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Discounts and Cost Shifting: Today’s challenge for Self-funded health-plan managers December 11, 2012

Posted by medvision in Chronic Disease, health data, Healthcare Costs, Healthcare Reform, Insurance Plans, Risk Management, Rx Costs, Uncategorized.
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health, paying for healthcareIn my experience in health plan risk management and benefits planning, nearly all large self-funded plans don’t have dollar shortages.  They have allocation problems. In today’s healthcare environment, managers need to know their “real” problems and their vast improvement opportunities. Independent, member-centric, HIPAA-compliant data is not a luxury — it’s the “oxygen” necessary to ensure plan survival in today’s economic climate.

If ever a cat and mouse game existed, it could be best illustrated by today’s billing practices confronting self-funded plan managers.

Years ago, consultants badgered insurance companies and providers over their in-hospital daily rates. Hospitals quickly realized many of the in-patient procedures could be performed in an outpatient setting and, in turn, made up their inpatient financial losses by loading outpatient billing rates.

Consultants, MCO’s and plan managers maintain an on-going tit-for-tat game in the provider discount arena.  Basically, no consultant can definitively analyze a MCO’s overall discount because they cannot access hospital contracts, and hospital charges make up 60-70% of annual plan expenses. Given this lack of hospital contract knowledge, they rank health plans by a stated percent discount off of billed charges. Providers have the ability to increase their billing, charge master,  thus, the discount off billed charges is less relevant.

A more relevant measurement is the amount self-funded employer plans pay as a percentage of Medicare provider reimbursements, for given geographic areas. In my consulting practice, we employ independent, deep-mining healthcare software to analyze the clinical and financial status of the plan’s performance. Recently, with the advent of the national healthcare reform law, PPACA, we discovered certain data elements being charged in manners never seen.

For instance, most plan sponsors today see aggregate annual outpatient claims almost equaling annual inpatient claims.  Outpatient procedures are when the patient comes to the facility, usually in the morning, receives a medical procedure, and goes home in the afternoon. By definition, outpatient procedures cannot be of a very serious nature, although the patient can have serious disease. In contrast, inpatient procedures require 24-hour care by physicians and nurses and can last weeks or months.  As an example, some patients with heart disease are well enough to undergo heart catheterization/angioplasty in the outpatient setting.

Let’s get to the billing issue now.  On average across America, Medicare reimburses hospitals, in the outpatient setting, for angioplasty an amount averaging $4,000. The physician, interventional cardiologist, receives approximately $800. But I’m seeing multiple instances in which our self-funded plan sponsors are paying in the neighborhood of $40,000 plus or minus. Rough arithmetic would show the $40,000 payment to be 800% to 900% above the average annual Medicare reimbursement.  I’m sure this is not a shock to many plan managers as everyone knows the commercial side of healthcare helps finance shortages from Medicare, Medicaid, and unreimbursed indigent care.  Employer plan sponsors can do much better than this ratio by direct contracting with best-of-class interventional cardiac providers.

Now for the jaw-dropping part: If a consultant requests the plan sponsor’s average cost for angioplasty, he or she would probably supply a list of codes aligned to angioplasty, outpatient,   and wait for the answer.  What we are discovering is that the paid billing indicates the codes aligned with angioplasty are populated by very small dollar amounts; however, on the date of service, a large dollar billing of $40,000 is described as a low-cost medical service, sterile IV solutions (saline), listed under the procedure description, while the actual descriptive procedure, CPT code, is listed under a blinded aggregate hospital revenue code. This produces a scenario in which normal queries would not identify the large $40,000 amount paid and requires a detailed, line-by-line billing to investigate the appropriateness of the charge.

How prevalent is this practice? In one instance, medical claim dollars listed under sterile IV solutions, pharmacy incidental to radiology, generic pharmacy, and non-assigned pharmacy equaled $25 million over 24 months.

Without further investigation, it is virtually impossible to ascertain if these dollars are being spent correctly under contracted arrangements. At best, it represents new escalations in the game of hide-and-seek.

And the real concern lies in the subject of cost shifting. Ponder this question: Not counting physician office visits, what percentage increase is fair in addition to the amount providers receive from Medicare reimbursements? Remember that with high-cost healthcare procedures your plan is reimbursing providers much more that Medicare for the exact same treatments/procedures.  It’s a tough question.  Although if we are to maintain employer-sponsored healthcare, it must be addressed. My guess, 200-300% is fair.  And 800-1000% is unreasonable.

This issue is important as commercial plans cannot meet the financial shortages coming in the future.  Another outpatient assumedly situation showed a payment of $78,000 to a hospital assumedly all under contracted rates, in network. If the patient spent eight hours at the facility, employer’s bill equaled $9,750 per hour. This seems expensive.

Another plan management “treat” is represented PBM vendors charging plans 1000%+ more for common generic drugs than members can pay at retailers, Costco, Target, and Walmart. Yes, employer plans save a few dollars from generics, but the lion’s share of savings are gobbled up by PBMs.  Moral of this story: Study your contracts carefully and know that it could be in your organization’s best interest to seek support from a health-plan risk management firm relying on independent health & pharmacy data software.

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Ominous threat to employer sponsored healthcare July 25, 2012

Posted by medvision in Chronic Disease, Employee Wellness, health data, Healthcare Costs, Healthcare Reform, Insurance Plans, Risk Management, Rx Costs, Uncategorized.
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If your job involves managing employer sponsored health plans, on behalf of employers, there’s an article out (http://tinyurl.com/d836mol) that  says the following:

One in 10 employers plan to drop health benefits.

