One of the better journalistic oversite ‘sites’ is the one run by the Columbia School of Journalism.
Each year they feature a column on ‘errors of the year’. It is usually hilarious, and this year’s no exception.
While some think there’s no such thing as bad PR, I sincerely hope never to have this blog featured on the EOTY…
That said, I don’t think there’s much chance managed care can compete with copulating bats and expletive-spewing politicians. Sigh.

Evan Falchuk of Best Doctors has launched a new blog carnival focused on employee benefits – primarily health benefits. His first edition is here.
While there are a plethora of carnivals out there, this is the first one I’ve come across that focuses specifically on health benefits. Good quick read too.

There’s a lot more happening in Vegas than we can discuss here, as many of my conversations yesterday started with the words “you can’t write about this”.
Alas.
There was much discussion about Texas and the demise of the voluntary networks on the first of the year. While PBMs have been working thus for over a year, other vendors are only now becoming aware of the implications.
While the Certified networks will continue, most of the work comp medical care doesnt flow thru them. Payers have long relied on an assortment of broad-based generalist PPOs, specialty networks and PBMs to help reduce medical expense. Come 1/1/11, those vendors are out of business.
Word is employers are livid, as are several powerful members of the Texas legislature who are none too pleased with work comp Commissioner Bordelon. The Commissioner is in a very tough spot as the interpretation of the enabling legislation sunsetting the voluntary networks is pretty straightforward.
Word of a couple of deals is circulating on the floor; one’s big – quite big, and the other not. No word on timing of the announcement but both will likely occur.
I’ve been asked a dozen times about the current status of AHCS’ suit against me. Here’s the update.
Our lawyers met last week to set the discovery and process schedule. More on that when I catch up with my attorneys – who are very very good, thank you.
I can’t reveal our legal strategy but suffice it to say we (me, supporters, and our attorneys) are not cowed by AHCS or their bullying tactics.
And yes, there is a legal defense fund in the works; expect an announcement soon.
I’d be remiss if I didn’t offer a big ‘thank you’ to all the folks who voiced their support and offered help. I’ll need both if we are going to successfully expose AHCS and their business practices.
More to come…

There are several potential deals in process now; for a change there appears to be more sellers than buyers, perhaps due to the pending changes in tax laws. For whatever reason, this is one of those very busy times for private equity firms, their research contractors, and the various people and firms that play some role in the deal assessment process.
I’ve participated in several transactions, and while I don’t pretend to be an expert I have seen enough to know some of the more common mistakes/errors in judgment/exaggerations and the impact of same.
For example.
Don’t claim that any payer that ever sent you a payment is a ‘customer’. Differentiate between real, honest to goodness customers – those you have a long-standing relationship with, and other revenue sources. Sure, you can argue with some basis in fact that anyone who pays you is by definition a customer, but when the smart young research people start digging deeper you’ll find yourself not being able to answer basic questions about this ‘customer’. Which will lead potential Investors to wonder if you know what a customer is and anything about your’s.
Don’t over-enthusiastically forecast. The research firm will vet that info carefully with folks who actually KNOW what’s going on in the market, and you’ll find yourself either a) answering uncomfortable questions or b) answering awkward questions post-deal when you don’t hit your numbers. Or possibly both.
Remember the old adage: pigs get fat and hogs get slaughtered. (hat tip to John Swan) Share the wealth between and among staff; they helped get you there and deserve your thanks. Think of it this way; is another million going to mean as much to you as it would parceled out among your employees?
Do your own due diligence on potential buyers, and absolutely stay away from potential buyers with heavy baggage. There are really good investment firms looking for deals and some on the other end of the spectrum. Ask around, talk to people who’ve sold companies before, and if at all possible who’ve dealt with the firms you’re negotiating with.
Watch the earn-out. It’s perfectly acceptable to have one in the final deal, as long as it’s achievable, provides a nice upside for over-achievement, and the worst case scenario is something you can live with.
Do spend a lot of time with the future board. You are going to have to live with them, and while you don’t have to like them you do have to understand and respect the board.
And finally, be reasonable. A business is just that. It is not a child or even a much-loved black lab.

