Insight, analysis & opinion from Joe Paduda
Steven Colbert’s one of the funnier people/newscasters out there – and his piece on “Debt Panels” [opens video] is terrific.
Colbert helps us understand the role of finance in the emergency medicine department, a role that has grown significantly over the last couple years along with the rise of the number of uninsureds…
Hat tip to Care and Cost for the head’s up.
In what will be one of the more entertaining episodes in Presidential campaigning, GOP presumptive nominee Mitt Romney will have to disavow his success in passing health reform in Massachusetts that now looks to be a major success.
Reform was intended to cover more people and reduce or at least mitigate cost increases.
While coverage did expand, for several years costs went up dramatically as well, leading some to point to the Mass “experiment” as a failure.
First, coverage. The latest data indicate 95% of citizens are insured, compared to 84% of the national population.
The latest information suggests those decrying the Mass reform may have been a bit premature in their assessment.
Small group insurance premiums were up just over one percent last quarter, the second quarter in a row where rates have gone up less than 2 percent. Moreover, two large health plans filed for rate decreases…
Why? What’s made this happen?
Glad you asked. According to Kaiser Health News/NP5,
“…two years ago, the governor directed his insurance commissioner to exercise a little-used power to turn down a requested rate increase because it was excessive. Not every state has this power.
Insurance companies were outraged. But [CEO Andrew} Dreyfus of Blue Cross Blue Shield now says it was a pivotal point.
“It sent a message to the entire health care community and the business community that we had to change,” Dreyfus says.
And change seems to be happening. Insurers have torn up their contracts with hospitals calling for annual reimbursement increases of 8 percent and 10 percent, and negotiated agreements providing for 3 percent, 2 percent and even zero percent increases.”
What does this mean for you?
While there’s no question governments can screw up lots of things in lots of ways, this appears to be one of those times where governmental authority, intelligently applied, is actually solving a problem.
What does this mean for Mitt?
Let’s see; if he takes credit for the result, he’ll be pilloried by the free market/Tea Partiers. Ouch.
If he says it doesn’t work, he’ll be, well, admitting he screwed up.
If he says it will only work in Massachusetts, he’ll be admitting other states aren’t able to fix this problem.
When it comes to health reform, perhaps the only thing Congressional Republicans agree on is they hate ObamaCare.
There’s no agreement on a basic framework much less consensus on an actual bill. Moreover, there are parts of ObamaCare that enjoy solid support amongst many Republicans, complicating the GOP’s efforts to develop an alternative without conceding political ground.
Their dilemma is certainly understandable; as anyone who followed the tortuous path of the PPACA (aka Obamacare), there was precious little consensus among the Democrats who passed the bill. While most had serious issues with various bits and pieces, they held their noses and voted “aye” when pressed.
Now that there’s a distinct possibility that the Supremes will overturn part/some/all of reform, there’s pressure on the GOP to come up with an alternative.
Here’s a few of the more contentious issues.
– requiring insurers accept all applicants is favored by most Republicans (according to Politico) but a) some senior Republicans hate the idea and b) there’s zero consensus re how to actually make that work. Do they forbid upcharging for older/sicker people? Adopt some form of risk-adjustment and/or financial transfer among/between insurers based on the risk profile of their members? Or allow the free market to operate, hoping that insurers will somehow figure out how to insure people with pre-existing conditions at affordable rates?
– taxation is a big issue; one bill sponsored by Rep. Paul Broun (R-Ga.) allows taxpayers to deduct all of their health care costs, while others cite the tax-free status of health insurance as a major cost driver. What looks like the leading bill (at least at this point) also uses the tax code to encourage people to buy insurance.
– most GOP-authored bills allow people to shop for insurance across state lines, which seems to be at odds with other GOP concerns that health insurance should be the purview of the states, and the Feds ought not to be involved
– the elimination of coverage for young adults and kids with pre-ex conditions is a concern to Rep Tom Price, who stated: “That would present a significant void and vacuum in health policy…There will be a need to have some things to fill that vacuum.” Again, many first-term Republicans see no role for the Federal government in health care, making any caucus-wide consensus on the issue doubtful.
