Dec

National health reform – implications for workers comp

Posted by Joe Paduda on Tuesday, December 9th, 2008 | Comments

I’ve gotten several queries about the future of work comp if/when health reform occurs. The real answer is – no one knows. But I’m happy to take an educated guess.
I very much doubt comp will be directly impacted by or addressed in any health reform bill. It is going to be difficult at best to pass health reform legislation; adding comp is unlikely to increase support but would almost certainly drive work comp stakeholders to lobby against the bill. There’s just no upside for including comp in health reform.
Back in the Clinton health reform days, comp was part of health care reform, where it ran into objections (most warranted) from employers, industry types, insurers, and providers. Work comp was addressed in Title X, which “would have required that employees receive all of their health care through the same insurance plan, regardless of whether the injury or illness occurred at home or at work.” For lots of reasons, this was a non-starter.
President Elect Obama may well have learned from his future Secretary of State’s errors: nowhere do the words ‘workers compensation’ or similar terms appear in President Elect Obama’s website, policy papers on health reform, or in the several speeches he has made on the subject.
Finally comp is not linked to/mentioned in the Baucus plan, Wyden/Bennett Healthy Americans Act, or on Sen. Kennedy’s policy pages. These should be viewed as drafts of final bills; if policymakers were actively considering incorporating work comp it is likely we’d have seen it appear in one or more of these bills.
What does this mean for you?
Don’t expect to see work comp directly addressed in reform legislation on the Federal level.
But, any reform initiatives will undoubtedly affect workers comp. Here are a couple specifics.
Physician reimbursement
The fall will be highlighted by a debate over Medicare physician compensation. With docs scheduled to see their reimbursement drop by around 20% in 2010, the caterwauling will be heard loud and clear inside the Beltway. Don’t look for a major policy change, but rather something to satisfy the physician community and build a little equity for the future. My sense is CMS will increase reimbursement for E&M codes (cognitive services). Almost all WC fee schedules are based on Medicare, so any change in Medicare directly and immediately impacts comp reimbursement. Watch Capitol Hill carefully; if Congress passes legislation signed by future President Obama affecting Medicare reimbursement, clinic companies may be big winners.
This will also be good news over the long term for comp in general. Good work comp medical care requires physicians to spend time listening to patients, and talking with employers, adjusters, and case managers. Docs don’t get paid (at least not adequately) for this time, therefore any increase in reimbursement for office visits will encourage docs to spend time with claimants instead of doing procedures. Well, at least not discourage doctor-patient discourse…
Medical care delivery
If there is a major reform initiative passed, there will likely be fundamental changes in the way health care is delivered, the virtual ‘location’ delivering that care, and the evaluation of care.
And that would dramatically affect workers comp.
Today, health care is delivered episode by episode; diagnosis, care plan, treatment, assessment, and repeat steps 2-4 until the situation is resolved. This episodic model of care will (over time) change to one based on functional outcome management – care focused on returning the patient to functionality, and maintaining that functionality.
This will be in large part driven by the growing influence of chronic care and need to develop a better care model to address chronic care, one that will heavily emphasize patient education and monitoring. It will also require a different ‘location’ of care – the medical home.Dr Kathryn Mueller of the University of Colorado sees the medical home model as a big part of the solution in workers compensation, as the medical home may well be the dominant model for delivery of care throughout the health system in years to come. Studies indicate the home decreases medical errors and improves the quality of care delivered. Notably, the medical home model is NOT a primary-care gatekeeper model – but rather a model wherein the physician is tasked with and responsible for coordinating care and educating the patient.
Drugs
If Congress calls for the Feds to negotiate drug prices, this will affect comp in one of two ways. Either comp payers will be able to piggyback on the Feds’ negotiated rates, in which case per-pill prices will come down, or (more likely) comp payers find their per-pill prices increase due to cost shifting.

