Insight, analysis & opinion from Joe Paduda
That’s what Jaan Sidorov wants to know as he hosts the latest ed of Health Wonk Review.
Jaan’s keen commentary on the best of the last biweek’s health wonkery is well worth the read – even if you’re not stuck in O’Hare while thunderboomers roll thru.
There’s been a lot of ‘under the radar’ activity in the work comp space of late, with much of it coming from the Medicare Set Aside sector. As ‘unique’ as the workers comp services sector may be, there’s no niche as…fascinating as the MSA business.
It is brutally competitive; rife with personal, public attacks; and abounding in claims, counter-claims, and counter-counter-claims. Here’s a quick tour of some of the news.
Coventry sales chief Ken Loffredo will be leaving CVTY after over a decade to take an equity role at Med-Allocators. The departure isn’t imminent, as he and Work Comp Division boss David Young are working together to find a successor, looking at both internal and external candidates.
Coventry isn’t doing much in the MSA business these days, and reports indicate management probably wished it didn’t do anything with MSAs in the past.
Gould and Lamb and (former CEO) John Williams have parted ways, reportedly because Mr Williams ‘wants to spend more time with his family’; evidently G&L’s owners are fully supportive of that desire. No announcement yet on a replacement.
The book on G&L has been out for some time; no word on whether the company is still looking for a sale or additional investment. The costs associated with preparing for CMS reporting, and challenges thereof, may be a factor
Despite some competitors’ statements (public(!)) to the contrary, PMSI is not contemplating, thinking about, planning to, or even preliminarily exploring a sale of the company’s MSA division. Don’t know how that got started, but there’s nothing to it
Those are just the highlights.
The rough-and-tumble MSA industry reminds me of the oil and gas business of a hundred years ago. So far no John D Rockefeller has made an appearance, but the industry is ripe for consolidation. Lots of folks are trying, but no one’s looking like a clear leader.
I spent a good part of the morning in a meeting discussing recent research into societal cost of prescription drug abuse. Here are a couple of stats that got my attention.
Prescription drugs are now the most abused drug, surpassing marijuana among young people.
70% of the prescription drugs abused were obtained directly or from a family member (I may have this slightly misquoted, will correct if necessary).
Emergency room admissions for prescription drug abuse doubled from 2004 to 2008.
Now let’s consider a few other factoids.
Narcotic opioid use in California’s work comp system increased dramatically between 2002 and 2008, with several times more claimants receiving these potent, potentially-addictive medications.
Medical severity is also increasing in the Golden State; I’m not saying there’s a cause:effect relationship here but rather drug costs and usage changes may be contributing to the problem.
OxyContin accounts for just under ten percent of comp drug costs. This drug has been widely associated with abuse; it can be ground up and eaten, inhaled, smoked, or dissolved and injected.
Sorry to ruin your day.
Data from several sources, including Farrah and Associates (got to love a company that is located in Maine) indicates group insurers were able to reduce medical trend to 4.9% last year. That’s the best result, in, well, further back than I can remember.
Coventry’s recent Q2 2010 earnings call indicated their results were comparable, and med loss trends were pretty close.
Aetna’s numbers are comparable, as are the reasons for the improvement. According to a WSJ piece, “Aetna and its peers are reporting lower utilization of medical services this year. [President Mark] Bertolini attributed the trend to the weak economy, a less severe flu season, harsh weather in the first quarter and some wearing off of Cobra coverage for people who were laid off their jobs.”
How’d they do it? Can you do what they did?
First, let’s deconstruct the reasons for the happy news.
The flu season wasn’t a) as bad as predicted and b) insurers, burned by the previous flu season, probably over-reserved.
Members covered by Cobra are notoriously expensive; people don’t sign up for Cobra unless they think they’ll need it, and in most cases they are right. Loss ratios for Cobra tend to be well above 125%; thus the expiration of Cobra helps dump unprofitable business. Expect this to continue to aid MLRs for several quarters to come.
Many health plans now have higher deductibles and copays, cost-sharing arrangements that may well be causing members to avoid seeking care. (research suggests the care avoided may be necessary or unnecessary). Coventry Allen Wise mentioned this in his earnings call as a possible contributor.
