Guest Blog from Sander Domaszewicz on Decline in Utilization Metrics

By Clive Riddle, April 30, 2012

Sander Domaszewicz is a Principal with Mercer well-versed in employer and employee health benefit issues, and is a noted national speaker on topics related to this arena. Recently, MCOL’s ThoughtLeaders publication asked it’s panel about the recently observed trends regarding a dip in various utilization metrics. We didn’t connect with Sander in time to ask him this question for the current issue of ThoughtLeaders, but I asked him if he wouldn’t mind doing a short guest blog with his thoughts on the issue.

Question: A number of recent studies have indicated a modest decline in several key patient utilization metrics since the onset of the great recession. Will a long-term change result, or will utilization increase as the economy improves – and what are the implications?

Sander Domaszewicz, Principal, Mercer:

Many of the plan sponsors we work with are busy moving forward with strategies that will right-size utilization now and in the future, making sure that their workforce gets the care they need at a good value, and no more.  Some of the most powerful efforts in this area started to blossom during the great recession, and our expectation is that long-term change will result. 

Employers' focus has shifted to almost equal attention now being given to both the Demand-side and the Supply-side of the care consumption equation.  On the Demand-side, employers are investing in keeping healthy folks healthy and keeping illnesses well-managed for those that have chronic conditions.  This Demand-side aligns with "wellness" or "health management" initiatives and is trying to reduce the demand for health care services in the first place.  If the Demand-side of the intervention breaks down, employers are also addressing the Supply-side of the care utilization equation.  So if people do need to seek health care services, let's make sure we get them the right care, at the right time, from the right provider, for the right price, with the right outcome.  In other words, how can we get the most total value for the health dollar spent.  Consumer-directed health plans, centers of excellence, narrow networks, patient-centered medical homes, ACOs, medical travel, telemedicine, retail/onsite clinics, and other interventions all have Supply-side impact.

Both the private and the public sector purchasers of health services are working diligently to optimize necessary utilization and prevent unnecessary utilization, so better control over time may be more achievable now than at any time in the past.

Celebrating an Anniversary Under Threat of Divorce

By Clive Riddle, March 23^rd , 2012

The Affordable Care Act turned two today. If we consider this a birthday, some would say the Act is entering its terrible twos, but DHHS and other are referring to this as an anniversary, which in this context is bittersweet as the Act now sits under a Supreme Court cloud starting next week, with plenty of partisan positioning from both sides. Will the Anniversary result in Divorce, Annulment, Trial Separation, a Second Honeymoon or settle in a routine marriage with ups and downs?

Here’s some key accomplishments that White House touts, in their six page white paper regarding the Act at the two year mark: Affordable Care Act: The New Health Care Law at Two Years:

• A one-time $250 Medicare rebate check to seniors who hit the “donut hole” coverage gap in 2010, and a 50 percent discount on brand-name drugs in the donut hole in 2011.
• Insurance companies can no longer deny coverage to children because of a pre-existing condition.
• In 2014, discriminating against anyone with a pre-existing condition will be prohibited.
• No more lifetime dollar limits on coverage
• Insurance companies prohibited from rescinding coverage because of an unintentional mistake on an application.
• Starting this fall, health plans provide consumers standardized Summary of Benefits and Coverage forms
• Health insurance companies now have to meet the 80/20 Medical Loss Ratio rule.
• Insurance companies must publicly justify any rate increase of 10 percent or more.
• Tax credits for small businesses, in 2011 affecting an estimated two million workers from an estimated 360,000 small employers who will receive the credit in 2011.
• Early Retiree Reinsurance Program (ERRP) has provided $5 billion in reinsurance payments to employers to benefits for retired workers not yet eligible for Medicare.
• 2.5 million young adults who were uninsured have gained coverage by being able to stay on their parent’s health plan,
• 54 million additional Americans now receive coverage through their private health insurance plan for many preventive services without cost sharing such as copays or deductibles.
• More than 32.5 million seniors have already received one or more free preventive services, including the new Annual Wellness Visit and like mammograms and other cancer screening tests for free
• More than 50,000 Americans with pre-existing conditions have gained coverage through the new temporary Pre-Existing Condition Insurance Plan.
• Advancement of Medicare Accountable Care Organizations  with Thirty-two “Pioneer” ACOs already up and running
• Thirty-three States have  received at total of nearly $670 million in Health Insurance Exchange Establishment Grants.
• The Act creates a new type of non-profit health insurer, called a Consumer Operated and Oriented Plan (CO-OP),  run by their members, with seven non-profits intending to offer coverage in eight states h awarded more than $638 million in loans to get up and running.