Oct

The ethics of the surgical implant business

Posted by Joe Paduda on Thursday, October 30th, 2008 | Comments

Companies routinely pay outside experts to help them improve their products. Louisville Slugger pays baseball players, Porsche pays race car drivers, medical bill review companies pay consultants – it’s just common practice.
Companies that make surgical implants – Zimmer, Biomet, Stryker et al – also pay experts. But there’s a bit of a difference; these companies are directly benefiting when their ‘experts’ implant a device in a patient. Nissan pays a driver to test a car, not to sit down with potential customers and, as part of a much larger transaction, include a car.
That’s what surgeons are doing with and for the implant firms. Patients have just about zero say in which manufacturer’s device is implanted in their body – that’s up to the doctor. But the physicians often are the source of innovation; as they use the devices and tools to implant the devices, they make improvements, tweak the devices and enhance the product. Docs who perform this service contribute to the success of the device manufacturer by making their product better. While this is certainly a valuable service, it is difficult to discern how this is materially different from TRG hiring Patrick Long to drive its cars and provide feedback to improve the company’s products.
The Feds got involved in the industry, and after a lengthy investigation busted the five leading makers of artificial joints last year. That’s a bit of an exaggeration; the Feds and device makers reached a settlement that required public disclosure of the company-physician financial relationship and a total fine of over $300 million. As part of the settlement, device manufacturers were required to post lists of physicians and payments to those physicians.
These lists are revealing. Past disclosures from manufacturers indicate 48 docs were paid more than a million dollars each for their services. In total, Zimmer et al paid 6500 docs over $800 million over a four year period. Zimmer decided to get in front of the problem, and has started publishing names of physicians it has worked with and the amounts paid to those docs during 2007. A few of the payments are rather stunning; Dr Jorge Galante of Clinton WI was paid $1,951,810; Kenneth Gustke MD of Tampa received $582,648; and Aaron Hoffman MD of Salt Lake City was paid $4.3 million.
I don’t have a problem with Dr Hoffman being paid by Zimmer; he has fourteen patents and likely is paid royalties by Zimmer for sales of devices incorporating these patents. The ethical issue is rather more complex than a payment for royalties. Orthopedic implants are outrageously expensive; my sense is this is in large part because they are difficult for health plans to accurately and fairly price. Physicians who own patents on devices with little price elasticity can make relatively minor changes and earn huge rewards from the manufacturers – who can charge more for the ‘enhancement’.
In my post yesterday, I noted consumers attribute much more of the blame for rising health care costs to health plans than to other players. I’ll bet their opinions will change if and when they find out the doc operating on their hip got paid over $4 million by the company that makes the device he’s bolting onto their pelvis.

What does this mean for you?
Health costs are out of control, and these outrageous payments are one more example of the corrupting nature of the American health care system.