From a purely speculative perspective, it is possible that employers who were faced with high premiums due to poor experience rating, older populations, or other factors, have dropped their coverage at a higher rate than in the past. This might contribute to lower utilization. I’d also note that rate increases may have the opposite effect; employers that really need coverage will hold their noses and pay up, while employers who don’t think it’s worth it (read – don’t expect to need insurance) drop out.
We’re left with results driven by benefit design, demographic changes, and one-time events.
Don’t get me wrong, the numbers are good, but the drivers aren’t what we need to really gain control over costs over the long term.
Fortunately, some health plans are already taking steps to do just that with smaller, tighter networks and limited access out of network.
If you are a workers comp payer in California, chances are your results were a whole lot worse, as medical costs are once again back up to pre-reform levels. According to this piece in Risk and Insurance;
“…looking at first-year payments on lost time claims, researchers found that since hitting their post-reform lows, average amounts paid per claim for treatment have increased 41 percent; average amounts paid for pharmaceuticals and durable medical equipment are up 69 percent; [emphasis added] average amounts paid for med-legal reports are up 79 percent; and average amounts paid for medical cost containment are up 86 percent.”
Of course, this simply means reform cut costs dramatically over the last few years, and only now, several years after reform’s implementation, have costs returned to the levels seen in 2004.
That said, comp payers can’t fiddle with benefit design, out of network contribution differentials, cost sharing, and the like.
What does this mean for you?
a) a temporary hiatus from structural trends, or a pause to show us what the future may hold if we get serious about containing cost.
b) for comp payers, the recent moves to smaller networks should be a big wakeup call.
Coventry earnings call this morning was notable in at least two ways – more discussion about underlying cost drivers, utilization trends and management thereof, and the growing importance of low cost delivery systems from management.
And more evidence that (most) financial analysts don’t understand this business.
Here’s my view on the takeaways from the call.
The per-share earnings charge of $1.18 (from work comp PPO litigation in Louisiana) was the subject of a good deal of discussion during Coventry’s Q2 2010 earnings call this morning, but has to be considered in the context of the overall solid performance of the company.
Coventry actually increased guidance for the full year, marking another improvement in financials for the company that has been on a steady upward trend since CEO/Chair Allen Wise resumed his post a year and a half ago.
Commercial group membership grew nicely, while MLR (medical loss ratio) guidance decreased for the entire year. Coventry expects medical costs to increase in the second half of 2010, consistent with past experience.
In the prepared remarks part of the call, management diiscussed the implications of health reform, asserting the company’s recent results show it is well prepared for reform as it is able to control MLR while maintaining membership and expanding the company’s footprint in selected markets (the Mercy deal is an example)
The company’s statement noted Wise’s enthusiasm for results and performance of the company’s clinical management programs.
Clarity around MLR regulations was the first question – unsurprisingly, given the new regulations regarding limits on insurers’ administrative and other fees. Wise noted that the cost structure in one market in particular was going to improve by shrinking the company’s network, selecting more cost effective delivery systems/health systems. This marked a significant change from calls as recently as last year at this time. Coventry is clearly seeking to partner with more cost efficient health systems; as Wise put it, ‘we need to stop fighting over nickels and focus on overall costs’. [paraphrasing]
This was followed by a question about health plan utilization trends – overall utilization appears to have tapered off industry-wide, the question is why? Wise admitted Coventry doesn’t know, although they’ve spent a lot of time looking at this and their preliminary conclusion is the high deductibles and copays are leading to lower utilization, coupled with expiring COBRA benefits for some employees laid off quite a while ago.
Going forward, Wise sees the market as getting more competitive, making customer service and managing the little things critical to survival and success.
Wise thinks the group health product pendulum has swung back to mid-eighties model where networks are smaller, there’s less choice, and better control over cost and utilization. Coventry’s going to offer products with smaller networks based on provider systems with documented better outcomes and lower costs. They will preferentially look to buy provider-owned plans as they tend to have better cost structures than non-provider-owned plans. The analyst who asked the question wasn’t particularly interested in what Coventry was doing, but rather focused on pricing implications given the MLF regs coming out shortly.
That’s another example of how most of the analysts following this business are out of their depth. The real issue, the key to success, for Coventry and every other health plan, is how they are going to compete in a post-reform world. Price is a result of cost structure, and the failure of the analysts to focus on cost and cost drivers shows how disconnected the analysts are.
Another analyst asked if other health plans are pursuing similar acquisition strategies. Wise noted that there just aren’t that many potential acquisition targets that have good cost structures, fit geographically, and are provider-owned.