So what are others saying about the state and fate of the Act on this second anniversary?

Bloomberg BusinessWeek notes huge numbers of the population are enjoying the benefits included in the Act, even as they are caught up in the politics of it, and quotes Paul Keckley, executive director of the Deloitte Center for Health Solutions: "The coverage improvements are very popular. I think all of that will stay regardless of the individual mandate.”

The Center for Studying Health System Change  released a new study: The Great Recession Accelerated Long-Term Decline of Employer Health Coverage and found that “between 2007 and 2010, the share of U.S. children and working-age adults with employer-sponsored health insurance dropped 10 percentage points from 63.6 percent to 53.5 percent.” They conclude that “while there has been vigorous debate about the effects of national health reform on employer-sponsored insurance, the study findings  indicate that the debate often misses a key point—employer-sponsored insurance likely will continue to erode with or without health reform, especially for lower-income families and those employed by small firms.”

The Wall Street Journal reports in an article Untangling Unknowns in Health-Care Law, that as guidance continues to be developed, and the details continue to unfold, we really don’t know enough today about the Act as we think we do. They summarize: “Two years after Congress passed President Barack Obama's health-care legislation, despite all the assertions about what it will or won't do, no one really knows how it's going to work. The U.S. has rarely attempted anything of this scale before.”

Kaiser Health News comments on the possibility that the Supreme Court might strike down the Individual Mandate while keeping the other components of the Act intact, in their article The New Jersey Experience: Do Insurance Reforms Unravel Without An Individual Mandate  in which they state that” or some clues, the justices could examine what happened in New Jersey, a state that tried to reform its insurance markets without a mandate -- and failed pretty miserably”

The Wall Street Journal also informs us the health plans are making their contingency plans, in their article Insurers Set Plans in Case Mandate Is Quashed.

And, The New York Times notes that politicalization of the issue in their article ”Publicity Push as Health Law’s Court Date Nears”, reporting that “Republicans on Capitol Hill have put together a highly coordinated two-week renewed assault on the health care law, seizing on the legislation’s second anniversary and the next week’s oral arguments before the Supreme Court concerning its constitutionality. “

Walgreens and Express Scripts: The PBM-Pharmacy Feud

By Clive Riddle, March 16, 2012

Once upon a time, pharmacies and PBMs seemed like one happy family – experiencing minimal conflict in the health benefits arena while hospitals and health plans duked it out.  But as the marketplace pressures matured, a full blown family feud  - or pharmacy feud – has erupted in the form of the ongoing Walgreens – Express Scripts saga.

Walgreens walked away from their Express Scripts contract effective January 1^st, due to an impasse over low reimbursement.  Stock analysts so far say the loss of volume does not bode well for Walgreens. But will Walgreens, and other major pharmacies for that matter attempt to turn the table through the merger & acquisition arena, consolidating to improve their contracting clout just as hospitals somewhat successfully did to health plans at the dawn of the new millennium.  Or is it that PBMs will out merge them?

Here’s what’s been expressed in this saga’s script during the past year:

Walgreen’s owned their own PBM, but decided to get out of the business (just as many hospitals shed their regional health plans before going into consolidation mode in the late 90’s and subsequently). Express Scripts was a strong suitor to purchase Walgreen’s PBM, but then Walgreens sold to Catalyst Rx in March last year.

Express Scripts and Medco Health Solutions entered into a Definitive Merger Agreement for the two PBM giants in July 2011, which is still undergoing regulatory scrutiny and thus under a veil of uncertainty.