Oct

Why state reform initiatives won’t work

Posted by Joe Paduda on Tuesday, October 14th, 2008 | Comments

Last week I posted on the perils of evaluating hospitals on the basis of ‘discounts’, noting that some hospitals’ charge to cost ratios are so high that it is relatively easy for them to offer large discounts – it’s the old ‘raise the price by 50% and offer a 30% discount to make them think they’re getting a deal’ technique.
(note – I got a call from and spoke with Tenet’s Chief Managed Care Officer about the post; he’s going to send me material supporting his claim that Tenet (the subject of last week’s post) has reformed its ways. Will post on this if/when I hear more)
Hospitals have adopted this policy in part due to low Medicare and Medicaid reimbursement and the rising number of uninsured (and in part to suck more money out of insurers’ coffers). Hospital execs rationalize their pricing by noting (accurately) that Federal law requires them to treat everyone, regardless of their insurance status, so treat they do. (It’s called EMTALA and is discussed here). Medicaid is a notoriously lousy payer, and Medicare, while better, doesn’t do much to offset the costs of indigent care and underpayments from Medicaid. So, the hospital charges private payers a lot more, a policy known as cost-shifting (and one not only well-documented but acknowledged by many hospital execs).
Part of the reason Tenet jacked up charges ten years ago was to game the Medicare reimbursement system. By inflating charges, more of their patients became ‘outliers’, and therefore Tenet got paid more – even though the patients’ severity wasn’t materially different. Tenet paid a $900 million (!!) fine for this behavior, and by several accounts has been working to clean up its act. The Tenet case shows why it is all but impossible for states to ‘reform’ health care. About a third of all medical care is paid for by the Feds (states contribute to Medicaid, but reimbursement is largely driven by CMS). CMS’ reimbursement methodologies are also widely used by commercial payers, and when the Feds change policies, the impact moves thru the health care community like a tidal wave, swamping some businesses, flooding others, and occasionally lifting others to high ground.
Refusing to pay for never-ever events and off-label use of Actiq, changing hospital DRGs, pharmaceutical pricing methodologies, changes in physician reimbursement – all are recent moves by CMS and related entities that have sent shock waves through group health, individual insurance, workers comp, pharmacy, hospital charge policies, and health plan medical policies. The effect is no different on state-specific reform policies.
Any state initiative will find itself trumped by CMS. And CMS may well be forced to make drastic changes, changes that up until a few weeks ago were unthinkable. We are heading for a deep economic recession/decline/really bad time, one that will force Congress to think the once-unthinkable – make major changes to entitlement programs. As Maggie Mahar pointed out yesterday,
“Make no mistake: we’re heading into a long and deep recession. And it will effect everyone. Both blue collar and white collar unemployment will soar… (Today, speaking at Harvard, Bill Gates predicted that unemployment will hit 9 percent. Whatever you may think about Gates, he is good with numbers.) Not only will people lose their jobs, they will lose their employer based insurance…”
Maggie knows of what she speaks – she covered the financial world for Barron’s for years and wrote a best-selling book about the stock market boom.
What does this mean for you?
We’re in a very deep financial hole, one that will force major changes in health care and health insurance. There’s a decent chance that change will begin with reform of the insurance markets on a Federal level. And don’t be surprised if next on the table is big changes in Medicare and Medicaid reimbursement, changes that will reshape the health care industry in ways unthinkable a month ago.

Oct

Are Tenet hospitals in your network?

Posted by Joe Paduda on Thursday, October 9th, 2008 | Comments

Many benefits professionals and risk managers evaluate networks based, at least to some degree, on the thickness of the directory and the depth of the discount. The logic is – hey, the more hospitals in there, and the better the discounts, the better it is for my employees/claimants and the better it is for my bottom line.
Logical, and likely wrong.
Let’s take Tenet Hospitals as an example.
I recently completed an analysis of several networks for a client, who was initially impressed that one of the networks under consideration featured their national contract with Tenet, a large for-profit health care system with facilities in the southeast, Texas, California, and southeastern Pennsylvania. In total, Tenet has about 56 hospitals (some are in the process of being sold) and about $9 billion in revenues.
They also have one of the highest charge-to-cost ratios of any hospital or health care system in the nation.
A very thorough, albeit dated, report on hospital charge to cost ratios was underwritten by the California Nurses’ Association and published in 2004. Although the data is somewhat old, it is nonetheless revealing. For example:

Of the nation’s hospitals with the highest charges compared to costs, seven of the top ten were Tenet facilities (three were soon to be sold)
Tenet’s charge to cost ratio typically was several times higher than the national average
64 of the top 100 hospitals ranked by charge to cost ratio were Tenet facilities
the top hospital was a Tenet facility with a ratio of 1092%

