Insight, analysis & opinion from Joe Paduda

Dec
21

Is Walgreens going to bend?

Posted by Joe Paduda on Wednesday, December 21st, 2011 | Comments

With the end of the year fast approaching, the dispute between pharmacy giant Walgreens and equally-giant PBM Express Scripts shows no sign of resolution. There’s been no disclosure of any discussions for
Meanwhile, the contretemps is already starting to hurt the retail chain, as Walgreens announced earnings were lower than projected in part due to the Express Scripts issue; Walgreens share price declined over six percent on the news.
This is a big deal – Express accounts for over $5 billion in annual sales at Walgreens 7800 stores, and losing the pharmacy scripts means patients won’t be coming in and picking up toiletries, batteries, and consumables while they’re waiting for their scripts to be filled.
So, will Walgreens bend?
I’d have to say “probably, but not definitely” yes.
Here’s why.
As Express’ members need refills, they’ll head back to Walgreens only to find their card doesn’t work. They’ll then take their scripts – and their other purchases – elsewhere. This won’t have much of an impact until later in January, so I’d expect Walgreens and ESI to work out a deal sometime before mid-February.
The problem Walgreens has is there is a CVS right across the street, and a Rite-Aid on the other corner, and a WalMart down the road next to the Safeway, all of whom still work with Express. So there really isn’t any incentive for the member to protest if they can’t get their script filled at Walgreens.
There’s quite a different take for workers comp claimants. There isn’t any deductible or copay, and Walgreens will (very likely) continue to fill scripts for Express’ workers comp claimants and send the bills to the insurers on paper. The chain knows the claims are good, and they know they’ll get paid. Actually they’ll get paid more as reimbursement will be at fee schedule and not at the deep discount Express currently enjoys at Walgreens.
That said, I do think it is ‘when’ and not “if” the issue gets resolved.
What does this mean for you?
Hope it gets worked out, but prepare – just in case.

Dec
19

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
16

How health reform will affect you

Posted by Joe Paduda on Friday, December 16th, 2011 | Comments

There’s been one consistent finding among all the polls and surveys seeking opinions on health reform: most respondents don’t know much about it and there are many misperceptions and misconceptions about reform.
The good folk at Kaiser Family Foundation have put together an interactive tool to help remedy that situation. The YouToon application shows how reform will impact employers – large, small, and mid-sized; individuals and families, the well-off, middle class, and poor.
It’s easy to understand and a quick read too.
There’s a more “you-specific” tool here that is focused on individuals and families, not employers.
And the Washington Post has an interactive site where you can plug in details on income, family size, source of insurance, and marriage status and get specific info on how reform affects you – specifically – and what, if any, tax impact it has.

Dec
15

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?

Dec
14

Friends of Sandy Blunt

Posted by Joe Paduda on Wednesday, December 14th, 2011 | Comments

Bob Wilson of WorkersCompensation.com fame has a new group on his LinkedIn page – the Friends of Sandy Blunt.
This isn’t one of those exclusive, fancy clubs, merely a virtual gathering of like-minded intelligent and insightful folk who share a mutual respect and admiration for Sandy.
I’m honored to be one of the founding members, and look forward to seeing you there.
For those who don’t know Sandy, here’s a quick note on why you’ll love the guy.
The former head of North Dakota’s state workers comp fund has been – and continues to be – vilified by a few people who obviously don’t know the guy. (more on the appeal in a future post).
Prosecuted for ‘misuse of funds’ by a rogue Prosecutor who withheld exculpatory evidence, Sandy’s life has been ruined because he approved payments for balloons, small ($5 – $10) gift cards, sweets, and cakes for employee recognition events, along with refusing to seek repayment for relocation expenses for an employee terminated for performance (which was legal and appropriate).
Well, I do know the guy, and there’s plenty wrong with him. Here’s the real scoop on this horrible guy/abuser of the public trust/scofflaw/criminal mastermind…
Well, he worked for George HW Bush in the White House (our politics are pretty different, but I keep hoping he’ll come over to the bright side).
He’s an avid, very well informed – and extremely loyal – Cleveland sports fan. (Gotta respect that, even if you don’t understand it)
He isn’t a golfer. (Me neither, so that’s actually a big plus)
I don’t think he can dance.
He went to one of those fancy Eastern big-name business schools (Wharton, I think).
He is such an Eagle Scout (which he actually is) that he won’t let his kids download music from file-sharing services because it is unethical. I’m sure the young Blunts think he’s horribly unfair.
For a non-IT guy, he’s pretty good at tech stuff, making me think he was an AV club guy in his high school days (and no, that’s not meant pejoratively).
Sandy was COO of Ohio’s Bureau of Workers Comp before he was recruited to professionalize the NoDak state fund (so much for that honest effort). By all accounts he was well-liked, and more importantly, very well respected in that role. But still, he was a workers comp exec, and you KNOW what those people are like…
He’s unremittingly positive, unerringly cheerful, and undeniably an upbeat person. Despite what the ‘criminal justice’ system has done to ruin his life, Sandy’s always positive.
I don’t get it.
So – click here and join the party.

