Insight, analysis & opinion from Joe Paduda

May
26

Surgery v. rehab for back pain

Surgery to relieve chronic lower back pain is no better than intensive rehabilitation and nearly twice as expensive” concluded researchers in a Reuters article published Monday. The researchers at Nuffield Orthopedic Center in Oxford England studied 349 patients with back pain who either had surgery or intensive rehab.
According to Jeremy Fairbank, an orthopedic surgeon at the center “This is strong evidence that intensive rehabilitation is a good thing to do for people with chronic back pain who are thinking of having about having operations


May
25

State initiatives

The Piper Report has an excellent summary of state health care initiatives. These include plans to encourage employer-based funding of health insurance; reform payment mechanisms for uncompensated care; create better care management for high cost Medicaid patients; and new (and old) pharmaceutical purchasing programs.
States are often the best labs for health care reform, and those states with particularly attractive results (financially and politically, that is) often see their governors move into national roles (see Tommy Thompson and Mike Leavitt, ex governors who went on to run HHS).


May
24

The problem with Workers Comp provider networks

Several of the larger workers’ comp payers are strongly considering using group health provider networks for their claimant population. And, some have already inked deals with these entities (Hartford-Aetna; Hartford-Horizon NJ). This marks a shift in strategy, and the reasoning behind the moves is telling.
Workers comp networks such as First Health, CorVel, and Focus have several challenges.
First, they apply a generic, one-size-fits-all model across all markets and types of providers. While a PPO predicated on getting the best possible discounts from as many providers as possible sounds good, it breaks down when one remembers that unit price is but one-third of the medical cost equation; the other two being utilization (volume of services per claim) and frequency (number of claims with that type of service). Physical medicine and pharmacy are but two examples of types of care where total costs are minimally impacted by unit price.
Second, with the (possible) exception of First Health, the WC networks rely on their WC business to leverage discounts with providers. The problem with that is very few providers have much WC business; out of the nation’s $1.4 trillion health care bill, $30 billion is WC. Another way of looking at this is that one large HMO in Florida pays more for inpatient hospital care alone than the entire WC medical spend for all payers in that state. So, WC-only networks have little buying power.
Third, the level of customer service delivered by most of these WC-only networks has ranged from mediocre to abysmal. For some of these self-styled WC networks, there have been significant and on-going issues with data quality, provider recruitment, systems changes, state certification, and basic responsiveness, coupled with a level of arrogance that is, on occasion, breath-taking.
Added to those issues is the inability of WC networks to deliver results, defined as control of medical expenses, and it is not surprising that payers are looking elsewhere.
What does this mean for you?
If you are a WC generalist network, get your act together. If you are a WC payer, your frustration is understandable, but I have little confidence that group health companies will remain committed to this business over the long-term. UnitedHealthcare, HealthNet, Aetna, and Blue Cross of Florida are just a few examples of the group health companies that have entered, exited, and in some cases re-entered the WC network business.


May
24

Bush official states health care crisis could bankrupt the country

In a refreshing acknowledgement of reality, a top Federal official noted that “if there’s one thing that can bankrupt the country, it is health care. It is out of control.” US Comptroller David Walker made this statement while referring to the growing US budget deficit in a speech in New York last Wednesday.
Walker’s comment came during a talk on the budget deficit where he referred to the health care system and federal government health care programs as key contributors to last fiscal year’s $412 billion budget deficit.
Why is this obvious statement of such interest to your author? Because it is the first public acknowledgement by a Bush official of the primacy of health care over Social Security (although Walker did not mention SocSec specifically) as a threat to the economic wellbeing of the nation. It is likely Walker’s comments were not officially vetted, but regardless, they are one of those “emperor has no clothes” statements that may add a level of urgency to the health care debate.


May
23

Provider quality-based plan design

One of the newer ideas to hit employee benefit health plan design is tiering copayments according to the quality of the provider accessed by the insured. United Healthcare and Medica are two of the health plans that have introduced these plans.
The idea is simple in concept – insureds’ copays are higher for those providers deemed to be less than optimal. The issues lie in the criteria and methodology used to determine the rankings.
A critic, Al Eldendary, president of the St. Louis Metropolitan Medical Society, notes that UHC uses bills and claim data instead of medical records, and therefore the assessment of quality is not based on a complete picture of the patients’ situations.
United’s head of clinical strategy noted that the analytics uses survey as well as patient data, and also acknowledged that the criteria also includes some cost data.
Fof those of us who have been criticizing medical treatment guidelines, provider profiles, and clinical pathways for years, this is another piece of evidence casting doubt on the entire process and the results thereof. Few would dispute that medical bill data is rife with errors of accuracy, that diagnosis and procedure data is not only inconsistently coded but reflects a desire to maximize reimbursement and not to accurately represent the actual care delivered to the patient. Moreover, there is no assessment of the patient’s functionality at the end of treatment.
How can any reimbursement system that supposedly focuses on “quality” fail to consider whether the patient got better, died, returned to full functionality, or was partially disabled? After all, is not the goal of health care to ensure the health and wellbeing of the patient?
What does this mean for you?
Be very wary of medical guidelines, provider reimbursement schemes, and profilign activities that do not take into account the patient’s functionality. Without that end point, you are just looking at the left side of the equation, as the result is unknown.


