Nov

Health care costs are headed up – and so are premiums

Posted by Joe Paduda on Monday, November 10th, 2008 | Comments

Health care costs are on their way up – or more precisely, the rate of inflation is going to increase.
Although the medical CPI, currently sitting at 2.8%, looks quite good compared to historical rates in the mid-single digits, there are several reasons for the coming rise in costs, and precious few factors likely to drive them down.
Let’s start with the worsening economy and its impact on employment. As people lose jobs, they also lose their insurance coverage (unless they can afford COBRA, which is doubtful for many desperate to hold onto cash). They will still need health care, but won’t have insurance to pay for it. As a result, they will either have to rely on the understanding of their current providers, or go to hospital emergency rooms for treatment. Either way, the folks who provide care have to recoup their loss on charity care by charging their paying customers more.
Expect to see more cost shifting as unemployment grows.
The economy will likely cause more employers to cancel their health insurance. While it is too early to see if this is actually occurring, it seems a safe bet that employers faced with declining sales will cut costs wherever they can. With the average family policy premium close to $13,000, terminating a health insurance policy will save any employer big bucks. Again, these newly-uninsured will still require health care, but they won’t have insurance to pay for it.
Those who hold onto their jobs, and their health insurance, will likely feel rather uncertain about their future and the stability of their employment. Seeing others lose their jobs and health insurance may well result in higher utilization on the part of the employed, as they get all their elective procedures done, prescriptions filled, and preventive care taken care of while still on their employer’s policy.
Finally, consider a situation we can think of as ‘retroactive adverse selection’. Seniority often plays a role in the who-gets-laid-off calculation; the older folks who have been there longer are more likely to be retained. As the younger, healthier folks leave the plan, the demographic mix becomes older and (usually) more costly. This drives up per-employee costs, which inevitably leads to higher premiums.
If the economy continues to stagnate, the effect of these cost drivers will grow. And the longer it takes to pull out of recession, the more we’ll feel the impact on health care costs.

Oct

What’s that light in the tunnel?

Posted by Joe Paduda on Tuesday, October 28th, 2008 | Comments

The public does not like health insurance companies. And neither does Congress.
Health plans are blamed for rising health care costs by far more Americans than point an accusing finger at pharma companies, the government, hospitals or physicians. Fully 41% of respondents say health plans are most responsible for the surge in health care expenses, compared to only 16% who blame big pharma.
And by the way, political party affiliation doesn’t really affect the numbers at all.
You can moan and groan, whine and sigh, and decry the ignorance of the average survey respondent, or you can accept this for what it is – a blast of the whistle and glare from the headlight of reality.
oncoming%20train.jpg

The health insurance industry has done a great job of selling the public – on the benefits of a single payer plan.
Between ill-advised (and illegal) cancelations of insurance policies held by individuals who have the gall to actually get sick, a refusal to actually explain benefits in terms normal humans can grasp, and a complete failure to justify the hefty surcharge they receive for providing Medicare Advantage plans, health plans look arrogant and out of touch.
It didn’t have to be this way.
If there’s one service that should be easily (and positively) branded, it is health insurance. Taking care of sick folks, helping expectant mothers, easing the pain of the elderly, eliminating that awful paperwork and getting America out of the sickbed and back on its feet – how great a message is that?
Instead health plans spend their time, money, and intellectual capital avoiding selling insurance to anyone who needs it, canceling policies for individuals who get sick, tightening the reimbursement screws on physicians (who are the face of health care to the public), and making the whole thing incredibly complex and difficult and a huge pain in the butt.
Hell, look at big oil. British Petroleum has done a pretty nice job positioning itself as the green oil company, with a nice flower-type logo and talk about responsibility and alternative energy, all the while spilling crude in Alaska, operating unsafe tankers, and devoting a tiny fraction of their R&D budget to ‘green energy’.
BP et al have figured out that their public image is critically important to their success. If the public views the company positively, they are less likely to be hauled in front of Congress for hearings and pilloried in the press.
Health plans start out way ahead of big oil – pictures of healthy babies and smiling octogenerians and active families are much more powerful than schools of happy dolphins near an oil rig belching smoke. But by not investing in branding, by consistently doing the wrong thing, by making health insurance and health care byzantine and frustrating beyond measure, the health insurance industry has managed to make big oil look good by comparison.
The next President will very likely be a Democrat. The House will become even more Democratic, and the Senate may see a filibuster-proof majority of Democrats. These men and women have a mandate to fix a lot of what’s wrong with this country, and they are not going to be shy about taking a sledgehammer to health plans.
At this point there is little health plans can do to avoid the blows. The time to build a positive image was two years ago, back when they were getting fat off Medicare Advantage subsidies. Now, health plans can count themselves fortunate if they avoid becoming little more than administrators for a single payer system, a fate they rightly deserve.