I’d note again that these data are old and Tenet has sold off some of these facilities. However, data from client medical bill repricing reports indicates high charge to cost ratios are still quite prevalent among Tenet facilities.
There is additional evidence that charging a lot has been a core business practice at Tenet, which has been charging more than other hospitals for identical procedures since at least 2000. According to one report describing an analysis of Tenet charge policies by the SEIU:
“Tenet’s California hospitals charged an average of $73,038 for pacemaker implants, 81 percent more than the $40,452 charged by non-Tenet hospitals, according to state government figures analyzed by the Service Employees International Union. Tracheostomies, at $569,672, were 69 percent higher at Tenet than in the rest of the state, where they average $336, 579. “Tenet is engaged in turbocharging,” said Steve Askin, health care research coordinator for the union in Los Angeles.”
And:
“From 1996 to 2001, Tenet’s average daily inpatient charge in Orange County grew 101 percent, compared with 28 percent for non- Tenet hospitals. Tenet’s charges for outpatient services here rose 119 percent, compared with 43 percent for its competitors, according to the data.
Last year, [2006] eight of the county’s 10 highest-charging hospitals belonged to Tenet. The Orange County hospital at the top of that list was Tenet’s Western Medical Center in Santa Ana. It billed an average of $9,453 a day per patient. That was $2,500 more than the highest non-Tenet hospital — UCI Medical Center — and nearly twice the countywide average.”
Look at Tenet’s website (or, for that matter, any other health care systems) for information about cost and cost-effectiveness . There are very few statements (and even less supporting data) regarding cost effectiveness, efficiency, or competitiveness. Lots of words about quality and patient care and how great their people are (all of which are important, and significant, and appropriate to be considered in evaluating network facilities).
What does this mean for you?
Discounts are not important – net costs are. Do not evaluate networks on the basis of how thick the directory is and how deep the discounts are. Hospitals that charge a lot can ‘discount’ a lot more than hospitals that don’t engage in charge inflation.
This is obviously critically important for group benefits administrators as well as work comp payers. It also is instructive when considering the potential for national health reform. I’ll dig into that tomorrow.

Sep

Time for work comp insurers to Man Up

Posted by Joe Paduda on Thursday, September 18th, 2008 | Comments

Some hospitals in Connecticut are throwing what amounts to a temper tantrum. They are outraged that workers comp payers are actually paying them according to state law.
Strange, but true.
Sources indicate that Yale-New Haven Hospital and their affiliates have informed several payers that they will no longer provide elective procedures for the offending payers’ insureds. There are also reports of an effort on the part of Y-NH to get other hospitals to join in the fun.
The reason for their displeasure is several payers have ditched their hospital networks and begun paying hospitals according to the Workers Compensation Act.
The Act reads, in part, “The liability of the employer for hospital service shall be the amount it actually costs the hospital to render the service”.
But many payers in Connecticut (including the State itself) are not paying costs, but paying billed charges, or something close to it, and they’ve been doing it for years. Workers comp has been a huge moneymaker for Connecticut hospitals; on average commercial payers reimburse between 41.65% and 45.14% of charges.* Contrast that with comp payers’ reimbursing hospitals at billed charges or a few points off (in a network arrangement).
*(The variation between 41.65% and 45.14% depends on which measure you use; the former is based on recent data, the latter from data reported to the State). I’d also note that commercial payers are paying 122% of costs (again from CT State statistics).
Sources also indicate the good folks from Yale (several of whom live in my town) understand, and even agree with, the methodology the payers are using to reimburse the hospital. But they don’t want to accept that reimbursement, as they would rather go back to the good old days when they were making a fortune off all workers comp payers (when hospitals were being paid three to four times more than they should have been). (Most payers are still paying billed charges or close to it)
I’ll leave aside the obvious fiduciary responsibility issue here, except to note that as a CT taxpayer, I’m not too happy that the State has been paying way more than it should to hospitals for State employees’ workers’ comp bills. Instead, I’ll note that this amounts to a hidden tax on employers – all of whom are forced by regulation ot buy workers comp insurance. Those employers (and their insurers) that are paying billed charges, or a discount off billed charges, are helping those hospitals to pay for care delivered to those without insurance, make up the underpayments from Medicare and the state’s HUSKY program (kid health insurance), buy big new machines and build new facilities.
That’s nice, and its also grossly unfair to employers.
Workers comp insurance companies need to “Man Up” and not give into what is tantamount to blackmail on the part of providers. Policyholders need to tell their insurers not to spend one dime more than legally required.
The US health care system is incredibly screwed up, unfair, and dysfunctional, and hospitals are a key part of that system. But it’s not up to Connecticut employers and taxpayers to solve hospitals’ financial problems by paying a hidden tax.