Walgreens couldn’t re-negotiate a PBM contract with Express Scripts to their satisfaction for 2012 and beyond, so as of January 1^st, they were no longer a participating pharmacy provider.  Walgreens touted its Prescription Savings Club was helping them keep Express Scripts patients, but Reuters reported earlier this month that Walgreen Co's comparable sales fell more than expected in February, the second month that the largest U.S. drugstore chain did not fill prescriptions for patients in the Express Scripts Inc.  pharmacy benefits network.  Reuters cited that the “number of prescriptions filled at Walgreen's comparable stores decreased 9.5 percent during the first 28 days of February after falling 8.6 percent in January. No longer being part of the Express Scripts pharmacy network slashed 10.7 percentage points from comparable prescriptions filled in February, Walgreen said. In February 2011, 12.6 percent of Walgreen's prescriptions were for Express Scripts.”

Adding fuel to this fire were various articles across the country, such as in the March 6^th Oregonian, that Express Scripts users settle in with new pharmacies.  Then this week PCMA, the PBM association, released survey results that tout the headline: New Survey: Walgreens’ Customers Flock to Independent Pharmacies.

But the future may not be so gloomy for holders of Walgreens stock, despite a rash of analysts saying “sell” earlier this year.  Now a possible Rite Aid – Walgreens merger is rumored with the New York Times reporting that a major motive must be that “a merger could create a big new drug store company capable of pushing back against increasingly strong pharmacy benefit managers like Express Scripts.”

Stay tuned. 

The Current Facts on Alzheimer's

By Clive Riddle, March 8, 2012

The Alzheimer's Association this week released their 2012 Alzheimer's Disease Facts and Figures, with the full report available from their web site.

Harry Johns, President and CEO of the Alzheimer's Association, tells us "Alzheimer's is already a crisis and it's growing worse with every year. While lives affected and care costs soar, the cost of doing nothing is far greater than acting now. Alzheimer's is a tremendous cost driver for families and for Medicare and Medicaid. This crisis simply cannot be allowed to reach its maximum scale because it will overwhelm an already overburdened system."

Johns goes on to say "this disease must be addressed on parallel tracks: supporting research to find treatments that cure, delay or prevent the disease, and offering assistance and support to the more than 5 million Americans now living with Alzheimer's and their more than 15 million caregivers. This is what the National Alzheimer's Plan is all about. Caring for people with Alzheimer's and other dementias costs America $200 billion in just one year. By committing just one percent of that cost, $2 billion, to research it could begin to put the nation on a path to effective treatments and, ultimately, a cure. Given the human and economic costs of this epidemic, the potential returns on this one percent solution are extremely high."

Here's a selection from the boatload of information provided in their 72 page report on Alzheimer's and other dementias:

• $140 billion will be paid by Medicare and Medicaid in 2012 for care and treatment
• Total costs by payer for 2012 will be $200 billion, broken down as follows: Medicare $104.5B; Medicaid $33.5B; Out-of-pocket payments $33.8B; Other $26.2B
• Medicare payments for an older person with Alzheimer's and other dementias are nearly three times higher and Medicaid payments 19 times higher than for seniors without Alzheimer's and other dementias.
• A senior with Alzheimer's and diabetes costs Medicare 81 percent more than a senior with diabetes but no Alzheimer's.
• An older individual with cancer and Alzheimer's costs Medicare 53 percent more than a beneficiary with cancer and no Alzheimer's.
• An estimated 800,000 individuals have Alzheimer's and live alone, and up to half of these individuals do not have an identifiable caregiver.
• The 15.2 million friends and family members of the 5.4 million individuals with Alzheimer's and other dementias provide 17.4 billion hours of unpaid care valued at more than $210 billion.
• 200,000 of the Alzheimer's population are under age 65 with “younger-onset Alzheimer's”
• 45% of seniors over age 85 have Alzheimer's
• 16 percent of women age 71 and older have Alzheimer’s disease or other dementias compared with 11% of men
• Someone develops the disease every 68 seconds
• Alzheimer's is the sixth-leading cause of death in the country and the only cause of death among the top 10 in the United States that cannot be prevented, cured or even slowed.
• Based on final mortality data from 2000-2008, death rates have declined for most major diseases – heart disease (-13 percent), breast cancer (-3 percent), prostate cancer (-8 percent), stroke (-20 percent) and HIV/AIDS (-29) − while deaths from Alzheimer's disease have risen 66 percent during the same period.
• Alzheimer's accounts for somewhere between 60-80% of all dementia cases

Midwest Business Group on Health’s Quest to Reduce Elective Preterm Deliveries

By Clive Riddle, March 2, 2012

Last week,  Larry S. Boress, President & CEO of the Midwest Business Group on Health was one of three featured speakers in the HealthcareWebSummit event: Managing an Increasing Trend of Elective Preterm Deliveries.