Dec
13

Killing claimants..

Posted by Joe Paduda on Tuesday, December 13th, 2011 | Comments

A doctor prescribes massive doses of opioids for a claimant; that prescription is denied; another physician writes the exact same prescription, the claimant gets the drugs, dies, and the insurance company that paid for the drugs is liable.
Only in workers comp.
I’ve received no fewer than eight emails and references to this in the last few days; all express outrage – outrage that any physician would prescribe these drugs, outrage that the second prescription wasn’t rejected, outrage that the doc that wrote the second prescription was the sister of the first prescriber, outrage that the insurance company is somehow deemed liable for the death.
I won’t get into the court’s decision re liability; Roberto Ceniceros has that discussion covered here. That’s dealing with the result. What makes me insane is the simple reality that the claimant got drugs they never should have received.

Because the system – denying inappropriate care through the state-regulated utilization review process – worked. The pharmacy that received the initial script refused to fill it.
Here’s a few more details that add even more concern.
The claimant was prescribed fentanyl patches which were supposed to last two days per patch. Two days after the script was written, there were only four patches left in the box. According to court records, “Subsequent toxicology reports revealed that Fentanyl alone was sufficient to account for death, in even a tolerant user, as Decedent was [sic] certainly was. Decedent died from drug intoxication due to an overdose of Fentanyl prescribed for his work injury.”
This was in addition to “Propoxyphene, which is [sic] synthetic narcotic analgesic, frequently compounded with non-narcotic analgesics; Oxycodone, a narcotic analgesic, often compounded with other ingredients such as non-narcotic analgesics…”
Oh, and the doc who prescribed the drugs that killed the claimant worked in her brother’s practice; was referred the claimant by her brother, who told her to “handle” the situation; knew the UR determination had rejected her brother’s initial prescription; yet wrote the exact same script – for Sonata, Fentanyl, Oxycodone, Fentora, Docusate, and Lyrica.
What does this mean for you?
It is abundantly clear that opioid usage in workers comp is a national disaster. PBMs and payers have to start – or step up – screening for overuse and denying scripts that are not medically necessary. Physicians exhibiting these prescribing patterns have to be very carefully scrutinized. PBMs and payers have to work together to identify claimants at high risk for addiction, assess those claimants, and get them into treatment.
And we need to do this NOW.
Court decision is here.

Dec
12

Medicare physician reimbursement – a two year fix?

Posted by Joe Paduda on Monday, December 12th, 2011 | Comments

It looks like Congress may well include a two-year fix for Medicare physician reimbursement in a sort-of catch-all bill focused on extending the payroll tax cut.
At least that’s the way it looks this morning.
The Medicare SGR formula/process was first implemented in 2000, intended to establish an annual budget for Medicare’s physician expenses and thereby better control what had been steadily increasing costs. Each year, if the total amount spent on physician care by Medicare exceeded a cap, the reimbursement rate per procedure for the following year would be adjusted downward.
And for ten of the last eleven years, reimbursement – according to SGR – should have been cut, but each year (except 2002) it was actually increased, albeit marginally. The result is a deficit that is now about 300 billion dollars, a deficit that we’re carrying on our books, and, by the way, is not addressed in the bill currently under consideration in Congress.
The reason the deficit is still there, and still growing, is simple – fixing SGR permanently would require acknowledging the deficit and thereby adding it to the total debt.
But not fixing SGR may well be worse, as it is a fatally flawed cost containment “approach”. 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, for more click here).
There is at least one Senator willing to acknowledge the accumulated deficit – Sen Jon Kyl (R AZ).; Kyl is proposing using the “savings” from ending the engagement in Iraq and Afghanistan to offset the accumulated deficit, thereby allowing Congress to come up with a permanent fix. Kyl’s backed repeal of SGR before, notably when he joined with Sen Majority Leader Harry Reid (D NV) to push the Super-Committee to include the fix in their work.
What does this mean for you?
Fixing SGR for two years will remove this political dynamite from the landscape till 2014 – and give some stability to provider prices based on Medicare (which applies to lots of group and workers comp contracts).