– most of the plans on offer include some thyme of malpractice reform, however there’s ample evidence that malpractice reform would have a negligible impact – at best – on system costs. (One authoritative study indicated a 10% reduction in malpractice rates was associated with about a 0.132% decrease in the overall cost of care.)
If the GOP decides it must act, the challenge will be to first convince the Tea Part Republicans that Congress has the authority to do so. While the Republican Party used to be pretty disciplined (especially when compared to the Democrats), last summer’s debt-ceiling fiasco was ample warning that Boehner doesn’t control his membership.
If and when that’s done, next step is to come up with a plan that doesn’t look an awful lot like/have a lot of the same provisions in ObamaCare and make sure it actually expands coverage and reduces costs, as scored by the CBO.
This should be interesting…
Hat tip to California Healthline for the head’s up.
Today’s NYT arrived with the news that injecting steroids is not much more effective in treating back pain than injecting saline.
Yet one of the most common approaches to “treating” back pain is the epidural steroid injection (ESI), with tens of thousands of patients subjected to the procedure – and its attendant risks (spinal cord injury, paraplegia, quadriplegia) – every year.
While those who got the steroid injection did fare somewhat better than those who got alternative treatments (saline or etenercept injections), but the difference was not statistically significant, and leg and back pain actually decreased in all three groups. Here’s how the authors summarized the findings:
“More patients treated with epidural steroids (75%) reported 50% or greater leg pain relief and a positive global perceived effect at 1 month than those who received saline (50%) or etanercept (42%) (P = 0.09).”
It is likely that ESIs help some patients, it is also abundantly clear that far too many are done. Given the real risk of spinal cord injury and other nasty adverse outcomes, payers would be well-advised to ensure patients are very well-informed, and providers are cognizant of the research before going thru with this procedure.
What does this mean for you?
More evidence that far too much of what passes for medicine is based on opinion and not science or research. Time to update your list of procedures subject to pre-cert.
Last week’s post on the recent release of Annual Reports by PBMs Progressive, PMSI, and Express Scripts, got me thinking (spurred by a friend’s query); if PBMs produce these reports as a matter of course, why don’t other specialty medical management companies?
The wealth of information contained in these reports provides readers with insights into cost drivers; pricing; changes in prescribing and treatment patterns; differences due to geography, claim duration, and diagnosis; new treatment options; and changes over time in all of these categories/metrics.
It strikes me that industry/speciality appropriate information would be pretty valuable and help differentiate as well.
PBMs have raised the annual report to an art form; PMSI’s is extremely detailed and clinically robust; Cypress Care’s upcoming report differentiates between older (> 3years) and new claims; Express focused on opportunities to reduce costs thru increased use of step therapy and generics; Progressive’s discussion of regulatory changes was comprehensive and thorough.
The short answer is “it takes a lot of resources.” True, but the payoff is likely commensurate with the investment. Others are concerned that somehow competitors will learn the ingredients of their “secret sauce” and use it against them. Possibly, but not if you’re smart and careful.
There’s precious little real differentiation in the managed care services industry. Clearly it’s working for PBMs; undoubtedly it will work in other sectors as well.
and a “thanks for the thinking” to Peter Rousmaniere.
While Coventry’s work comp division revenues were pretty much flat quarter over quarter, the company views the results as better than expected. .
In comments during this morning’s Q1 2012 earnings call, CFO Randy Giles said Coventry had experienced “higher than expected revenue from the workers comp business”; he went on to note that the overall improvement in Coventry’s overall SG&A (sales, general, and administrative) expenses was driven by workers comp (I’m paraphrasing here).