Aug

Hospitals’ growing power

Posted by Joe Paduda on Friday, August 8th, 2008 | Comments

We’re going to stick with the hospital story for just a bit longer. So far posts have discussed the significant profits generated by workers comp payments, the inability of comp networks to manage facility costs, and a cornucopia of other hospital-related issues.
The thesis statement for all could be summed up thusly – Hospitals are gaining power at the expense of commercial payers.
Here’s the proof.
The largest hospital/surgery center company in the nation, HCA reported a 21.6% jump in profits in the last quarter. Revenues “increased 3.7 percent to nearly $7 billion despite a decline in surgeries and flat admission numbers. ”
Lets parse that statement out.
Profits were up much more than revenues, indicating the company (also known as Hospital Corp of America) has been able to keep expenses under control while delivering higher margin services.
Revenues were up even though surgeries (which tend to be very profitable) were down (albeit slightly at 0.5% for inpatient and 0.7% for outpatient facilities) and admissions were flat. The only way that can happen is by changing the mix of services delivered and improving the payer mix (think private insurance instead of Medicaid).
HCA’s success wasn’t an anomaly. Unlike the other hospital companies, Universal Health Services (could we please get just a bit creative with the company names here?) enjoyed an increase in profits and revenue. UHS saw its profits increase 35%, driven by a big increase in inpatient admissions (up 8.5%) and smaller, yet significant increase in the length of hospital stays (up 3.1%). This wasn’t just a one-quarter event; looking at the first half of the year, revenues were up 8% and net income rose 34%. Note that UHS is one of the smaller for-profit hospital companies with fewer than 31 hospitals.
Revenues and profits were also up at HMA, with top line increasing 3.9% despite a decline in patient volumes. HMA, which operates 58 hospitals, also had a good first half of the year with profits almost doubling on a 4% increase in revenue. Interestingly, surgery counts also declined slightly at HMA over the same quarter in the prior year.
We’ll round out the review with a quick look at Tenet – the 58 hospital company saw admissions up almost 2%, driven mostly by ‘governmental managed care admissions’ which jumped 16%. (I wonder, does that mean the Medicaid and Medicare Advantage programs are seeing higher inpatient admission rates? or is it just a shift from unmanaged Medicare?) Tenet also enjoyed a 7.5% increase in ‘same hospital commercial managed care revenues’. (which brings up the rather uncomfortable question – is Tenet a preferred partner with the big managed care companies, or are the big managed care companies seeing a jump in hospital admits?)
Notably, Tenet’s revenues were up 6.3% on that 1.9% increase in admits, a rather surprising jump given that the Feds are not exactly a generous payer. And digging deeper into Tenet’s earnings report, one learns that commercial insurer admits actually declined 2.2% and patient days dropped 3.1%, while outpatient visits were also down 1.8%. So, revenues were up 7.5% on fewer admits and shorter stays…Cost-shifting, perhaps?
Here are a couple statements from Tenet’s earnings report that shed additional light on the situation.

Outpatient pricing outpaced the growth in inpatient pricing due to an improving mix of procedures performed in our outpatient facilities.
Pricing improvement was evident across all key metrics, primarily reflecting the improved terms of our commercial managed care contracts [emphasis added]

And this from Forbes “Price increases from better terms in its commercial managed-care contracts also helped boost Tenet’s profit and revenue.”
Looks like a trend to me – hospital revenues are up slightly, profits are up much more than revenues, and this despite (mostly) flat patient volumes and lower surgical volumes.
The source of all these profits? Commercial managed care companies.
Which brings us back to a question I asked a while ago; “what exactly are ‘managed care’ companies managing?”
Thanks to FierceHealthcare for the heads up

Jul

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

Posted by Joe Paduda on Thursday, July 17th, 2008 | Comments

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.

Jun

Workers comp – the hospital profit engine

Posted by Joe Paduda on Thursday, June 26th, 2008 | Comments

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.