There’s an excellent piece in the NYTimes detailing the results of the taxpayer investment in AIG.
Here are a couple highlights.
“First, the $180 billion headline figure [widely reported as the cost of the bailout] is not the right number to consider. Today, taxpayers have extended loans through the Federal Reserve and Treasury to the tune of about $130 billion, which is still a boatload of money. However, about $30 billion — and he is rounding numbers here to make this easier — of that total include assets that are owned in large part by the Federal Reserve through its Maiden Lane funds. Those assets, which were once considered troubled at the height of the panic in September 2008, have since increased in value and are now, as Mr. Millstein contends, “money good.””
A.I.G.’s sale of Alico to MetLife will be finalized in a couple months, for $6.8 billion in cash and $8.7 billion in securities.
The planned IPO of A.I.A. will produce about $12 billion.
Another $4.2 billion comes from the sale of AIG StarLifeInsurance and AIG Edison Life Insurance, to Prudential Financial.
“A.I.G is going to pay down the Fed’s remaining $20 billion stake in two special-purpose vehicles, which hold the rest of Alico and A.I.A, he [Jim Millstein, the man in charge of unwinding our investment in AIG] explained.
That reduces the total figure owed taxpayers to just under $50 billion.
And here’s the clincher.
“Treasury will own 1.6 billion shares, or 92 percent of the company. At A.I.G.’s share price on Monday, the government’s stake would be worth about $62 billion, a $13 billion profit. That’s if, of course, shareholders do not send shares tumbling because of the dilution.
Mr. Millstein is betting that investors will be bullish on the stock once they understand the government’s plan to exit its investment over time.”
There’s no certainty here; there’s a lot of moving pieces, markets can move, conditions can change, etc. However, the net is we taxpayers are likely to be out far less than $180 billion – far less.
What does this mean for you?
We dodged a bullet – but we better make sure we don’t have to do this again, when we may not be as fortunate.

The news has been full of reports about the recovery of insurance giant AIG, the once-mighty largest insurer in the world that crashed and burned when a tiny subsidiary gambled wildly and lost very, very big.
After the crash, the Obama Administration made the controversial, and much-debated, decision to bail out AIG and keep the company afloat. In a sound bite, AIG was judged ‘too big to fail’; a view many disagreed with, some vehemently. I opined then, and reiterate now, that AIG was far too big to fail, as failure would have had effects far more devastating than those resulting from a taxpayer bailout that was never repaid.
I just re-read my post of a year and a half ago; here’s the heart of the matter.
“AIG is not too big to fail; it is too ‘connected’ to be allowed to fail. AIG provides the underpinning for many pension funds and retirement plans; its financial instruments guarantee the returns for pensioners. It backs up the investment of many banks. It owns many of the airlines’ airplanes, planes that might be repossessed if AIG goes under. AIG insures many Fortune 500 companies, and is among the largest writers of workers comp in the nation. It is a large individual auto insurer as well.”
While free-market purists will argue that no business is too big to fail, I have to disagree. The economic impact of AIG’s demise would have crushed every sector of the US economy, and slammed the world’s as well. Everything from teachers’ pensions to airplane manufacturing would have been hit, with some seriously hurt and others facing an uncertain future.
At the time (early 2009), that may well have been enough to turn a severe recession into a depression.
Instead, we now face the very real possibility that we taxpayers will get all of our money back, a fortunate event indeed, but one that should not blind us to the incredibly scary position we were in two years ago.
In retrospect even the most vehement opponents of the bailout should be pleased that taxpayers will be made whole. Undoubtedly the opponents will also argue that no business should ever get to the point where it is so important that it has to be bailed out by the Feds, but therein lies the problem with the purists’ faith in the free market.
AIG’s near-demise was a direct result of its participation in what was an almost-completely-unregulated business: credit default swaps and other derivative instruments. The significance of AIG’s position as the leading firm in the business was such that its failure could have crippled the international banking system, with unknown, but likely far-reaching – and very bad – consequences for the world economy.
In retrospect, some experts believe other options could have, and should have, been considered before a bailout, but we’re much smarter now than we were then.
What does this mean for you?
We dodged a bullet. But we’d have been much better served if the bullet had never left the barrel. As difficult, and onerous, and frustrating as regulations can be, the collapse of AIG serves notice that not enough regulation can be just as bad – or even worse – than too much.

Here in no particular order is a list of concerns/issues/problems that have recently come up in conversations with work comp insurers large and small.
1. Repackaging and physician dispensing of drugs – I’m still getting calls from payers (first came right after my post a couple weeks back); about this issue. Physician dispensing in itself isn’t so much the problem as the potential for much higher prices when a repackaged bunch of pills is billed at some multiple over the cost for a similar non-repackaged drug.
2. Too much utilization review and not enough utilization control – there’s a growing awareness that much if not most of the precert and concurrent review is little more than a rubber stamp followed quickly by a bill. UR has to – absolutely has to – deliver more value.
3. Claim counts are increasing ever so slightly. The trend has been up for a few months; it’s not yet a trend but if it keeps up for a couple more months we may be out of the proverbial woods.
4. The competition appears to be a little less brutal than a few months back. (An unscientific sample set of) agents report more consistency in rates across the board. While there are still some of those ‘they quoted what?’ incidents, they are fewer and further between.

