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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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Blind Faith: Self-Funded Health Plan Management and Hospital Billings November 16, 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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Blind Faith: Self-Funded Health Plan Management and Hospital Billings

 Health CostsMany things concerning our current healthcare situation leave me in amazement. For example, today an article featured in “The Hill” highlighted a 4-5% decrease in healthcare inflation, which is a positive sounding reduction. http://tinyurl.com/czmmdz4  The national consultant attributed this to America’s adoption of high deductible health plan programs. This would seem logical if our national problems were based upon members utilizing too many $100 doctor visits. In other words, make patients 100% responsible for funding doctor visits, prescription medications and other high-value, low-cost health services. This sounds terrific until one discovers an excess of 75% of our national healthcare expenditures go to mitigate/control existing chronic disease. So is the logic “prevent the low-cost services to inflate high cost chronic disease services”?

 Unfortunately, the above can only make sense to plan managers who have no independent, actionable data. One simple exhibit, the expense distribution analysis, would show plan managers that a very small number of their members account for huge expenditures of claim dollars. Let’s assume a plan provides health benefits for 10,000 members (employees, spouses and children). If together the plan sustains $36 million in annual claims, a typical report would note a per-member-per-year, PMPY, expenses equaling $3600.  If the real expense distribution analysis was available, one would see:

-Top 1% (100 members) incur annual average claims of $90,000 each;

-Next 4% (400 members) incur $35,000 each;

-Next 25% (2500 members) incur $3000 each;

-Next 20% (2000 members) incur $1500 each; and

-Bottom 50% (5000 members) incur $500 each.

Notice the above does not include member paid coinsurance or monthly payroll deductions for coverage. Now, the plan manager is  advised to increase the deductible to $2000 per member before any plan benefits are payable. Why? Give members skin in the game! Immediately, it’s easy to see 50% are completely disenfranchised from any benefit payable. Does it make sense for the plan sponsor to eliminate benefits payable for the bottom 50% to 60%?  How much impact will the new $2,000 deductible have on the top 1% members spending an average of $90,000 per year?

Remember that very sick members are not consumers in the sense of purchasing an automobile. They are fighting for their lives. The bottom 50% of members are not consumers either, as the vast majority are not in life or death disease struggles.  Due to the 100% expense, these 50% are foregoing necessary wellness visits and other necessary disease management services. From a risk management standpoint, this plan design doesn’t compute.  I think this builds a speed lane into the top 5%/1%!

 The centerpiece of my consulting practice at Med-Vision is actionable, independent, HIPAA compliant, patient centric health plan data. Recently, while digging through a client’s outpatient hospital data, I noticed a $7 million paid run of charges recorded under revenue codes entitled — other pharmacy IV solutions and pharmacy incidental to radiology. These have no detail, no backup, and will require the administrator to request itemized billings to investigate. This could be totally legitimate, but I find it amazing clients are scouring the lunch tabs of their sales force and increasing the deductible for needed member preventative health services, while blindly paying $7 million for possible saline injections.  If this isn’t a home run example of the necessity of actionable data, nothing else is.

I often joke that many large self-funded health plans could be purchasing someone a brand-new Mercedes- Benz, S-500, each month with no notice.  It’s time for employers to take notice, evaluate their plans, implement solutions, and gain control of their healthcare costs.  What’s more, with the right plan design and data analytics, costs can be cut while simultaneously enhancing benefits and improving the quality of care.

                                                                                           

The light of free markets slipping into employer sponsored health care! March 6, 2012

Posted by medvision in Employee Wellness, health data, Healthcare Costs, Insurance Plans, Risk Management, Uncategorized.
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Free market practices appear to breaking through the screens covering our American health care system. Healthcare is a unique marketplace in which our current lack of financial and quality transparency produces high cost and poor clinical outcomes. How many patients will flock to a hospital experiencing 300% increases in cardiac death for heart surgery?  Read this physician’s post: Why we are busier than we’ve ever been.

Self-Funded plan management–take a close look at disease management results February 27, 2012

Posted by medvision in Employee Wellness, health data, Healthcare Costs, Insurance Plans, Risk Management, Uncategorized.
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Recently results of Medicare’s largest commercial disease management study were republished in the New England Journal of Medicine.

This study should refocus plan managers on the issue of disease management because 75% of all plan dollars are spent on chronic disease. Preventing the production of disease and the management of existing disease states is the entire ball game with respect to healthcare. Back to the Medicare pilot. In the Medicare Modernization Act of 2003, CMS was required to test the commercial disease management industries services with respect to the Medicare fee-for-service program. The program engaged eight of the industry’s DM providers, 250,000 Medicare beneficiaries with serious cardiovascular disease and spent $400 million over the four-year program. The conclusion was reported: In this large study, commercial disease-management programs using nurse-based call centers achieved only modest improvements in quality-of-care measures, with no demonstrable reduction in the utilization of acute care or the costs of care.

How should this be viewed in today’s environment? I’ve always felt the practice of nurses calling healthcare members they do not know, usually from a different state while attempting to offer advice concerning very personal aspects of one’s health is very problematic. Why? (1) Everyone, especially working folks, have very limited time during home hours (2) Not many are comfortable discussing their health issues with strangers and (3) nurses calling many times have limited, or worse, incorrect data about the medical conditions associated with the member.

My impressions of commercial disease management reports being delivered to clients today seem to be verified by the Medicare study as having, essentially, no positive results. But, Medicare members are very different from commercial health plan members? Yes in some ways, however they are mainly at home available so members have time to speak with nurse managers, this pilot targeted serious states of disease, and still, no demonstrable reduction. In what ways should plan managers react when delivered industry standard reports?

  1.  Don’t allow a 50 page DM document impress. DM providers have a strategy of creating member silos in which they describe all silo members as participants in the plan. A member not complaining about monthly mailings is “not” a participant! How many of us pitch 3/4ths of the mail we receive in the trash can? Probably over 90%. The only participants are the ones in continuous monthly/weekly phone calls with nurse managers. Usually this class never exceeds 1-3% of total members.
  2. Health claims metrics reported by the DM vendor probably will contain positive results. These must be verified from independent data in order to be considered valid. Many times DM providers attempt to “prove the negative’ by claiming their efforts created an absence of claims. Even worse are “vapor” attempts to prove savings by producing some type of productivity gain metrics! Sorry but this business in not akin to a college philosophy class.
  3. Each year $100s of millions are simply wasted on telephonic DM. If you cannot see the results clearly, the result didn’t happen.
  4. If you are offering a sole HDHP don’t assume a short-term claims reductions are necessarily good news. In today’s economic climate many are forgoing important medical care. As water recedes prior to a tsunami, an absence of claims this year may be indicative of an avalanche of future chronic disease.

Now the good news. If it isn’t working, try another approach. I’ve seen clients spend $250K through $500,000 with no clear results. How about using the dollars to hire, through a vendor/or directly, on site full-time nurses to reach out to members, face to face? People trust others they meet, trust and recognize!

The greatest opportunity in healthcare is for employer purchasers of healthcare to start demanding the results they want/need from vendors. Vendors which perform win should be rewarded and the many failing need to be sent packing!

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