search and review of existing scientific evidence published in peer reviewed journals was performed during the guideline development.” (while their science is solid, they really need to get some English majors involved in the whole writing thing…)
What does this mean for you?
If an organization or vendor is touting their medical criteria or guidelines, prepare – and ask – pointed questions about the methodology, development process, quality of the evidence, and staffing of the effort. The good ones will be only too happy to share their work, and the others will either not know why you aren’t impressed and/or be exposed.
A thoughtful piece on ranking the evidence used in medical guideline development can be found here. [opens pdf]
Lots more info on guidelines is available here.

Dec

Health plans’ two-faced approach

Posted by Joe Paduda on Tuesday, December 14th, 2010 | Comments

According to AHIP, over the last ten years, private insurers’ hospital costs in California are up 159%.
One hundred and fifty nine percent.
Instead of an intelligent and helpful discussion of the causes and impact, there’s an all-too-familiary orgy of finger-pointing and ‘oh yeah, sez you’ as hospitals blame insurers and insurers wail about the unfairness of it all and everyone complains about Medicare.
Time to call Whine-one-one…

Here’s what we should be focusing on.
1. Clearly (some) private insurers and health plans cannot – or more likely will not – do anything to control hospital costs. For all their bitching and complaining, this is yet more evidence that health plans have not fulfilled their primary mission – control costs and deliver quality care.
Here’s how a healthplan exec put it: “The report’s focus on California hospital costs just reinforces what we have been saying the past couple of years. Steep increases in medical costs must be addressed. Our country and state cannot sustain this kind of growth,” said Patrick Johnston, president of California Association of Health Plans.
No kidding. I don’t get the AHIP strategy – bitch about government intervention then complain that outrageous health care cost inflation isn’t your fault.
2. Private insurers are clearly asking for help from government – the same government they pillory in their multi-gazillion dollar PR and lobbying campaign as too incompetent to run a health plan.
3. Controlling costs will require health plans to build small, tight, highly-managed networks of excellent providers, an approach most seem quite unwilling to pursue, citing the ‘managed care backlash’ from the late nineties. (there are a few notable exceptions)
Execs, that was then, and this is now.
4. If health plan execs think their life is tough, they should sit behind the desk of a work comp claims exec. Work comp is getting murdered by facility costs; many payers would kill for a 159% increase over a decade.
Last week Kaiser Health News reported several large health plans appear to be frustrated with AHIP and are looking to set up their own DC lobbying entity – albeit one that is a ‘subcommittee’ within AHIP. Evidently they feel the smaller health plans and not-for-profits have hijacked AHIP and aren’t representing their interests.
Bob Laszewski sees a historical parallel: “This reminds me of the early 1990s. In the wake of the insurance industry being made to be the bad guys during the Clinton Health Plan debate, many of the largest members exited the historically dominant Health Insurance Association of America (HIAA) for the competing HMO dominated trade association.
At the time, many observers saw a cynical irony in the move; it was those dominant members that drove much of the policy that got the industry in trouble.”
What does this mean for you?
At this rate we’ll all be covered by the VA health plan in a decade – which is just fine with me. They are the only ones that consistently control costs and deliver quality care.

Nov

Humana to acquire Concentra for $790 million

Posted by Joe Paduda on Monday, November 22nd, 2010 | Comments

In an announcement a few minutes ago, healthplan company Humana announced it intends to buy occ clinic firm Concentra for $790 million.
Currently Concentra has about 300 facilities and 240 on-site clinics and revenues of $800 million.
The deal does two things for Humana.
First, it diversifies the health plan’s revenue sources; Concentra handles over 10 percent of all work comp primary care, a very different business form Humana’s group/medicare business.
More importantly, Concentra’s three hundred plus clinics are located near many of Humana’s current – and hopefully future – members. This solves a very big problem for Humana – and every other health plan – the dearth of primary care.
Concentra also has very strong relationships with local employers, relationships that Humana is certain to leverage as it rolls out its new offerings in the near future.
Concentra’s facilities will be able to provide Humana with a significant advantage in many markets – tight control over primary care costs, integrated electronic medical records, access to wellness and health promotion activities and resources (currently a top priority for Concentra).
This is a smart move for both organizations, and will likely get other big health plans thinking harder about creative ways to address primary care access.

Jun

Financial shenanigans and their impact on moms

Posted by Joe Paduda on Monday, June 21st, 2010 | Comments

Anne Zieger has written a brief, very compelling piece about how a certain large teaching hospital crossed (at least technically) ethical boundaries by telling a patient she was covered, then that she wasn’t, but only after she had a procedure that was billed at $25,000.
I don’t know why the insurer didn’t cover the procedure, or why the hospital didn’t tell her it wasn’t covered, just like I’m sure the patient has no idea how she’s going to come up with $25k. It could be a breakdown in communication at MassGeneral, or it could be the patient was told and can’t remember, or perhaps there’s some other explanation.
Regardless, it certainly points out – as if we needed more evidence – exactly how screwed up our financial reimbursement ‘system’ is.
Yecch.

Jun

Auto insurance and hospital cost shifting – so THAT’s why my premiums are so high!

Posted by Joe Paduda on Friday, June 11th, 2010 | Comments

Cost-shifting – the practice of seeking higher reimbursement from some payers and patients to cover shortfalls due to low or no reimbursement from others – is rampant in the US health care system. Having worked with providers, health care systems, and payers, I can attest to the pervasive nature of the beast – it happens all the time, everywhere.
More evidence came across my virtual desk yesterday in the form of a study by the Insurance Research Council entitled “Hospital Cost Shifting and Auto Injury Insurance Claims” [available for purchase thru IRC]. The study compared auto injury hospital costs in Maryland to those in 38 other states that don’t have the all-payer hospital rates mandated in Maryland. Thus, whether a patient is covered by a health plan or auto insurer in MD doesn’t matter – all are reimbursed at the same level.
Here are a few of the highlights.
– the “percentage of a state’s population without health insurance was found to be the strongest predictor of average hospital costs for auto injury claimants”
– “another important predictor of average hospital costs for auto injury claimants is the percentage of a state’s population covered by Medicaid”
– IRC estimated of the impact of cost shifting to auto insurers totaled $1.2 billion in 2007.
It is clear that cost shifting is rampant, particularly to property and casualty payers. Work comp payers are particularly vulnerable as their network arrangements are under growing pressure from hospitals seeking higher reimbursement.
What does this mean for you?
Your hospital costs are headed up. What are you going to do about it?
predictive modeling
And
artificial intelligence

Category: Providers