The company will be revamping its individual health product offering – in response to a question, Wise noted that the company’s distribution, IT, and benefit design are all works in progress, and there’s still a ways to go.
More to come after I review the transcript
Today’s Kaiser Health Tracking Poll contains interesting data about support for health reform (steady positives, declining negatives), what’s much more telling is the extent of seniors’ a) ignorance of basic facts about health reform and b) widespread belief that reform includes death panels and cuts Medicare benefits.
Yikes.
According to Kaiser, “Half of seniors (50%) say the law will cut benefits that were previously provided to all people on Medicare, and more than a third (36%) incorrectly believe the law will “allow a government panel to make decisions about end-of-life care for people on Medicare.”
These are both factually incorrect.
Moreover, “Despite the fact that Medicare’s actuaries predict the health reform law will extend the life of the Medicare Part A Trust Fund by 12 years (from 2017 to 2029), only 14 percent of seniors know this and nearly half (45%) of seniors think the health reform law will weaken the financial condition of the fund.
”
There are several ways to look at this.
The power of the anti-reform noise machine is truly impressive; death panel myth promoters are clearly effective in getting people to believe their claims, despite widespread debunking of the claim by multiple independent organizations. (One well-respected organization, Politifact.com (run by the St Pete Times, a terrific newspaper, called it “pants on fire false).
Then again, it’s hard to underestimate the ignorance of the American public; we’re talking about a country where 43% of the population doesn’t believe in human evolution…
Seniors tend to vote in higher percentages than the rest of the population, so their concerns about reform, based at least in part on ignorance of the actual reform bill and its provisions, may well have a disproportionate impact on the election this fall.
Closer to home, health plans and insurers have to take note of these poll numbers and consider the impact on their own members.
As health plans increasingly emphasize provider network selection based on quality and outcomes data; rigorously employ evidence-based medical guidelines; and get tougher on experimental and unproven medical procedures and therapies, they are going to be exposed to the same type of fear-mongering from idiots using the public’s ignorance and fear to gain notoriety.
What does this mean for you?
Health plans must – and I mean must – develop and implement programs to stay on top of the public’s perception and opinions about them. Call it opinion monitoring, social network monitoring, complaint management, whatever, but do it. But this will only work if you proactively educate members and the markets about what you’re doing and why. Otherwise it’s purely defensive, will appear so, and will be little help when the stuff hits the fan.
Which it always does.
The recess appointment of Dr Donald Berwick as head of CMS has incited a furor among politicians outraged at what they claim are his advocacy for rationing and fondness for Britain’s National Health Service.
To support their claims, these politicians are using Berwick’s own words, in a way eerily reminiscent of the recent Shirley Sherrod debacle.
It started with Glenn Beck, master of the one-word quote, and then slipped over into more mainstream politicians.
What’s really troubling about all this, in addition to the blatant political motivation, is Berwick is pretty closely aligned with core conservative values.
Don Berwick is now, and has always been, a patient-centric, consumer-oriented ‘radical’ who’s concept for the ideal system is one that is almost entirely patient-focused. Here’s Berwick’s ideal health plan from a piece by Ezra Klein:
“(1) Hospitals would have no restrictions on visiting — no restrictions of place or time or person, except restrictions chosen by and under the control of each individual patient.
(2) Patients would determine what food they eat and what clothes they wear in hospitals (to the extent that health status allows).
(3) Patients and family members would participate in rounds.
(4) Patients and families would participate in the design of health care processes and services.
(5) Medical records would belong to patients. Clinicians, rather than patients, would need to have permission to gain access to them.
(6) Shared decision-making technologies would be used universally.
(7) Operating room schedules would conform to ideal queuing theory designs aimed at minimizing waiting time, rather than to the convenience of clinicians.
(8) Patients physically capable of self-care would, in all situations, have the option to do it.
“I suggest that we should without equivocation make patient-centeredness a primary quality dimension all its own, even when it does not contribute to the technical safety and effectiveness of care,” he says.”
Pretty radical, indeed – returning power to the patient, from the practitioner.
If Berwick’s opponents just took a minute to read what the guy really stands for, they’d discover he’s pretty much aligned with many ‘conservative’ principles – self responsibility, ownership, consumer-centered policies and practices.
