Feb

Medicaid expansion will…expand.

Posted by Joe Paduda on Monday, February 18th, 2013 | Comments

As governors look more closely at the benefits – and costs (political and financial) of the Medicaid expansion slated to begin next January, more and more are deciding it isn’t such a bad thing after all. Ohio’s governor has been pushing his supporters in this direction for some time, and Gov Kasich is joined by several of his fellow GOP governors including Michigan, Arizona, Nevada, New Mexico and North Dakota. I’d expect Florida will also join the list; I listened to Gov Rick Scott uncomfortably listen to a Florida hospital CEO make his pitch in a meeting last fall, and a compelling pitch it was.

While this may be politically distasteful for some, it’s simply common sense, with a big dose of fiscal reality thrown in. The reality is this: taxpayers from every state will finance the expansion, with their federal tax dollars paying for 100% till 2017 and 90% thereafter. So, states that don’t accept the expansion will be providing funding for those that do.

Second, hospitals in particular are screaming for support. For those who would decry Medicaid expansion as yet another entitlement we can’t afford, the hospitals respond that they are the ones hurt by this noble stance, as they’re providing care to the uninsured. With the number of uninsured around the 50 million mark, those without insurance get much of their care at hospital emergency rooms. Medicaid expansion will add about 8 million more people to the insured rolls, greatly lessening the burden on hospitals. It will also add about $300 billion over a decade to hospital revenue.

With those kind of dollars floating around there’s no doubt more states will join Kasich et al and agree to Medicaid expansion.

So what does this mean?

A few things.

Providers will protest the low, and decreasing, reimbursement for Medicaid recipients. Something is far better than nothing, so safety-net providers will grudgingly accept the deal. The savvy ones – and there are many – will realize that fee-for-service reimbursement is a loser’s game, and push very hard to adopt and prove out different models of delivering care and paying for it.

This is a very good thing.

More coverage for more people lessens the need for providers to shift costs to private insureds, workers’ comp claimants, and auto/liability claimants.

Feb

Variation in hospital results – how to use the data

Posted by Joe Paduda on Tuesday, February 12th, 2013 | Comments

It has long been known that there’s wide variation in the type, quantity, and outcomes of medical care across providers. A new report – research done by Dartmouth, and funded by the Robert Wood Johnson Foundation – looks at variations in re-admission rates among and between hospitals, and provides some striking insights.

The researchers used 2010 Medicare data; the overall results indicate one of eight surgical patients were readmitted within 30 days of discharge. Non-surgical patients were readmitted more often; one out of six was back in within 30 days.

According to the report, the “issue of patients being readmitted to the hospital is considered important because many are avoidable and, as the report notes, can occur because of differences in patient health status; the quality of inpatient care, discharge planning, and care coordination; the availability and effectiveness of local primary care; and the threshold for admission in the area.” [emphasis added]

CMS recently began reducing reimbursement to hospitals with high levels of readmissions – which will make it really important for those hospitals.

So that’s kinda interesting, but not really. Here’s what’s really interesting.

The good folks at Dartmouth have published the re-admit rates for all hospitals, and you can download the spreadsheets. Now before we go picking the best hospitals based only on their numbers, let’s look a little deeper.

Looking at two hospitals in my home state of CT, one can see the readmit rate for St Vincent’s in Bridgeport is much higher than Middlesex Hospital’s. One answer may lie in the population; Bridgeport is a lower-income area than Middlesex, and likely has a much higher proportion of patients without adequate primary care and/or insurance. Dartmouth provides some insight into this – 82% of patients discharged from Middlesex after congestive heart failure treatment saw a primary care provider compared to only 60 percent at St Vincent’s.

A couple other stats looked interesting; the data for surgical re-admits for UPMC facilities indicates they do a pretty good job keeping readmits down – and therefore overall quality is likely better than most (again this is just one data point). Similarly, patients discharged after a heart attack from Geisinger’s Wyoming Valley facility have a high incidence of primary care follow up – compared to other facilities in PA (58 percent v 48 percent. However, they’d be just above average in Wisconsin (54.4 percent).

What does this mean for you?

While there’s a LOT to digest here, I’d suggest one use would be for network direction. Identify the hospitals with statistically better results, assess them for confounding factors, and think about how best you can direct patients/injured workers to those better-performing facilities.