MBGH has taken a keen interest in facilitating a reduction in elective preterm deliveries, and Larry shared why purchasers have gotten involved, and what they are doing about it.

Larry’s opening arguments were:

• Maternity care is the number one reason for hospitalization among employee populations
• The highest cost for maternity care is when underdeveloped infants are treated in the neonatal intensive care units of hospitals
• Preterm infants are less likely to survive to their first birthday than infants delivered at full term
• Those preterm babies who do survive are more likely to suffer long-term costly disabilities than infants born at term

He shared 2009 Data compiled by Thomson Reuters for the March of Dimes, which compared average expenditures for newborn care yielding $4,551 for uncomplicated cases vs. $49,033  for premature/ low birth weight cases.

So what exactly is an early elective delivery. Larry offered these characteristics:

• The newborns delivered with a gestational age between the 37th and 39thcompleted week, that were delivered electively
• Early elective deliveries are performed on women of all backgrounds and incomes.
• These are distinct from early deliveries performed due to clinically-appropriate reasons to avoid health problems facing the mother or the infant

And what is the scope of early elective deliveries? We learned that the national average is up to a rate of 17% of deliveries, while the Leapfrog group has set a current target at 12%. Minnesota, South Carolina, Indiana and Arizona all have rates above 25%. Virginia, Florida, and New York exceed 20%. While 53% of hospitals are at or below the Leapfrog target of 12%, 33% of hospitals have rates of 20% or higher (6% of hospitals have rates of 45% or higher.)

What are the motivations to have an elective preterm delivery, despite the dangers and costs? Larry cites these delivering physician convenience factors: (A) Guarantee attendance at birth;  (B) Avoid potential scheduling conflicts; (C)  Reduce being woken at night; and (D) the NICU can handle it. Furthermore, Larry offered these motivations for the mothers:

• Prior bad pregnancy
• Desire to deliver on special date or holiday
• Special circumstances
• Cultural factors
• Ability to  plan in advance for birth
•  Convenience
• Ability to be delivered by her doctor
• Maternal intolerance to late pregnancy
• Excess edema, backache, indigestion, insomnia

But there are serious quality implications of non-medically indicated early deliveries beyond cost that Larry cited:

• Increased NICU admissions (and separation from mother)
• Increased respiratory illness
• Increased jaundice and readmissions
• Increased suspected or proven sepsis
• Increased newborn feeding problems and other transition issues
• Under developed brain and lungs
• Potential development of cerebral palsy

The good news is this is now a national quality measure for the National Quality Forum (NQF); Leapfrog Group; The Joint Commission; and AMA Physician Performance Consortium Measure.

Larry closed by noting that in the twelve months since MBGH made its initial Call to Action to reduce elective preterm deliveries, over 70% of hospitals reduced their early elective delivery rates below previous levels, and many have set 5% as their goal.

Kaiser by the Numbers - 4th Qtr 2011

By Clive Riddle, February 17, 2012

Kaiser Permanente, the nation’s largest integrated health care delivery system, last week released fourth quarter and year-end 2011 financial results.  Here’s some highlights, as well as comparison to their fourth quarter and year-end 2010 and 2009 financial results:

Full Year End Results

• Combined total operating revenue:  2011 $47.9 billion  |  2010 $44.2 billion  |  2009  $42.1 billion
• Operating income:   2011 $1.6 billion  |  2010 $1.2 billion  | 2009 $1.6 billion
• Operating Income % of Operating Revenue:  2011 3.3%  | 2010 2.7%   |  2009 3.8%
• Net non-operating income:  2011  $426 million  |  2010 $789 million |  2009 $524 million
• Net income:  2011 $2.0 billion | 2010 $2.0 billion  | 2009 2.1 billion
• Capital spending :  2011 $3.2 billion  |  2010  $2.9 billion  |  2009 $2.6 billion
• Total Membership:  2011 8.9 million  |  2010 8.7 million  |  2009 8.6 million

Fourth Quarter Results

Combined total operating revenue:  2011 $12.1 billion  |  2010 $11.1 billion | 2009 $10.6 billion