Sep

Credit market collapse – the worst is yet to come

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

Bear Stearns, Lehman Brothers, and Merrill Lynch were here one day and gone the next. Their rapid, almost-overnight disappearance from the world wide financial landscape is as stunning as the collapse of the Twin Towers. Solid as concrete and steel, their permanency wasn’t even questioned until days before they were forever gone from the skyline.
The next to go may well include Morgan Stanley and Washington Mutual; if the stock prices of other financial institutions continue to drop, more companies may also be putting up ‘for sale’ signs.
While the Fed’s rescue of AIG may well have prevented a global mess of historic proportions, it also sent a very loud, and very clear message that the financial industry is in danger of worldwide collapse. As one South Korean put it, “”The U.S. government’s rescue of AIG helped the markets to avoid the worst case scenario, but the fact that only the government was willing to help indicated the gravity of U.S. credit problems.“[emphasis added]
Now we learn that rating agencies, all too aware of their failure to accurately assess credit risk in banks, investment houses, and property and casualty insurance, are re-thinking their approach to assessing the financial viability of health insurers. Fitch Ratings will be dumping the traditional debt to capital formula within a month. “Fitch believes operating EBITDA, funds flow from operations (FFO) and subsidiary dividend capacity are the appropriate measures in assessing financial leverage and debt utilization, to augment the debt-to-capital analysis traditionally used for insurance companies.”
Clearly the landscape is changing dramatically – mountains may be disappearing here, but they will likely be replaced by new mountains in other parts of the globe. From here, it looks like New York, long the center of the financial universe, may be losing that status to London, or perhaps eventually Dubai. Investors hate uncertainty, and there’s all too much of it here in what has become the Wild West of speculative ‘investing’.

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

Coventry earnings call – the analysts blew it

Posted by Joe Paduda on Friday, July 25th, 2008 | Comments

I think I’ve figured out why analysts have been unable to accurately forecast health plan financials – they don’t know what questions to ask.
That’s the only conclusion I can draw after listening to the latest earnings call from Coventry Health. The mid-tier health plan company is still reeling a bit from last month’s announcement that it had been surprised by a sharp increase in medical costs, an increase that evidently had caught management by surprise.
Folks, this is a health plan company – one that claims “We deliver exceptional value every day, driving solutions that help people enjoy optimal health.”
One might think that a health plan company makes money by managing medical care for hundreds of thousands of Americans. Near as I can tell, Coventry isn’t a health plan, it is a transaction processor that makes money by pricing its insurance far enough above medical costs to administer the plans and make a bit of margin.
And from the questions that were asked ,and the ones that weren’t, it is pretty obvious Wall Street analysts think Coventry is a transaction processor as well. Out of the twenty or so questions after the management presentation, there was one – yes, one, that got anywhere close to actually inquiring about medical management. That questioner asked what Coventry could do or had done to deliver care to Medicare enrollees through an HMO at lower cost than thru the standard Medicare plan. Coventry Chairman Dale Wolf responded by noting that hospital days per 1000 members among Medicare HMO plans could be in teh 900-1300 range, compared to standard Medicare rates of around 3000 days/1000.
That was it. No follow up question as to how they could do that, what the long term implications were, how that affected pricing, what the techniques were that delivered such a great result and could those techniques be used for commercial members.
The entire conversation was about medical trend and how Coventry was fixing its pricing model to reflect higher trend, and if enrollment was going to decrease as a result. Not the factors causing medical trend and what Coventry was doing about it. Well, to be fair, there was a little dialogue about higher inpatient utilization and unit costs in Medicare, and higher hospital utilization on the commercial side. But if you were interested in Coventry’s solution to same, you’re out of luck. Not one analyst even asked.
If analysts don’t know to ask the company why their costs are going up and what they are going to do about it and how that will play out, what, exactly, are they ‘analyzing’?
There’s this thing in business called a sustainable competitive advantage – something you do really well, that is hard to do, that others don’t do well. This gives you an edge in the market, one that makes you a perennial winner. Coventry doesn’t have one, and neither do any of the other health plans. Because all they do is process transactions, adding no value.
Here are some of the questions they should have been asking.