I’m forced to change how we handle comments on posts. For the immediate future, please send any comments via email to me at jpadudaAThealthstrategyassocDOTcom.
The reason for the change is the proliferation of spam comments on everything from ‘fake replica handbags’ (what, is the replica not really a replica?) to anatomy enhancers to eastern european bride selection services.
I kid you not.
We’re working on a solution.

In the almost six years I’ve been publishing MCM I’ve never strayed this far off topic. Except for the annual April Fool’s day fun (consider yourself warned), this is all about stuff somehow related to managed care, health policy, insurance…
Try as I might, I just can’t come up with a link here. Except for the very very distant possibility of a workers comp claim.
So here’s what’s got my attention.
Just a few minutes ago, a flight attendant, fed up with a &^@&*(?! of a passenger, ran to the exit door, pulled the emergency escape hatch, inflated the slide, and jumped out of the plane.
Yes, the plane was on time, and no, it hadn’t been sitting on the tarmac broiling in the sun with backed up potties.
Fortunately, JetBlue 1052 was on the ground in New York [scroll to the bottom and read the comments; some are hilarious] when Steven Slater, the flight attendant in question, pulled the cord.
Wait, this gets better…
Turns out Mr Slater was reacting to a passenger who had jumped up just after the plane had landed, started to get his bag out (you’ve undoubtedly been on a plane with one of these jerks), refused to stop when Slater asked him to. In fact, the passenger’s bag fell out of the overhead and smacked Slater on his head.
Slater didn’t go nuts then – he actually asked the passenger for an apology. Instead of doing the right thing, the guy (ok, it might have been a woman, but we all know it wasn’t) cussed Slater out. Whereupon Slater got on the PA, screamed a few choice words (reportedly “To the passenger who called me a m—f–er, f— you!…I’ve been in the business 28 years. I’ve had it. That’s it”) over the squawk box, and exited the craft.
I kid you not.
Perhaps Mr Slater can claim work comp from an injury that discombobulated his sense of propriety…