Employee Health, Wellness, Health Plan, DataI hope this is a huge wake-up call for employers.  Over the past 10 years, I’ve pounded the pavement trying to explain the necessity for plan executives to utilize actionable, independent, member-centric data to manage the financial and clinical aspects of their health plans. Some employers have adopted this model and, as a result, their trend/health inflation has become virtually nonexistent over the past several years. Just look at Med-Vision’s news page for examples.  Many others, however, have declined and are flying, virtually blind.

Let’s think about the impending threat to our current system of healthcare delivered at work. First, which types of employer plans are at the highest risk? To make my point, I’m borrowing from the comedic styling of Georgian funnyman, Jeff Foxworthy:

(1)        If you report to an elected board, commission, mayor or any other type of politician who grovels every few years to be reelected, you might have a problem

(2)        If your annual per employee plan costs are $8,000 plus, versus the penalty of $2000 PEPY to drop coverage, you might have a problem

(3)        If your plan design pays claims for an unlimited maximum, while you attempt to save money by preventing care during the first $10,000 of expense, you might have a problem

(4)        If your plan advisors, broker, consultants tell you your existing 10% trend fits the norm, you might have a problem

(5)        If your plan pays hundreds of thousand dollars annually for disease management and the only result you see is one out of 100 members talking to a nurse, you might have a problem

So, maybe you fall into a few of the top Foxworthy-isms. Believe it or not, this performance can be turned around in as little as a year or two. What do you do?  Here’s my advice:

•           Work with advisors/vendors who win solely when you win. If you’re partnering with a public company, MCO/consultant/broker, look at their financial performance on one of the multiple finance websites. Yahoo finance is a great spot. How is their stock, profits, cash flow performance? If they are succeeding wildly while your plan fails, you probably are not receiving the best advice? Why would you pay more in fees and commission while your plan performs negatively? Pay for performance and zero for failure. Make your advisors stay awake at night worrying about the care/lack of care your members receive. If your plan is failing, yell, scream and threaten firing all vendors. Here’s a nice take-away. MCOs are dumping huge sums of cash into client wellness funds to be selected during bidding competition. If you are humming along with an MCO/TPA, demand some wellness cash!  Ask $40K per thousand employees covered.

•           Are you treating plan reports, performance metrics from your MCO/TPA as gospel? Do you think they report on failures/weaknesses concerning your plan while you pay fat ASO fees? (If so, I have some beautiful, airboat accessible, home sites in the center of the Everglades for you to consider purchasing). This is where plan managers fly blind. Identify and implement services from an independent, patient centric deep data mining company. Analyze health data as a risk manager focusing on prevention, disease mitigation and financial accuracy. Read and analyze your existing employee benefits contracts closely. With your data mining functionality you’ll be able to determine if your plan is paying 2000% markups for cheap generic drugs delivered via mail. PBM performance is an easy way for plans to save $10-$15 PEPM. Ask simple questions like, what percent of our women members are receiving breast cancer screenings past age 50?

•           Where is your health plan money being spent by service category? Plans performing in the top 10% spend over 15% of their total budget on primary care services. The vast majority I see spend less than 10% on primary care.

Furthermore, please don’t be assured a Republican win in November will clear the threat. The “right” wants to remove the corporate tax deductions for employer sponsored healthcare.  An era of employer-driven healthcare reform is needed to mitigate risks and lower costs.

And a last thought. Worry about your plan members receiving appropriate health care services in the same manner you worry about your family members receiving correct care. The higher the quality, the lower the cost!

As Geoffrey Hickson said: “If you forget you have to struggle for improvement you go backward.

Another HDHP rant! March 28, 2012

Posted by medvision in health data, Healthcare Costs, Healthcare Reform, Insurance Plans, Risk Management, Uncategorized.
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Today we are in the middle of the arguments concerning healthcare reform before the US Supreme Court. The individual mandate is the issue of the week; however, I’d like to discuss the lack of procedure pricing in health markets. Although lack of pricing information is not the main problem with High Deductible Health Plans, the issue is amazingly resilient. First, I’d like to describe personal experience with my own HDHP.

Somehow during December 2011 my family actually met the large deductible of our plan. Given this was the first month of any reimbursable expenses over the last several years, I elected to follow my primary physician’s advice and submit to a sleep study. My physician is owned by a local hospital and I was referred to their outpatient center. I tried to check the pricing on my MCO’s website only to find no information exists for sleep studies. So, around December 30th I traipsed over to the hospital ending up in the basement in a drab, lifeless room. Subsequently, I was met by male technician who proceeded to stick wires all over my head and chest to the point I looked like Frankenstein. Somehow, I fell asleep, was awoken after four hours and drove home.

About two weeks later, I noticed the EOB in the mailbox and quickly opened it. Shock, outpatient billing $4000, BUCA allowed $2000, BUCA paid $1600, member amount due at 20%, $400. Subsequently, I start receiving calls from hospital to schedule my next delightful evening, another four-hour visit, but this time entirely subject to my fantastic $3000 deductible. I answered, “Hmm, let me get back to you”.

By now, I’m feeling pretty stupid and decide to call another facility to inquire the discounted rate for the same procedure/CPT under my MCO. The facility answers, “we don’t know what you’re MCO pays”. Then I say, “forget the MCO, I’m paying cash”. “Oh, you should’ve mentioned that at first, yes the cash price is $300 per evening or $600 for the entire procedure”. Pretty big variance? Drafty hospital, $4000 or brand-new facility $600!

Here’s a supporting posting today on Kevin M.D. The subject has a little more clinical risk significance.  Again, I’m not in the HDHP corner!

http://tinyurl.com/7ddt2a8

 

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