What key indicators of medical trend do you watch closely?
Exactly what is your average inpatient days per thousand for each block of business and how does that compare to industry standards?
How about admissions per thousand?
what is driving trend? Is it unit cost (price per service), utilization (number of those services received by a member when they do get those services), frequency (percentage of members that get that service) or intensity (higher cost version of a technology or more expensive procedure type than expected)?
Which types of medical care are the biggest drivers; ancillary, physician services, pharma, inpatient, outpatient?
What is your plan to address those issues?
How will you measure results and when will you know if you’ve been effective?
What is Coventry doing about members with chronic conditions? How have your results compared to industry standards?

And the big one:
How would Coventry compete and win if it could not risk select and had to take all comers at a community rate?
Because that may well be the scenario Coventry, and all its competitors, face in two short years.
Note – this applies almost equally to most every health plan. In fact you could just about replace ‘Coventry’ with Wellpoint, Cigna, Humana, Blue Cross, etc and the same perspective would hold true.
Now I really am going on vacation.

Jul

Another insurance screw-up

Posted by Joe Paduda on Tuesday, July 22nd, 2008 | Comments

Like a man stumbling through a darkened room full of sharp objects, the individual health insurance industry continues to bash itself bloody.
Today’s painful encounter is the news that individual health policy marketer HealthMarkets agreed to pay a $20 million fine to 36 states for failing to educate sales reps, failing to fully inform customers, and allegedly not paying providers promptly. HealthMarkets caved quickly, as the agreement came less than a year after the initial suit was filed.
This isn’t the first time HealthMarkets has felt the wrath of regulators.

In 2006, Massachusetts required HM “reassess denials of policyholders’ medical bills dating to January 2002” (Appleby USAToday)
Maine levied a million dollar penalty earlier this year, while also requiring HM to refund $5.6 million to policyholders
Delaware fined HM $500k in 2006 (the largest fine in the state’s history) for “steering consumers into individual rather than group health insurance policies, failing to provide state-required coverages, engaging in deceptive and improper marketing, mishandling consumer complaints and failing to institute adequate management controls” (Commissioner’s statement); the insurer also failed to cover immunizations and mental health benefits, in direct violation of state and Federal law.

The Delaware case is especially revealing. There are better benefits, more state controls, and more regulation of small employer policies. And insurers are required by state law to offer those policies – but HealthMarkets’ subsidiary insurer didn’t, instead steering applicants to the ‘more costly, less benefits, more complicated’ individual policies.
HealthMarkets’ leadership team should know better. Led by Allen Wise (ex-founder of Coventry), the board includes Steve Shulman (ex-Value Health CEO), Harve DeMovick (ex Coventry CIO), the board also is populated with notables from the various investment firms that bought HM several years ago. Fortunately, HM brought a seasoned compliance officer on board earlier this year, but you’ve got to wonder why it took them so long. Wise et al have been in the business for many years, the company had a checkered past (to be kind), and the pressure from regulators didn’t start last year.
Why am I highlighting a relatively small player (>700,000 insureds) that operates on the fringes of the insurance market?
To show what can happen when the insurance business operates in the ‘free market’. This company took advantage of uneducated consumers, sold them policies that weren’t as advertised, took their money and left them with lousy coverage. For all those staunch advocates of deregulation – here’s what you can look forward to – but on a much grander scale.
What does this mean for you?
Most insurance companies aren’t like this. Most are staffed by good people trying to do the right thing, to get policies issues, pay claims fairly and promptly, and operate ethically. But when companies cheat and lie and steal, they make it all too easy for folks to tar all insurers with the same brush.