Operating income:  2011 $247 million  |  2010 $42 million |  2009 $214 million

Net non-operating income:  2011 $227 million  |  2010 $205 million  | 2009 $276 million

Net income:  2011 $474 million  |  2010 $247 million  |  2009 $490 million

Capital spending:   2011 $1.0 billion  |  2010 $1.2 billion  |  2009 $900 million

More Numbers

High level browsing of KP’s financial results can be given a little more perspective by touring through some key information about the close to 9 million member not-for-profit health plan:

• Founded in 1945
• Headquarters in Oakland, Calif.
• Three main operating entities:  (1) Kaiser Foundation Hospitals and their subsidiaries;  (2) Kaiser Foundation Health Plan, Inc.; (3) The Permanente Medical Groups.
• 2010 Health Plan Membership, by Region:  Colorado: 526,258; Georgia: 222,074; Hawaii: 229,186; Mid-Atlantic States (VA, MD, DC): 488,171; Northern California: 3,263,619; Northwest (Oregon/Washington): 476,345;  Ohio: 122,342; Southern California: 3,341,646
• 2010 Medical facilities and physicians: 36 Hospitals; 533 Medical Offices; 15,853 Physicians;  167, 178 medical facility employees

Thought Leaders Thoughts on Readmissions

By Clive Riddle, January 20, 2012

Health Policy Publishing LLC this week launched its inaugural issue of Readmissions News, which is targeted at stakeholders interested in the management of hospital readmissions. One of the features of the new monthly newsletters is a Thought Leaders corner, and in this issue, experts were asked "Do you feel significant potential savings and improvements from further reductions in hospital readmissions can be achieved through the current set of public and private initiatives, or are expectations too high?"

Here are excerpts of what they had to say in response:

Randall Krakauer, MD, FACP, FACR; Aetna’s National Medical Director, Consumer Segment said in part “….The potential for impact has been demonstrated with several different programs under different conditions.  However, there is still a significant opportunity to broaden these efforts and create additional improvements in quality and savings.  Aetna has partnered with Dr. Mary Naylor at the University of Pennsylvania School of Nursing in developing and implementing a transitional care model that has resulted in improved quality and reduced costs for our Medicare Advantage members.  The demonstrated potential creates an imperative that public and private organizations work together to continue to expand these initiatives.  We should expect these types of programs to be as much a part of health care delivery as any other public health measure with demonstrated and accepted value.”

 Jeff Lemieux, AHIP’s Senior Vice President, Research, gave a response that included:  “The 20 percent reduction in readmission rates proposed in the Partnership for Patients Initiative sets an initial target for all stakeholders.  However, preliminary studies of variation in readmission rates across regions and plan types – and the measured success of certain transitional care programs – suggest that larger reductions may be possible.  We should aim for across-the-board improvements in all hospitals and for all patients, whether coverage is through public programs or employer sponsored insurance.  We should track progress on readmissions in the context of overall hospitalization rates….”

William J DeMarco, MA, CMC, President & CEO, Pendulum Healthcare Development Corporation, included in his response:  “…Hospitals that dropped their home health agencies need to rethink how they can realign the existing home health system or expand their own to take the pressure off of doctors by having these agencies step in with skilled nursing and custodial care.  This may include cross training people to come to the aid of those with chronic conditions early instead of having these patients filling the ER.  Several HMOs and some hospitals are building ‘navigator’ programs to attract and train people who are not professional RNs or LPNs but can be trained to watch for signs of a chronic care patient losing their way on the path to improved health status….”

Brian Jack MD, Professor and Vice Chair, Department of Family Medicine, Boston University School of Medicine / Boston Medical Center;  concluded his remarks with:  “….A variety of implementation demonstrations for hospital based transition programs such as RED, BOOST, STARR, and H2H are gaining momentum and allowing researchers to study what works and what does not.  Across the country there is now a long list ‘early adopter’ hospitals that have demonstrated remarkable reductions in readmission rates.  All this effort is forcing hospitals and communities to work together as partners, a necessary ingredient for successful ACOs.  However, safe readmission reduction can only happen if hospitals have well developed community-based partners, particularly primary care partners, willing and able to care for patients in the community.  We need to ensure that this primary care safety net is available for patients.”