Unfortunately, they just don’t care about who Berwick really is – they’ve decided he’s the stick they’re going to use to beat this Administration, regardless of whether he’s good, bad, or indifferent.
As Maggie Mahar noted in HealthBeat, “Thomas Scully, who led the CMS under President George W. Bush [said of Berwick] : “He’s universally regarded and a thoughtful guy who is not partisan. I think it’s more about … the health care bill. You could nominate Gandhi to be head of CMS and that would be controversial right now.”
Here’s hoping the recent Shirley Sherrod disaster has stiffened the backbone of the Administration and caused the wingnut media to think a little more deeply before throwing bombs.
And yes, I believe in the Easter Bunny too.
As I reported Saturday, the prosecutor who charged former North Dakota state fund CEO Sandy Blunt with felony ‘theft of services’ is herself under investigation for allegedly withholding exculpatory evidence from Blunt’s defense attorney.
Cynthia Feland’s case has been heard by the ND Supreme Court’s Inquiry Board, who found enough evidence to convene a Disciplinary Board. From the ND Supreme Court website – “Formal proceedings are begun when there is probable cause to believe that misconduct has occurred that deserves a public reprimand, suspension, or disbarment.” [emphasis added]
This isn’t a routine, ‘happens all the time’ thing. Far from it. although to hear Feland tell it, this is no big deal – according to the Bismarck Tribute, Feland “said it is not uncommon for people to file complaints against prosecutors.”
Well, Cynthia, let’s look at the numbers, shall we?
Last year there were 349 cases that went thru the Disciplinary Board program.
192 were dismissed or the attorney was referred to an assistance program and 123 are still pending. That leaves 34 cases where there was some kind of final ruling. 17 went to a Panel Hearing. That’s where Feland is headed. And the odds aren’t good.
Only 2 cases were dismissed. Of the remaining cases, the Panel reprimanded the attorney in 6, the Supreme Court suspended the attorney in seven, and disbarred the offender in 2.
So Feland has a much better chance of being disciplined, or having her license to practice suspended, than she does of acquittal.
If she’s not reprimanded or suspended, it’s even odds if she’s acquitted or disbarred.
And she has the temerity, the unmitigated gall, to pooh pooh this? A sitting prosecutor, looking at a hearing where she has just over a one-in-ten chance of escaping unscathed? And a 60% chance of losing her license, at least temporarily?
I find it hard to believe that the Inquiry Panel would find probable cause where none exists, particularly in a case where a sitting prosecutor is accused of withholding evidence from a defendant.
As a prosecutor, I’m sure Feland would love those kind of odds.
Interestingly, none of the other media outlets in the state picked this up; neither did the local AP writer (who happens to be a facebook friend of Feland’s).
I’m vastly unimpressed with the media in NoDak; here’s a case of potential wide-ranging import, one where a prosector is charged not only with withholding evidence, but also suborning perjury, yet it’s not worthy of coverage.
Nope, not when the state fair parade’s in town, by golly!
Last Friday the news couldn’t have been much worse for ex North Dakota state work comp fund CEO Sandy Blunt: the state’s Supreme Court affirmed his felony conviction on charges of theft. I spoke with Sandy that day, and can only report that he was all but devastated by the ruling.
What a difference a week makes. This morning, Sandy must have a whole different outlook – the prosecutor who convicted him is herself under investigation for allegedly suborning perjury and prosecutorial misconduct.
Late this week sources informed me that the state’s bar association was about to begin a formal ‘trial’ of Cynthia Feland based on evidence she withheld information from Blunt and his defense attorney. While this isn’t an actual criminal proceeding, it is quite serious, as the allegations, if upheld, are grave enough to result in Feland’s disbarment for life.
As I reported months ago, “I contacted Feland several times over the last few weeks, asked her directly about this situation, and she refused to address the key question – had she provided Blunt with a copy of the State Auditor’s memo which cleared Blunt of any malfeasance related to Spencer?…” You can read her response to my query, but here’s the net – The prosecutor has no record of providing the defense with a document that would have allowed the defense to prove that the prosecution’s main charge was not a crime.
While I couldn’t force the issue, the state Bar Association, and the county sheriff, have.
The details are beginning to come out. This morning’s Bismarck Tribune had a front-page, above-the-fold article detailing the allegations against Feland. Although Feland pooh-poohed the proceedings, according to the Tribune, “Sending a case to the Disciplinary Board for formal proceedings means “basically, they’re making a finding that there’s probable cause that misconduct occurred,” [ND Supreme Court Clerk Penny] Miller said.”