Jul

There is justice; UnitedHealthcare gets hammered

Posted by Joe Paduda on Monday, July 7th, 2008 | Comments

In yet another blow to the big health plans, giant UHC will be cutting 4000 positions as part of a restructuring plan. The plan involves ditching the Uniprise brand and putting all commercial products under the UnitedHealthcare banner.
The announcement comes at a time when UHC’s stock has been battered by bad news throughout the sector, with UHC recently announcing it is projecting weaker earnings. On the heels of Coventry’s missed forecast and following the CalPers settlement (see below), the bad news has driven UHC’s stock price to less than half its 52 week high.
The company also will be paying a fine of just under $900 million to settle CalPers’ lawsuit stemming from UHC’s stock option manipulation – while admitting no wrongdoing. Got to love that last phrase – if there was no wrongdoing I kind of doubt UHC would have agreed to pony up $895 million.
Apparently United has decided to fix its finances by cleaning out its book of business by dumping less-profitable business and tightening underwriting. These moves, coupled with increased premiums, will cut the medical loss ratio, but at the cost of membership. Expect UHC’s trend-neutral revenues to decline in 2008 and possibly 2009 (remember that all health plans have a built-in annual growth rate equivalent to medical trend; to accurately calculate growth one has to correct for that trend).
Over the long term, I don’t like UHC’s chances. This is not a company that invests in medical management – despite its trove of data, analytical expertise, participation in NCQA accreditation and inhouse capabilities, UHC has always been about managing reimbursement, not care. Their latest move to increase premiums is the way United has always reacted to bad financial results. And it may work for a while, but over the long term the winners in the health plan business will be those who actually understand how to manage care.
And United doesn’t.