Feb

Medicare, MSAs, the SMART Act, and your taxes

Posted by Joe Paduda on Friday, February 8th, 2013 | Comments

I’ve long avoided getting into the Medicare Set-Aside issue for a bunch of reasons; it’s highly esoteric, requires deep knowledge, is ever-changing, can get pretty nasty and getting educated about MSAs would come with a high opportunity cost – I wouldn’t be able to do any real work for a couple months.

But never one to waste an opportunity to stick my neck into the noose, here goes. First, my admittedly ill-informed view.

CMS’ failure to a) make rational decisions pertaining to future costs and treatment and b) provide intelligent guidance to P&C payers is a travesty.

For CMS to assume that any current treatment will continue forever, at current prices, with current (brand) drugs, when any sane person knows that is absolutely NOT going to happen, is nuts.

Passage of the SMART Act helps address several key problems, but there is still much to be addressed before insurers can feel comfortable settling claims – comfortable that they aren’t getting screwed, comfortable that CMS isn’t going to come back and ask for more money, comfortable that the process, methodology, and calculations are actually somewhat stable – if not rational. Certainty is the goal here, and we’re still well short of that.

Leaving aside the debacle that has been CMS’ attempt to implement a law passed by Congress (with little guidance as to how to actually implement Congress’ wishes), there’s a different issue that deserves mention – why MSAs?

Their purpose is to ensure that taxpayers don’t have to pay for care that should be covered by another entity. And I’m very much OK with that. As a taxpayer and contributor to Medicare’s funding, I don’t want my tax dollars spent on care that should be paid for by someone else. I doubt anyone does.

Therein lies the rub. Reality is, for decades, we taxpayers have been footing the bill for medical care consumed by workers comp claimants, to the tune of tens/scores/hundreds of millions of dollars (pick one). That was great for those on the hook for WC claims and premiums, not great for taxpayers.

So, on the one hand, I think everyone (except maybe CFOs at and owners of P&C carriers) supports the IDEA of the Secondary Payer Act. On the other hand, making the idea a reality has been a(n) mess/disaster/embarrassment. But on the third hand, it is necessary.

I know, commenting on something so obvious may seem like a waste of pixels. But it’s good to know CMS is actually trying to save taxpayers’ dollars.

Now if they could only figure out how.

Oct

Why health care costs too much

Posted by Joe Paduda on Wednesday, October 24th, 2012 | Comments

If you go into the hospital for surgery, there’s about a ten percent chance you’ll be back – victim of a surgical infection, gastrointestinal problem, or other complication.

Of course, this being healthcare, (in general) the facility isn’t financially penalized for the problem. In fact, they’ll increase their revenue – up to $58,000. So, the more re-admissions, the more revenue for the hospital (on average, they get about $1.2 million a year more due to re-admissions).

Fortunately, CMS and a few other payers are taking steps to help hospitals reduce re-admission, with the most important step being a refusal to pay for some re-admissions. That’s helping to concentrate the efforts of many providers, who are working hard to figure out what causes re-admissions and what to do to forestall them.

That’s not to say that ALL re-admissions are due to hospital error, infection, or other issue – some patients just have problems.

But – and it’s a big BUT – many re-admissions CAN be prevented – BUT absent a financial motivation, there’s just no reason for the hospital and providers to do much to prevent them. In fact, there’s 58,000 reasons to not try.

Today, our reimbursement “system” rewards excess treatment, expensive technology, over-utilization. If we are to gain control over our costs and improve our (very mediocre) outcomes, we have to reward good performance and penalize bad – while working with the poor performers to help them improve.

CMS is leading the effort, starting with its decision to not pay for “never-ever” events, continuing with reductions in reimbursement for selected diagnoses, and then expanding to cover more in 2015. And where CMS leads, other payers will benefit – as hospitals ratchet up their performance, re-admissions for all payers will decline, lowering costs while improving outcomes.

What does this mean for you?

Why are you paying for poor performance by healthcare providers, when you wouldn’t get paid to fix your own work if it was less-than-acceptable?

