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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.

Healthcare price transparency and the empty airplane seat July 6, 2012

Posted by medvision in Chronic Disease, Employee Wellness, health data, Healthcare Costs, Healthcare Reform, Insurance Plans, Risk Management, Uncategorized.
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health, paying for healthcareAnyone paying attention to our current national healthcare situation has surely seen published examples of pricing defying all realms of logic. For example, MRIs priced at $3000 for individuals without insurance, $1500 for individuals with insurance and, wow, $300 for individuals paying cash. Here’s the result of a recent Consumer Reports Study! http://tinyurl.com/7pnj4wx

I know, things like this make you want to pull your hair out. It’s simply a function of no transparency, infused with high utilization rewards/fee-for-service, plus a lack of value measurement, coupled with oversupply, fragmentation of care and unaccountably from spending someone else’s money. Our healthcare system lacks basic laws of supply and demand, accountability and economic reality. On the good side no place on earth can provide better care needed for critically ill patients.

For plan managers, such marketplace disruption can create some phenomenal opportunities to provide member care while sequentially saving vast dollars sums. For example, let’s say you’ve swallowed the consultant’s Kool-Aid and have a HDHP plan design w $3000 deductible while allowing members to make deposits into an HSA. Yes, yes, we all know annual physicals are covered at 100%, assuming nothing is diagnosed. However, you’ve adopted a plan design which essentially prevents members from receiving the lowest cost, highest value healthcare delivered to prevent chronic disease or manage emerging disease. For the sake of argument, let’s assume the same plan design in place but look to the crazy pricing variances for ways to cover the underinsured risk, i.e. the first $3000 annually:

  • Primary care. If your members are within a distinct geographic area/areas, why not contact a few of the larger primary care practices and ask for a capitated, or cash deal to treat your members? Cash deal means completely outside of your plan. Members would have no co-pays for doc visits and blood tests. Common low-cost generic drugs could be paid by the member or reimbursed by the employer, in or outside of the plan. What kind dollars would be involved here? Maybe an initial $100 cash payment when a member goes to the physician followed by a $40 per member per month payment.
  • Ancillary care. From the press we know pricing differences are amazing. Cash prices for CAT Scans can be 10% of the insured price. Simply coach members with the option of calling providers and asking for the cash price without mentioning they have coverage under a high deductible plan. These vastly reduced cash prices will not go towards the satisfaction of the deductible however from an economic perspective this practice makes perfect economic sense.
  • Inpatient hospital care. This is what insurance is for, so have members utilize the discounts available under the high deductible plan.

Empty airplane seat? I use is simply as an explanation of why such extreme variances exist in the health care system. A jetliner taking off with empty seats is simply losing seat revenue. This is why such wild price variances exist in the airline industry. It’s better to collect $.50 from a dollar ticket then receiving zero from an empty seat. The exact same thing happens with healthcare procedures. As an example, hospital A purchases a $2 million dollar CAT Scan machine. The hospital’s fixed cost is exactly the same whether it’s being utilized or not. Their expense includes capital outlay, interest and personnel necessary to operate the equipment. If they normally received $2000 per procedure and equipment is not utilized 50% of the time, it makes perfect sense to collect $300 per procedure during the time the machine is not being utilized for the $2000 procedure. Pricing information is invisible to consumers and the fact they charge either $2000 or $300 isn’t a problem.