Earlier this week we discussed the impact of pending changes in the world of big pharma will affect workers comp.
Changes to Medicare physician reimbursement, also just over the horizon, will have a dramatic impact on workers comp in ways both obvious and subtle.
First, a quick primer on how Medicare pays docs and ancillary providers.
Medicare adopted the resource-based relative value scale (RBRVS) along with a predecessor to the Sustainable Growth Rate mechanism called the Volume Performance Standard (VPS), eighteen years ago as a new way to pay physicians. The RBRVS incorporates three components of physician services – physician work, practice expense, and professional liability insurance.
A relative value unit (RVU) is assigned to each of these components; RBRVS system uses the definitions and procedure codes developed and owned by the American Medical Association in their Current Procedural Terminology (CPT). The reimbursement for a given CPT code is determined by taking the total RVU’s for the service and multiplying by the conversion factor, then multiplying by a geographic adjustment factor (GAF) is applied to account for regional cost differences.
As an example, in 2005, a generic 99213 (office visit) was worth 1.39 relative value units, or RVUs. Adjusted for North Jersey, it was worth 1.57 RVUs. Using the 2005 Conversion Factor of $37.90, Medicare paid 1.57 * $37.90 for each 99213 performed, or $59.50. (thanks to Wikipedia)
Got that?
So, what’s the problem? Well, as Gail Wilensky wrote, “The primary problem with the SGR is that while it can control total spending by physicians (assuming it is actually implemented), it does not affect nor is it driven by the volume and intensity of spending of individual physicians. In fact, there is some concern that expenditure targets may actually exacerbate the incentives for individual physicians to increase the volume and intensity of services they provide.” [emphasis added]
Late last year the Senate tried to address the issue, coming up several votes short on a bill that would have ended the SGR ‘program’. Senators from both parties evidently decided that approving a bill that would have a) immediately added about a quarter trillion to the deficit and b) thereby forced the CBO to factor higher physician reimbursement into its calculation of the cost of reform was not a (politically) good idea.
As a result, Congress has had to pass at least two (it’s easy to lose count) bills so far this year, both at the eleventh hour, temporarily blocking implementation of the 21% cuts. At some point Congress will have to ‘fix’ the SGR program, either by changing the calculation methodology, dumping it and replacing it with something else, or fundamentally changing RBRVS.
What’s likely to happen?
Expect that reimbursement for Evaluation and Management codes (office visits, etc) will go up – CMS has suggested by eight percent, while reimbursement for some subspecialties will decline, some more than others. This has been in the works for at least three years, and I’d expect a permanent change to occur later this year when Congress is forced to deal with the SGR mess once again.
Impact
First, the most obvious. 33 states base their WC fee schedule on RBRVS, the key word being ‘base’. A few directly tie their fee schedule to RBRVS, but most adjust the conversion factors, alter the RVUs, add a multiplier, or otherwise tweak RBRVS. And, some states do this thru the regulatory process, while others require legislative action to make significant changes to their fee schedules.
As a result, the state-level implementation of any changes CMS/Congress makes to RBRVS is unclear, state-specific, and politically influenced.
(for an excellent overview of this issue, see Barry Lipton, John Robertson, and Dan Corro’s NCCI Research Brief) (pdf)
More generally, basing WC reimbursement on Medicare is simple, but not appropriate. WC is a state-based disability compensation system where physician reimbursement is controlled by a political process completely unconcerned about its implications for comp insurers, employers, physicians, or injured workers.
A study completed in 2007 illustrated the problem – low reimbursement rates mean few physicians are willing to treat comp claimants. Among the five states that based their fee schedule on low percentages of Medicare (109% to 125% of Medicare), the percentage of neurologists and orthopaedists that participated in workers’ compensation tended to be a fraction of the available population (9% to 27% for neurologists, 23% to 46% for orthopaedists).
Among the states using Medicare’s RBRVS as the basis for physician reimbursement are Florida, Pennsylvania, West Virginia, Hawaii, Maryland, California, Michigan, Ohio, Tennessee, Minnesota, Oregon and Texas.
Yes, most pay above the Medicare rate, and many have built-in inflation adjustments. But physician compensation is still primarily controlled by the politics of Washington.
Third, even less obvious, but nonetheless critical. Many network contracts are based on Medicare’s RBRVS; if the Feds change, provider compensation will too. Think about the potential impact, and think deeply. The trickle-down will likely cause specialists to seek higher network reimbursement for two reasons – first the base from which their reimbursement (RBRVS) has declined, and second, they’ll want to make up their lost revenue from Medicare by increasing reimbursement from private payers.
On a related note, it’s utilization, stupid! The SGR attempts to use price to control cost. The complete failure of the SGR approach to control cost is patently obvious, as utilization continues to grow at rapid rates. This was a problem four years ago, and its done nothing but get worse. Not only does the RBRVS/SGR approach contribute to cost growth, it also ‘values’ procedures – doing stuff to patients – more than listening to them (I realize this is an unfair comparison, but read on).
According to an excellent piece by Robert Berenson in HealthAffairs,
“FFS, discretionary “harmless” services, self-referral, and, sometimes, patient demand all combine to produce the explosive growth in quantity of physician services [in Medicare] — but only for some kinds of services, provided by some kinds of physicians. In policy shorthand, the resultant disproportionate reimbursements and incomes (as private plans emulate Medicare payment approaches) are often described as primary care losing out to proceduralists. The more accurate summary would describe the winners as niche specialists and the losers as generalists — across and within specialties. So, general surgeons are compensated less well than many surgical specialists, and general orthopedists and ophthalmologists less well than spine surgeons and retina specialists, respectively. General internists (and “cognitive” specialists like endocrinologists) are near the bottom of the income totem pole, while gastroenterologists and, particularly, invasive cardiologists are near the top, even if they once trained together in internal medicine residency training programs.
By applying to all services equally, an SGR-imposed fee limit further accentuates income and service disparities originally created by misvaluations within the RBRVS system and the differential opportunity physicians have to increase the volume of services they provide. A root problem is that the Medicare fee schedule based on “relative values” does not permit consideration of the value of services to beneficiaries or the Medicare program. Rather, it relies on attempts to determine the relative resource costs of producing the thousands of services for which Medicare reimburses physicians and a sophisticated, but inherently subjective and, as it has been allowed to develop, highly political process.
What does this mean for you?
Watch what Congress does about Medicare’s SGR, and monitor NCCI’s site for updates. Change is acomin’, and success favors the prepared.