Time to rethink your provider contracts…

Jul

The Medicaid expansion and political choice

Posted by Joe Paduda on Monday, July 16th, 2012 | Comments

If Medicaid isn’t your business, you may be tempted to ignore the implications of the current kerfuffle over whether or not states should accept free money to expand Medicaid. That would be a mistake.
As all-powerful and influential as Medicare has become, the Medicaid expansion will make the joint state-federal program THE payer to reckon with, setting reimbursement, defining “care”, restructuring provider contracts and relationships, and dramatically affecting provider billing patterns and practices.
With the Medicaid expansion now up to invidiual states, we’re hearing some say “no way” and others say “Hell yes”. At first, this split mirrored political lines, but now it’s getting harder to tell which side of the argument a governor is on merely by the color of their political stripes. The indecision on the part of governors who would seem to be natural enemies of federal largesse is telling.
In every state capitol where the decision is uncertain, there’s fierce lobbying on the part of providers attempting to convince governors to take the money and expand Medicaid. Make no mistake – providers have a huge stake in this decision, and are pulling out all the stops. Perhaps the most powerful influence in this is going to come from states’ hospitals and provider communities – but mostly the hospitals. These are the ones most affected by the increase in uninsured’s, and they will be the ones that benefit the most – financially – from a Medicaid expansion.
States such as Florida and Texas are particularly important. 29% of the Sunshine state’s working-age population doesn’t have health insurance; bad as that is, it is better than Texas, where fully a third is uninsured. And these data are from 2010; it is highly likely those percentages have risen as a result of the recession.
Both Governors Scott and Perry say they will turn down the federal money (covers 100% of expansion costs initially, declining to 90% eventually), hospitals and other providers – currently struggling to meet the needs of very large populations with zero ability to pay for care – are going to be in ever worsening shape.
(Governors of Mississippi (27% uninsured), Alabama (22%), and Louisiana (25%) have also said they won’t expand Medicaid.)
They are going to have to make up the revenue loss from somewhere, and that “somewhere” is going to be from privately-insured patients. That will lead to health insurance costs increasing much faster in “non-expansion” states than in the rest of the country, which will lead to employers dropping out of the system, which will lead to more uninsured, which will lead to more uncompensated care…
You get the picture.
There’s already huge cost-shifting in our health care system, in effect a hidden tax on private payers, workers comp, and auto insurance coverage, a tax levied by providers desperate to cover the costs of the uninsured.
What does this mean for you?
If governors stand on principle and refuse the expansion, the result will be more cost-shifting, really unhappy providers, and higher insurance costs for everyone.

May

Inflation in Medicare, private insurance, and work comp

Posted by Joe Paduda on Tuesday, May 22nd, 2012 | Comments

Credible research indicates health cost inflation rates will remain fairly low during this decade, driven by “greater cost-sharing in private insurance, new Medicare payment policies, slower growth in prescription drug spending, and an upcoming tax on high-cost insurance premiums.”
Note two of the primary drivers are reduced payments to providers by Medicare and Medicaid and more spending by individuals. These ‘cost-moderators’ are countered (somewhat) by the growth in Medicare eligibles.
The result is overall inflation rates will be about the same for private payers and Medicare at 5.7%. However, on a per-enrollee basis, Medicare’s trend is substantially lower (more than two points) than private insurance. Again, cuts in Medicare’s reimbursement to providers is the primary driver.
It is important to understand the difference between overall program and per-enrollee
cost inflation; it’s also important to think thru the implications for other payers – work comp and auto specifically.
With significant growth in Medicare and Medicaid enrollment coupled with low growth in the number of privately insureds, providers will see flat to declining compensation from a large chunk of their patient population. The latest figures indicate physician compensation rates have been relatively stable; given low overall inflation this is likely “acceptable”. Notably, some specialities saw increases while others dealt with reduced compensation.
However, as patient mix changes, the decline in compensation is inevitable, and will have far-reaching consequences.
What does this mean for you?
Expect utilization to increase, along with charges for services billed to all payers. Those payers without strong fee schedule or contractual controls on price will likely see significant price inflation as well.