Jun

Two can play that game

Posted by Joe Paduda on Wednesday, June 4th, 2008 | Comments

Providers are now rating payers. And in the ratings game, Aetna looks to be doing better than other big health plans.
There are several ‘payer rating’ sources now available, each with their own approach. One of the more intriguing is published by the Verden Group. The VG tracks the policy changes that payers make on a daily basis, alerting providers “to any administrative and clinical policy, procedure and reimbursement changes occurring in the networks in which you participate, at the time these changes are occurring.” Think of VG’s service as a ‘policy aggregator’ that ‘pushes’ notice of policy changes out to specific providers (providers that sign up for their Alert service).
From a broader perspective, this business model is a classic example of niche identification. Providers are forced to proactively monitor the websites of the networks in which they participate for changes in areas such as prior authorization procedures, mailing addresses, credentialing requirements and processes, claims submission and approval, benefit design, and communications standards and protocols. VG removes the burden from providers – albeit for a fee.
A side benefit of all this monitoring and data collection is VG’s quarterly Managed Care Company Ratings report. The Report analyzes each major health plan’s impact on providers in the areas of cost of compliance, timeliness of notification of policy changes, volume of changes, and ease and clarity of communication. VG then weights these areas and the result is an aggregate rating.
In contrast, athenahealth’s payer rating system, PayerView(sm) is designed to evaluate the “ease of doing business with a payer.” Compared to Verden, PayerView appears to cover a broader spectrum of the provider-payer relationship, and is more financially oriented, although it does consider administrative performance and medical policy complexity (similar to Verden). athenahealth acts as a billing agent for their provider clients, and thus has extensive, hands-on knowledge of the gritty business of submitting bills and getting paid (or not).
(observation – while athenahealth’s information depth is certainly impressive, it is not very accessible – they do a poor job of explaining acronyms and use jargon extensively with little explanation)
I’ll let interested readers puzzle thru athenahealth’s PayerView on their own. The good news for Aetna is they come out on top – paying claims quicker and more accurately than other health plans. The health plan also reduced its denial rate by 10.6%, and remained the fastest paying health plan. Aetna was closely followed by CIGNA.
Aetna looks pretty good to the folks at Verden too, scoring at the top of the 18 payer list in cost to provider (changes that added admin expense, altered reimbursement, increased admin time and/or complexity) and clarity of communication.
One of their lower-weighted areas is notification period – the time between initial posting of a policy change and that change’s effective date. If there’s one thing that drives providers nuts it is the denial of a claim or procedure because the provider did not follow a process that no one told them about.
HealthNet ranked worst in this area followed closely by GreatWest. But most health plans were only marginally better.
This reflects poorly on health plans; providers will likely (and justifiably) assume this is due to a lack of concern about these issues on the part of management.
What does this mean for you?
Health plans that understand the importance of the provider – and do more than just talk about it – are going to do better than their rivals that don’t value providers.
Thanks to fiercehealthcare for the initial heads-up.

May

Why are there so many spinal implants?

Posted by Joe Paduda on Thursday, May 29th, 2008 | Comments

Disclaimer – This is the kind of post that makes one want to take a shower after reading. My apologies to readers without convenient access to bathing facilities.
One of the fastest growing segments of the surgical industry is the spinal implant business. In what may be the most comprehensive review of the problem, the Orange County Register reported:
“About 70 percent of U.S. adults — or 153 million people — have lower back pain, according to Millennium Research Group. Of those, about 15 million require medical treatment, and most eventually get spinal implants.” My take is that is a wildly overstated estimate; one survey reported that the total world market for devices was $4.2 billion; note this study used 2006 data. Another indicated the market was $5 billion in 2005, and predicted growth to $20 billion by 2015. Stryker, one of the major manufacturers, expects growth of 16% per year in the spinal implant market. Yet another report(note opens .pdf) indicated the 2007 worldwide market was $7 billion, with the US accounting for $5.4 billion of that total.
And boy is it profitable. One manufacturer (Allez Spine) sold screws to an implant device company for $79.31 each – screws that were then sold to hospitals for $1000 each (who then marked them up even more when billing insurers).