May
20

It gets worse for AIG

The mess at AIG may be getting worse. According to Reuters, on Wednesday, the state of Florida ordered American International Group Inc.:
“to turn over information about the company’s previously disclosed accounting misrepresentations or possibly be suspended from doing business in the state. The Office of Insurance Regulation order also requires AIG and its 43 units operating in the state to name and remove any culpable parties responsible for misrepresentations made on the insurer’s financial statements.”
Among other lines, AIG is one of the largest writers of workers comp in the state, with an estimated $200 million in premiums (plus claims administrative responsibilities for large self-insured risks). AIG also administers managed care programs throughout the state through its HealthDirect subsidiary. It is unclear from the report if there would be any impact on either the TPA or managed care programs.
According to Reuters;
“The Florida order also requires AIG to file by July 1 “true and correct” financial statements for the years of 2000 through 2005 for all AIG entities licensed in Florida. The company has said it expects to file its 10-K annual report with securities regulators by the end of May. If AIG does not comply with Florida’s order, the state said it will suspend the insurer, among other potential actions.”
What does this mean for you?
This is serious. It indicates a lack of faith in the veracity of AIG’s financial statements, and possibly concern about its finances. No one is suggesting, even remotely, that AIG is in financial difficulty. However, given how fast Kemper sank, and the very few indicators before their demise, one would be well-served to watch this developing situation closely.


May
19

Center for Study of Health System Change

The Center for the Study of Health System Change is a non-partisan organization that is focused on finding intelligent, practical means of improving the nation’s health care system. Under the leadership of Dr. Paul Ginsburg, CSHC provides a forum for discussion of topics ranging from pharmaceutical issues and the problems of uninsurance, to macro trends shaping health care policy.
CSHC has an excellent seminar planned for July in Washington. Here’s the details:
HSC’s Wall Street Comes to Washington Conference Scheduled for July 13
The 10th annual Wall Street Comes to Washington conference will be held on Wednesday, July 13. The conference will feature roundtable discussions with Wall Street health care industry analysts and Washington health policy analysts. A partial list of panelists includes:


May
18

Medicaid and hiding assets to qualify

An interesting post in HealthSignals New York addresses the “problem” of seniors hiding or transferring assets to qualify for Medicaid reimbursement for nursing home care. According to a study done by Georgetown University, the problem is not nearly as pervasive as one might think, nor does it have much of an impact on total Medicaid expense.
However, the caveats are that the data used are somewhat dated. Nonetheless, this may be less of a problem than politicians’ rhetoric indicate.
To quote HealthSignals New York:
“As they say, “absence of evidence is not evidence of absence.” This report is helpful and it sets a balanced tone, but by no means does it end the argument.”
What does this mean for you?
Probably not much, but it does indicate how important it is to look beyond the rhetoric to the underlying data.


May
18

Medicare Part D explored

Several readers have noted that there are other reasons for getting involved in the new Medicare drug program, citing the government’s “loss prevention” financial arrangements, the sophistication of PBMs in managing formularies, and the desire to enter what will be a growing and eventually huge market.
The Piper Report has an excellent summary of th program and pays particular attention to a partnership between Cigna and NationsHealth. The post also has numerous links to other sources that further explain part D.
While all this is interesting, I sense a “bleeding edge” aspect to these programs. For most entrants into this market, this will be their first large-scale initiative into senior drugs management. The challenges they face will include:
–inexperience about seniors and their drug-consuming habits
–the inherent problems with adverse selection noted in previous posts here
–their inability to control, or even impact, the treating physician, widely acknowledged as the primary driver of pharmaceutical utilization
This last may be the most significant. At the end of the day, PBMs are transactions processors, administering (in large part) what physicians order. If they can’t intelligently address and positively impact prescribing behavior in a way that does not put the beneficiary in the middle, they will find themselves caught between the doc and the patient – a very uncomfortable position.
What does this mean for you?
It is highly likely that early adopters will get burned in this deal, and slower movers will glean vital knowledge from observing without entering the fray. This is one of those rare circumstances where I would advise caution.


Joe Paduda is the principal of Health Strategy Associates

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