Feb

Coventry’s 2011 financial results

Posted by Joe Paduda on Wednesday, February 8th, 2012 | Comments

Coventry Health announced their full-year 2011 results this morning; I’d have to sum it up as quite positive, driven primarily by big Medicaid and Medicare revenue increases. There’s no question where management is focused – with CMS programs accounting for half of the company’s revenue and essentially all of their growth, management’s focus on the call was almost exclusively on governmental programs with some discussion of the impact of health reform.
Most interesting was the continuation of lower medical utilization and lower medical costs into Q4, especially in the inpatient admissions and days across both Medicare and commercial populations. Chairman Alan Wise did note there’s been a slight uptick in physician utilization, but this was outweighed by the decline in facility services.
Geographically, it is increasingly clear Coventry is focusing on their core Midwest states, with expansions in governmental programs, deals with provider systems, and specifically successful efforts to increase their Medicaid business in Kansas, Missouri, Nebraska, and (not strictly speaking a midwest state) Kentucky.
The commercial business is not faring as well, with essentially flat membership for the year; premium increases resulted in an 8% uptick in revenue. The work comp sector is not growing much – more on that below.
Coventry’s utilization trend was consistent with other payers, yet their overall cost trend is a couple points higher than other health plans at high single digits. This appears to be unit cost driven (no surprise), although CFO Randy Giles did state health reform increased trend by up to 200 basis points specifically from eliminating deductibles and copays for preventive services. Seems like an awful lot to me; I can’t see how preventive care deductibles and copays could possibly amount to 200 basis points in losses.
Coventry re-negotiated their Medco pharmacy contract (for their non-workers comp business) and got better terms and an extension, with Medicare through 2015 and commercial a year longer.
On the workers comp front, the loss of a large customer dropped revenue 3%; word is that was the ESIS contract. Management did note that the $1.1 billion in management services/fee revenue is higher margin and provides cash for investment and acquisition activities.
Charles Boorady did ask the only question about workers comp, asking what drove the loss of the large customer – Mike Barr [sp?]is the new manager of the overall services business so Wise deferred to him. WC is an area they’re looking to grow, as it is unregulated revenue it is a ‘great place to be’. Barr said they lost their second largest group due to a competitive environment, noting there was “nothing specific with WC that created the issue, as a line it runs well.” [paraphrase] He went on to note Coventry is centralizing some operations to consolidate especially in areas where there’s no network.
Management said that while Coventry lost the overall contract, some employers (likely administered by ESIS) are looking to come back and work directly with Coventry, and Coventry is working on those opportunities. In commenting on the work comp sector, Wise said it is a stable and slightly growing business, it is an accident based business and in tough environment it has continued to add revenue slightly and ebitda a bit. In response to a question, Barr said they lost the business on price.
What are the key takeaways?
Governmental business is increasingly important – and that’s where the focus will be for the foreseeable future.
Coventry’s trend seems to be just a tad higher than their larger competitors.
MLR rules and the effect thereof are still working their way thru the system; it will be interesting to see how small employers react when they get their rebate checks later this year.
Expect Coventry’s work comp sector to push hard to increase revenue from existing and add new customers.

Jan

Think your hospital bill was high?

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

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

Dec

Medicare’s “rationers” – the IPAB

Posted by Joe Paduda on Monday, December 19th, 2011 | Comments

Among the howls of indignation coming from anti-health reform legislators and more strident Presidential aspirants one can often hear the outrage about “faceless government bureaucrats” rationing medical care to our elderly.
(we’ll leave aside that many of the howlers are the same ones screaming about out of control Federal entitlement spending…for now).
Turns out those faceless bureaucrats will likely never be seated, as all 15 members of the Independent Payment Advisory Board (IPAB) have to be approved by the Senate. Given the current toxic environment for appointees (see Donald Berwick et al), it’s highly likely Senators opposing health reform will do anything in their rather considerable power to block all appointments.
That’s unfortunate indeed, as the Board is one of the few real cost saving mechanisms we have. Here’s a brief outline of their responsibilities excerpted from an excellent piece in Health Affairs.
– if the Medicare chief actuary finds that the growth rate will exceed [a relatively low] target, the actuary must determine how much Medicare spending growth should be reduced. IPAB will then have to recommend specific steps that will curb the rate of growth in Medicare spending.
– The total amount of the Medicare savings IPAB can propose, and the type of savings, are both limited by law. The total amount of these savings cannot exceed 0.5 percent of total Medicare outlays in 2015; 1 percent of outlays in 2016; 1.25 percent in 2017; and 1.5 percent in 2018 and thereafter.
– IPAB cannot propose any recommendation to “ration” care; raise revenues; increase beneficiary premiums or cost sharing; restrict benefits; or alter rules for Medicare eligibility.
– The law directs the panel to give priority to measures that extend the solvency of the program, improve beneficiaries’ access to care, and improve the health delivery system and health outcomes, among others.
– IPAB can propose savings in any part of Medicare, except hospital payments in the short run. [pharmacy is also excluded, much to my dismay]
– Congress has the option of passing alternative legislation, but it must achieve the same results in terms of the magnitude of savings. If Congress does not act, the secretary of HHS is required to implement IPAB’s proposals by August 15.
And there you have it – an advisory board that is tasked with doing what Congress can so obviously not do – control Medicare cost growth – without rationing care, reducing benefits, or changing eligibility.
What does this mean for you?
Is there a better way to achieve real cost control in Medicare that has a chance of becoming signed legislation?

Dec

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

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

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

Category: Medicare and Medicaid