(Coventry broke out work comp revenues separately from other lines this quarter)
While revenues may have been higher than expected, comparing Q1 2012 to the same quarter in 2011, workers comp revenues were flat. As there was considerable growth in the governmental businesses, comp as a percentage of overall revenues declined to 5.2% from 6.3% from Q1 2011. Sources indicate comp is still extraordinarily profitable, with margins at least double overall operating margins of 7.5%.
The impact of recent customer defections has yet to be felt; it remains to be seen if Coventry can make up for the losses by adding new customers and increasing pricing and selling more services to current ones. Given today’s more competitive work comp services environment this may be a ‘heavy lift.’
The macro factors affecting work comp are well-known, but perhaps misunderstood in terms of their impact on Coventry. For example, work comp claim frequency may have leveled off last quarter or perhaps even declined. This affects bill review, network, and UR volume.
Work comp medical costs are increasing due to pharmacy and facility drivers,while disability duration – and attendant medical costs – also looks to be increasing. The consolidation among health care systems and hospital has increased providers’ negotiating leverage, making it ever-harder for WC network staff to squeeze discounts out of providers. These drive bill review and network business.
Coventry PBM FirstScript generates a disproportionately large portion of the division’s revenue, and has been benefiting from industry-wide drug price increases. More detail on this next week.
The earnings call this morning was preceded by release of the Q1 earnings report
Tis the season for drug trend reports. Recent releases from PMSI, Express Scripts (ESI), and Progressive Medical show an ever-increasing level of sophistication and growing insight into cost drivers in workers comp pharmacy. Moreover, the layout, graphics, use of charts and layout are far superior across the board.
I’d caution readers against using these reports to directly compare PBMs; mix of business/client base, average age of claim, jurisdictional market share, and other factors make direct comparison of statistical results inappropriate. For example, one PBM might have significant share of the state funds, other PBMs typically service large carriers; some may have a large book of older claims (with higher spend, more opioids, and lower generic fills) while other, newer PBMs will have fewer legacy claims.
Here are some of the highlights from each.
Industry founder PMSI has been producing reports longer than most; their latest release includes chief clinician Maria Sciame, PharmD’s video discussion of the report. It needs a bit of highlighting, as at 72 pages, it is by far the most voluminous of the studies. PMSI saw an average cost increase of 3.2% with a higher cost per script somewhat mitigated by lower utilization. (in fairness, PMSI’s book likely has a higher proportion of legacy, long-term claimants than other PBMs, again making direct comparisons inappropriate; their average claim is 4.9 years old)
Average blended prices (weighted brand and generic) were up 6.3%, driven almost entirely by an 8.3% jump in brand AWP. These increases were somewhat mitigated by PMSI’s high mail order penetration and the attendant lower customer pricing; due in part to their mix of business, 27.5% of their scripts were home delivered. Narcotic utilization per claimant also declined.
Of particular interest is the lengthy discussion of differences in drugs used by claimants as claims age. In general, costs, and the number of scripts, go up rapidly over the first six years, level off somewhat, then cost trends upwards again after ten years while the volume of scripts stays level.
ESI released their drug trends report a couple weeks back. The big news is spend – measured on a cost per user-per year basis – decreased by 1.8%, driven primarily by a drop in utilization. Notably, narcotic spend decreased 3.6%, influenced by a 6.2 percent decline in OxyContin(r) spend. Overall costs could have dropped further if claimants had taken full advantage of home delivery/mail order, maximized generic substitution, eliminated physician dispensing, and used in-network pharmacies.
Express focused their report on opportunities for payers to reduce costs by addressing unnecessary spend, or waste. Their estimates indicate payers could reduce costs by some $2.1 billion by eliminating “waste”. While most of this reduction would come from greater use of generics, ESI also noted a significant increase in the cost of compounds; over the last four years costs have more than doubled. Substituting commercially-available alternatives for compounds would save hundreds of dollars per script…
Progressive Medical reported a 1.3% drop in spend per claim for 2011 as well, with narcotics down 3.9%, this despite an average increase in AWP of almost six percent on a per-claim basis. PMI’s report provided detailed explanations of legislative/regulatory changes during 2011, as well as a lengthy, and informative forecast of issues including new drug approvals, FDA activities and societal issues affecting pharmacy management. Unlike other PBMs, PMI does not see third party biller activity as an issue. This is unsurprising, as their ownership by Stone River enables PMI to apply their negotiated discounts to all bills coming thru Stone River Pharmacy (the leading third party biller).