How to plan managers take advantage of these situations? The answer is simple. The same way we purchase cheap airline seats. We explore, question, investigate and ask. The attached link shows a physician perspective.  http://tinyurl.com/chx8quh

Unintended consquences, PPACA eliminating 100,000+ agents and brokers December 13, 2011

Posted by medvision in health data, Healthcare Costs, Healthcare Reform, Insurance Plans, Risk Management, Uncategorized.
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The president’s healthcare bill is showing America “change” has unintended consequences. Here’s one which will ripple through the lives of Americans receiving health benefits through small to mid-sized employers! Losing their jobs are 100,000+ agents and brokers who served as a buffer between the needs of insured Americans and the insurance companies? http://tinyurl.com/7l2oup3

It seems Kathleen Sebelius, Duchess of HHS, found the 2.02% of agent commission unworthy to be included in expenses for MLR calculations. Back to the land of unintended consequences. What roles do these agents play in the health outcomes of every-day Americans? (Ok, I understand the intent of Obamacare’s creators is to completely eliminate employer sponsored health benefits. For the sake of discussion, let’s pretend the nation comes to its senses and only permits part of PPACA to survive?)

Here’s a few instances in which agents and brokers changed the lives of their clients (1) Cancer diagnosis A woman’s physician, and consulting physician, strongly suspect she has initial stages of  serious organ cancer. They recommend advanced imaging as a diagnostic tool. The insurance company declines opting only to pay/permit exploratory surgery to collect multiple biopsy samples. The insurance broker reminds the insurance company of legal and public perception issues with such a decision and, after additional consideration, the insurance company relents. The test indicates the woman cancer free!

(2) Simple mistakes sink ships– During an open enrollment meeting an employee mistakenly prints the wrong date on the group enrollment application. The insurance company denies coverage under the group. The agent threatens to move another large group to a competitor if the mistake is not treated an inadvertent mistake. Problem solved.

(3) Deny by contract provision An applicant for individual coverage correctly answers individual underwriting questions as not knowing about heart disease. The policy is issued and after 9 months the person suffers a heart attack. The insurance company cites a prior doctor visit as proof the individual knew, or should have known they were subject to a heart attack, and denies coverage. The agent hounds the company VP of underwriting until the decision is reversed.

I know some will say the above are exactly what the entirety of PPACA will prevent! Hold on there “Kiomsabe”. If you believe free market healthcare can be tough, how about nationalized healthcare. http://tinyurl.com/nyap8o Things aren’t so rosy with the national health system in Great Britain! What makes us think our government would do better? For example, “Cash for Clunkers”

I once had a boss with very initiative advice. “Be careful what you ask for. You may get it”. Why not make provisions for uninsured American’s without destroying our current system? More on this later!

High deductible plans not working? Here’s what works, 0 deductible! December 10, 2011

Posted by medvision in Cancer Care, Chronic Disease, Employee Wellness, health data, Healthcare Costs, Healthcare Reform, Insurance Plans, Rx Costs, Uncategorized.
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My initial introduction to consumer driven plans, HDHPs, was presented in a group setting by a national carrier, or, “industry speak” a BUCA. We were first told the reason for explosive trend is a combination of easy physician access due to low copays, better technology, our legal environment and expensive drugs. Then came the HSA regulatory part. (I used to think the 401K regs were somewhat complex)! Today, from my years of data experience, I know explosive health inflation is driven by a small percentage of members suffering worsening states of chronic disease.

Anyway, a troubling thing is sneaking up on the disciples of HDHPs and their concept of member consumerism. It’s the rapid adoption of on/near site clinics by 20%+ of employers with a thousand or more employees.

Hmm. In one corner we have plans requiring members to spend the 1st $1,000 – $10,000 before plan benefits start, And, in the other corner, all-inclusive primary care benefits with no, 0, member dollars needed. If fact, a few BUCAs are big proponents of both plans! Sort of an AC/DC strategy.

The clear winner is immediate and easy access to primary care, preferably in scenarios in which the physicians are significantly rewarded for “great” member health. A great plan discount occurs when large claims don’t occur due to prevention/early disease identification. Guess how many $70 primary care visits can be purchased for the cost of a $250K annual claim paid on behalf of a member facing end-stage renal failure? A great physician can he hired for $200K annually. So, how many members can a physician see in 12 months? Here’s a good opinion article on employer clinics! http://tinyurl.com/7rvm7sm

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