As assistant prosecutor, Feland personally led the state’s prosecution of Blunt.
The evidence was brought to the attention of the ND Bar Association by Steve Cates, author of the North Dakota Beacon and one of Sandy’s long time supporters. Case has diligently and persistently pursued the facts in this case for more than a year and a half, poring over thousands of pages of transcripts, reviewing each and every exhibit and scrap of evidence.
In the course of Cates’ research it became apparent that Feland had failed to turn over exculpatory evidence, evidence that would have proven Blunt’s contention that a state auditor had reported that most of the charges against him should never have been brought.
Not only did Feland withhold evidence, but she knew, before she brought the charges, that several of the charges weren’t crimes. And even more seriously, Feland suborned perjury by getting a key prosecution witness, Jason Wahl, to lie on the stand.
Feland isn’t the only prosecutor in hot water over their mishandling of the case. According to the Tribune, “The documents obtained by the Tribune said the Inquiry Committee West also found that Riha [Feland’s boss] was issued an admonition for violating rules 5.1(a) and (b) of the Rules of Professional Conduct by not making sure that the attorneys in his office were conforming to the rules of professional conduct. The admonition also was issued against Riha for violating rule 3.8(d) of the Rules of Professional Conduct for his office not turning over a Nov. 8, 2007, memorandum from Jason M. Wahl in the state auditor’s office to Feland.“[emphasis added]
The Wahl memo indicated Blunt’s actions regarding a discharged fund employee, actions that Feland had said were illegal, were perfectly legal.
Sources also indicate, and I have confirmed, that the county sheriff has launched a criminal inquiry into Feland based on alleged perjury charges. The charges stem from Feland’s statement to the judge at Blunt’s trial that all charges against Sandy had been sent to Blunt’s defense counsel before trial. It now appears that Feland knew this wasn’t true.
At long last, the truth is beginning to come out. Blunt was convicted, and his conviction upheld, due to prosecutorial misconduct. Simply put, he was railroaded by a prosecutor who accused him of crimes he didn’t commit and lied to the judge during the trial.
Sandy can’t get his life, or his reputation back. Here’s hoping he makes the Burleigh County prosecutors pay for what they did to him, and make it abundantly clear that these criminal actions carry a very heavy penalty.
Several clients have asked for more detail on how the reform bill will change Medicare reimbursement for physicians and other non-facility providers. Here’s the synopsis.
First, note that this pertains only to reimbursement changes contained within the reform bill. There are a host of other initiatives, ideas, pending changes, and reimbursement ‘tweaks’ outside the bill that will also impact reimbursement.
Reimbursement for primary care services – provided by some internists, family practice docs, pediatricians, PAs, and nurse practitioners – will increase 10% between 2011 and 2015. After 2015, the increase – which is described as a ‘bonus’ – will theoretically expire.
The key word here is ‘some’.
To get the increased compensation, 60% of the provider’s charges for services over the last (to be determined) months/years must have been for primary care.
There’s also more funds for some general surgeons – a 10% bonus if they provide ‘major surgical procedures in health professional shortage areas“.
That’s it for the easily described changes. Now here’s the more complex.
1. Bundled payments – there’s a national pilot program authorized under reform that would allow for bundling of payments for an entire episode of care, as opposed to the current fee for service (FFS) methodology. Under this scenario, a group of physicians, ancillary care providers, and facilities would get paid a flat amount for a specific condition/diagnosis.
2. Post 2014 and the Independent Payment Advisory Board – Starting in 2014, the IPAB would be required to recommend specific Medicare spending reductions in any year in which Medicare’s per capita cost growth rate exceeded a specific target. IPAB’s recommendations are more than just idle talk; they would become law unless Congress passed an alternative proposal that resulted in identical savings. Some provider types are excluded for a limited time (this is too deep in the weeds to go into here).
There’s more in the bill, but it is for very specific services, types of providers, and geographic areas yet to be identified – in all, few providers will be affected.
For more detail on the bill’s impact on reimbursement, click here.[opens pdf]
What does this mean for you?
Remember this is just the reform bill – it is highly likely other changes driven by other bills, regulatory changes, and miscellaneous factors will have as much – if not more – impact.