Yep, there are $480 worth of screws in this xray (wholesale), $6000 retail, and probably $9-12,000 to the insurer/patient. And that doesn’t include the other parts…
Medtronic, one of the larger device companies with about 45% market share in the US and the same worldwide, reported sales of $869 million for spinal implants last quarter, driven in part by a big jump in sales of its Kyphon technology. The $869 million represents growth of 35% from the same quarter last year.
The Kyphon story is an ugly one, and points to one potentially significant problem in the spine surgery industry – the focus on devices as a tool to maximize reimbursement.
Kyphon (the company) was acquired by Medtronic in 2005. The company settled a lawsuit filed by the Feds, agreeing to pay $75 million in fines. Kyphon agreed to stop providing inappropriate advice on reimbursement to providers, advice that resulted in hospitals filing inflated claims with Medicare for a spine procedure with the otherworldly name of kyphoplasty.
The details of the case, as reported by the New York Times, are revealing.
Kyphon “persuaded hospitals to keep people overnight for a simple outpatient procedure [bold added] to repair small fissures of the spine. Medicare then reimbursed the hospitals much more generously than it otherwise would have for the procedure, which was developed as a noninvasive approach that could usually be done in about an hour.
By marketing its products this way, Kyphon was able to artificially drive up demand among hospitals, bolstering its revenue and driving up its stock price. Medtronic subsequently bought the company, its competitor, for $3.9 billion, greatly enriching Kyphon’s senior executives. ”
Margins for Kyphon’s devices approached 90%, due in large part to the high price the company charged, a price that hospitals offset by extending hospital stays (as advised by Kyphon’s sales reps and reimbursement experts), thus generating higher bills and much higher revenue.
Another major contributor to the rapid increase in spinal implant surgeries may be the growth of device companies that have spine surgeons as stockholders. The OCR article reported that physician-owned companies are now under investigation by HHS’ Office of the Inspector General (OIG). In testimony before the Senate Special Committee on Aging, Gregory E. Demske, Assistant Inspector General for Legal Affairs at the OIG said:
“These financial relationships [between device manufacturers and physicians] can benefit patients and Federal health care programs by promoting innovation and improving patient care. However, these relationships also can create conflicts of interest that must be effectively managed to safeguard patients and ensure the integrity of the health care system…during the years 2002 through 2006, four manufacturers (which controlled almost 75 percent of the hip and knee replacement market) paid physician consultants over $800 million [bold added] under the terms of roughly 6,500 consulting agreements. Although many of these payments were for legitimate services, others were not. The Government has found that sometimes industry payments to physicians are not related to the actual contributions of the physicians, but instead are kickbacks designed to influence the physicians’ medical decisionmaking [bold added]. These abusive practices are sometimes disguised as consulting contracts, royalty agreements, or gifts.”
All this growth may well be based on a focus on surgical treatment that is just not supported by research. Some studies indicate surgery is not the best treatment for a substantial number of patients. According to the OCR article (source above);
a “2005 study of patients with back pain published in the journal of the British Medical Association concluded: “No clear evidence emerged that primary spinal fusion surgery was any more beneficial than intensive rehabilitation.”
“You look at the number of procedures and the rate of growth and it seems to far outstrip the number of patients who need this,” said Dr. Steven J. Atlas, a back specialist and Assistant Professor of Medicine at Harvard Medical School.”
And that old nemesis, provider practice pattern variation, is nowhere as obvious as with back surgeries. Looking at Medicare data, the back surgery rate in Fort Myers, Florida was 5 times higher than in Miami. Same population demographics, same state, but different providers.
Perhaps the best explanation for the considerable growth in the use of implants and spine surgery is the lack of evidence either for or against these procedures. There are some reports that indicate positive or negative outcomes, but nothing definitive has been published that could be used by payers and providers to judge the appropriateness of surgery for most patients with back injuries or degenerative conditions.

Category: Providers