As with other PBMs, Progressive focused on compounded medications, with their data indicating a very small (1.2%) increase in the average cost of compounds, offset by a 3.9% decline in the percentage of claimants using compounds driven by PMI’s requirement that all retail-dispensed compounds go thru a prior-authorization process.
There should be a couple more reports out shortly; when they are we’ll get them out to you as well.
This biweek’s edition of Health Wonk Review is up at WIng of Zock. If you want to know that exactly a “Wing of Zock” is, click here
With the appointment of Danielle Lisenby as CEO, Broadspire’s board affirmed the TPA’s focus on medical management, and served notice that the company will compete based on that focus.
Lisenby’s replacement as Broadspire SVP medical management is Erica Fichter, who has been with the company in various roles in and around medical management for years. Fichter’s reputation is one of a steady, seasoned professional with long experience in the industry.
With the re-emergence of medical cost as a primary driver of workers comp losses, the focus makes eminent sense. However, some “traditionalists” may view that focus as misplaced.
They’d be mistaken.
Managing medical is a whole lot more complicated than it was even a decade ago. Selecting and employing evidence-based clinical guidelines, meshing those guidelines with state rules and regulations, coordinating utilization review with bill review, knowing when and where to employ physician advisers, understanding the role of networks, and how and why they can be cost drivers (not cost reducers), employing speciality vendors who know dealing with PT requires a much different approach than managing facility expenses, these all require a level of sophistication and deep knowledge of medical trends that few pure claims execs or underwriters have.
When one adds to this the understanding that “medical drives indemnity”, it becomes obvious why medical management expertise is critically important.
For far too long, medical management has been an afterthought, a revenue generator, necessary evil, vendor-delivered function designed on the fly, poorly coordinated and haphazardly managed.
What does this mean for you?
Time to re-evaluate with an objective eye.
As insurers abandon the traditional “usual and customary” metric in favor of Medicare’s rates for out of network reimbursement, consumers are getting hit with higher bills, and many are protesting.
That’s understandable; it’s also necessary.
The usual and customary reimbursement methodology is used to pay providers that aren’t in the member’s ‘network’; it is based on what other providers in the same area charge for the same procedures during the same time frame. For decades providers have gamed the system by charging more and more every year for the same procedure, thereby ensuring they’ll get paid more next time for the same procedure.
Health plans, struggling to hold down costs, have finally given up, switching from U&C to a methodology based on Medicare’s RBRVS system, albeit one paying at 150% – 250% of Medicare – again for out of network care.
Many members have been surprised/shocked/dismayed/furious when they discover their share of the cost is much higher than they expected, and they’re blaming their insurer. While that’s understandable, it is also anger misplaced.
Members going out of network do so because they are either a)ignorant (our son just went to an OON provider for his elbow MRI…) or b) they want care from a specific physician(s). In the case of a), shame on us for not educating the young man on the intricacies of health plan contracts.
For b), it’s not quite so straightforward.
These folks chose to go out of network for the care they wanted, and that’s entirely their right. In so doing, they forewent the binding rates negotiated – on their behalf – by their insurer with in-network providers. If they’d stayed in network, their out-of-pocket costs would have been much, much lower.
I’ve pilloried insurers for years for their inability to do what they’re supposed to do as a matter of course – deliver quality care at a manageable cost. The change from the easily-gamed U&C system to one based on Medicare is an appropriate and necessary one. Yes, it’s also painful, but controlling health care costs is going to be ever-more-painful, requiring all of us to choose between increasingly-distasteful choices – higher premiums or more access.
Now I’ve got to go spend some quality time with our son explaining all this. Yippee.