Dec
9

Is York Claims buying Avizent?

Posted by Joe Paduda on Friday, December 9th, 2011 | Comments

I’d have to say “Yes.”
Several sources have confirmed that the rumored acquisition of Avizent by York Claims is an all-but-done deal.
York was a small, low-price NYC-based TPA a decade ago, a subsidiary of AIG (who had bought the company from the founding family) that won business on low bid awards. THe offices were modest (to say the least), staff over-burdened and under-qualified. Over the last ten years, the company has evolved been transformed into what is now a well-regarded, well-positioned TPA with offices in a dozen states, thousands of customers, and a growth record that’s pretty impressive given the economic conditions of the last few years.
Purchased by management and private equity firm Bexil in 2002, York was acquired by Odyssey (another private equity firm) in 2006, where York’s growth accelerated through acquisition and new clients. York acquired several TPA and related businesses including Southern California Risk Management Associates (SCRMA) and Bragg and Associates, expanding the company’s reach in California and the midwest.
Columbus Ohio-headquartered Avizent looks to be the next company purchased by York. Not to be confused with Advisen, Avizent is a well-regarded TPA that has also grown, albeit primarily via new business acquisition. With its roots in the old Frank Gates organization, Avizent added FA Richard (FARA) in 2010, a major deal that greatly expanded Avizent’s business in the south.
The contract is done, due diligence essentially completed, and it’s just details and timing now.
What does this mean?
There’s been a lot of consolidation in the claims administration industry. Industry leader Sedgwick has been acquiring various and sundry claims services and claims related entities for several years, Gallagher Bassett bought GAB Robins back in 2010, and regional TPAs have been consolidating – or closing – as the soft market has dramatically affected their business.
These deals have removed competitors and added strength in different geographic areas and industry sectors.
Now that the market looks to be hardening, TPAs are positioning themselves for organic growth. As insurance premiums increase and insurance becomes harder to find, more employers are going to turn to self-insurance. The TPAs that have survived the brutal conditions of the last few years are – in general – well positioned to flourish.
(Note I asked both entities for comment; if I hear back I’ll provide an update)

Dec
9

Brad’s Christmas list suggestions

Posted by Joe Paduda on Friday, December 9th, 2011 | Comments

Brad Wright’s edition of Health Wonk Review has suggestions for everyone on your list – from wonkers (that’s with an O, not an A !) to President Obama to Florida-domiciled relatives to the skeptic to the health reform repealer.
It’s kind of like Philippine boxer Manny Pacquiao, short, sweet, and packing a big punch…

Dec
8

Aetna’s exiting the work comp network business, part 2

Posted by Joe Paduda on Thursday, December 8th, 2011 | Comments

Here’s what Aetna provided in response to my questions about the termination of their workers comp business. The company did not directly respond to my queries about who was going to keep access for how long, and there’s a good bit of corporate-speak here.
If I hear more inside info about the decision I’ll pass it on…
“Aetna is focused on committing resources to areas where we see the greatest potential for growth and where we can deliver the greatest value to our customers. After reviewing our business portfolio, we made the decision to transition out of the AWCA [Aetna Workers Comp Access] business so that we can invest in other areas of the enterprise where we see greater opportunities for growth. We notified our customers of this decision earlier this year and have committed to honoring all existing contracts, which in some cases run through the end of 2013…
Since we are transitioning out of the business over a two year period, there will be no immediate impact to the services that we provide to our customers or to the employees that support the AWCA business. We will continue to monitor our staffing levels to ensure that they are in line with our business needs and will look for opportunities to realign staff to other business areas as appropriate.”
Readers will recall AWCA laid off a number of customer-facing staff early in 2011, so there may not be many left to go.
Initially Aetna said no other business areas were affected; in subsequent conversations I learned they will no longer underwrite the insurance risk for PetsBest pet insurance – but that’s it.

Joe Paduda is the principal of Health Strategy Associates

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