Jun

Coventry’s stumbled – badly

Posted by Joe Paduda on Thursday, June 19th, 2008 | Comments

The notice for the teleconference popped up in my email inbox a mere hour and a half before the telecon was scheduled to begin. That was the first indicator of potential trouble.
The second was the opening line from Coventry’s CEO: “To say we’re disappointed with the news we shared earlier this afternoon is an understatement…”
The source of Mr Wolf”s disappointment was Coventry’s report that it will miss its financial projections – by a wide margin.
For a company that has long been (justifiably) proud of its ability to tightly monitor and manage its business, the disclosure that it had significantly underestimated Q1 and Q2 medical costs was a bitter pill indeed, all the more so as it came a few weeks after Wolf’s recent efforts to pump up internal morale by comparing Coventry’s management discipline favorably to competitors.
Earnings will fall short due in large part to higher than expected medical costs in Coventry’s Medicare private fee for service and core group health businesses. In explaining the failure to meet the Medicare program’s projected MLR, CFO Shawn Guertin described the problems inherent in the claims submission and processing flow. Guertin went on to note that the company also had identified some problems in Coventry’s internal claims processing. Curiously, management blamed part of the problem on ID cards not being used by claimants, which delayed claims flows internally. Evidently some members don’t bother to show their Coventry cards when leaving the doctor’s office. The office sends the bill to Medicare, who returns the bill with a note that the patient is not a member. The office then contacts the patient, gets the correc claims submission info, and sends the bill to Coventry.
This takes time, and has led to Coventry under-estimating claims volume and expense for its Medicare private ffs business. I’d note that in prior calls management has been effusive in its self-praise for its ability to operate this business with statements like ‘we couldn’t be more pleased with how this business is running’.
For the Medicare business, the MLR is up 300-340 basis points over prior guidance. This isn’t even close enough for horse shoes or hand grenades. From comments by management on last night’s call, it appeared this popped up in April and May, after things appeared to look pretty solid earlier in 2008.
Again, this is a pretty big surprise.
On the group health front, higher trend in group outpatient utilization and inpatient unit cost, or price per service appear to be the problem. Instead of the forecast 100 basis point reduction in MLR, management is now expecting higher medical costs – with a potential swing of 400 basis points for outpatient expense. Inpatient costs are also up 100 basis points, so the combination is driving up total MLR by 150 basis points.
Another significant contributor to the higher MLR is an increase in the number of more severe (more costly) claims – not more claims, but more high cost claims, specifically between 50k and 150k in dollars paid.
In contrast hospitals are not seeing increased utilization. Facility revenue numbers are not trending up. Coventry wasn’t able to figure out why their hospital costs were going up while overall hospital utilization nationally is not.
Admittedly Coventry has not yet determined all the factors causing these increases in MLR. They do appear to have a grasp on the major factors; from the tone and delivery
of management comments I’d expect there’s a lot of yelling at Coventry HQ, likely to be followed shortly by the distinctive sound of heads rolling. (During the call Wolf did allude to staff reductions in a response to an analyst’s query.)
Lastly, management reported that the work comp business is not meeting projections due in part to lower fee revenue for bill review.
As the market closed, Coventry’s stock price had dropped to $40.97, resulting in a P/E just under 10. Coventry has long been rumored to be a potential acquisition target, and if the stock price declines further (a not unreasonable expectation) suitors will likely emerge.

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.

May

Why employers must be involved in health insurance

Posted by Joe Paduda on Wednesday, May 28th, 2008 | Comments

Productivity.
Lost in the great debate about the role of the employer, the individual, and the government in health care reform is the critical link between health insurance, care, and productivity.
Years ago when I was responsible for the Travelers’ utilization review account management function I met with Bruce Bradley, who was then the head of employee benefits at telecom giant GTE. I was going thru the data, reporting on how well Travelers had done reducing this and cutting that, when he stopped me and asked about the ER and inpatient admissions rate for children with asthma. I didn’t have the data, and asked why he wanted to know.
Bradley proceeded to educate me on GTE’s workforce and their functions. To summarize, they had a lot of employees who were single parents or one parent in a dual-income family. Many of their employees worked in line maintenance, directory assistance, and other blue- and pink-collar jobs.
And when one of these workers was out of work, caring for a child experiencing an acute asthmatic attack, the lines didn’t get fixed and calls didn’t get answered. Bradley wanted to know what the Travelers was doing about this. Truth was, we weren’t doing anything.
GTE is long gone, swallowed up in the telecom mergers in the nineties. But Bradley’s point is as true now as it was then – keeping workers, and their families, healthy and productive is the primary objective of health insurance.

I’ll grant that few policy wonks look at it from this perspective. Perhaps that’s because they didn’t have the pinned-to-the-wall-like-a-butterfly-in-a-display-case experience I went thru. But because they don’t consider the impact of health insurance on employer productivity, they miss the reason employers offer health insurance in the first place – to attract, and keep, good workers.
If employers are removed from the process of vetting and selecting health insurance vendors, individuals would be responsible for choosing their carrier. Insurance companies would ‘win’ based on how cheaply they could provide insurance to individuals and families, and the less care delivered, the lower the premiums. I don’t see what would prevent those vendors from suggesting each and every injured or ill worker or dependent tried bed rest and over the counter drugs for two weeks, then an x-ray or basic lab test, and only then would they get to see a diagnostician.
What does this mean for you?
Health care reform based on an individual market would work against employers’ desires and needs, and over the long term, against the nation’s best interests.

Category: Health Care Issues