Alexander Domaszewicz, Principal, Mercer, concluded  “…. real, sustainable improvements that don't require constant oversight, monitoring, and effort will likely take a shift in marketplace practices driven by payment practices. HHS not paying for readmissions caused by ‘never events’ and guarantees like Geisinger's pledge to not charge for readmissions after heart surgery within ninety days are key examples of how to get every facility and practitioner keenly focused on eliminating readmissions.”

Benjamin Isgur, Director, PricewaterhouseCoopers LLP's Health Research Institute, continued his discussion, asking  “….How responsible should hospitals be when community doctors or patients fail to follow discharge instructions?  Can hospitals realistically cut readmissions when so much is out of their control?  However, it is possible to reduce preventable readmissions if hospitals address three major issues: discharge planning, length of stay, and closer alignment to physicians.  All of these issues relate to focusing on the total health of a patient instead of performing a procedure. ….”

Peter Kongstvedt, MD, FACP, Principal, P.R. Kongstvedt Co., LLC , opened his reply with “We’re going to see modest improvements at best until we address the lack of coordination and follow up in both the transition from inpatient to outpatient and coordinated outpatient management of patients with multiple chronic diseases. Many of the approaches to managing patients with multiple complex diseases are able to demonstrate improvements in quality, but few demonstrate improvements in overall costs.  The exception is nurse-led teams involving multiple clinical disciplines and access to physician support…..”

Finally, Martin S. Kohn, MD, MS, FACEP, FACPE, Chief Medical Scientist, Care Delivery Systems

IBM Research;   concluded his remarks by saying  “….Many organizations have substantially reduced re-admissions using current technology. The greater challenge will be reducing all admissions, over longer periods for more patients.  A patient will not view a re-admission on the 31st day differently from an admission on the 29th day.   Keeping more patients safely out of the hospital will require enhanced population and predictive analytics to personalize the prevention programs to make them economically efficient with improved outcomes.”

A complimentary copy of the inaugural issue of Readmissions News can be obtained by visiting http://www.readmissionsnews.com/sample_issue.php

Health Care Data Predictions for 2012

By Clive Riddle, January 6, 2012

The Ponemon Institute just released this list of top 2012 predictions in healthcare data, that they edited from various health care data thought leaders:

1. Healthcare organizations will not be immune to data breach risks caused by the spread of mobile devices in the workforce, according to Dr. Larry Ponemon, chairman and founder, Ponemon Institute. In the recent benchmark study, 81 percent of healthcare providers say they use mobile devices to collect, store, and/or transmit some form of PHI. However 49 percent of those admit they are not taking steps to secure their mobile devices.
   
   
2. Class-action litigation firestorms are imminent, says Kirk Nahra, partner, Wiley Rein LLP. Class-action lawsuits will be on the rise in 2012, as patients are suing healthcare organizations for failing to protect their PHI. 2011 saw several class-action lawsuits for organizations, some of which involved business associates, due to breached patient data. Regardless of the outcomes, these lawsuits are a significant risk and tremendous expense for companies affected by them.
   
   
3. Social media risks in healthcare will grow, according to Chris Apgar, CEO and president, Apgar & Associates, LLC. As more physicians and healthcare organizations move to social media to communicate with patients and promote services, the misuse of social media will increase as will the risk of exposure of PHI. Often healthcare organizations do not develop a social media use plan and employees represent a significant risk, potentially exposing PHI through their own personal social network pages. These risks can lead to patient vulnerabilities, data breaches, civil penalties, loss of business and more.
   
   
4. Cloud computing is not a panacea; technology is outpacing security and creating unprecedented liability risks, suggests James C. Pyles, principal, Powers Pyles Sutter & Verville PC. With fewer resources, cloud computing is an attractive option for healthcare providers, especially as Health Information Exchanges (HIE) increase. However, privacy and legal issues abound, such as compliance with HIPAA privacy and security regulations and allocation of liability when a privacy breach occurs. A covered entity will need to enter into a carefully written business associate agreement with a cloud computing vendor before disclosing protected health information and should ensure that it has adequate cybersecurity insurance to cover the direct and indirect costs of a breach.
   
   
5. Growing reliance on business associates will create new risks, believes Larry Walker, president of The Walker Company. Economic realities will force healthcare providers to continue to outsource many of their functions, such as billing, to third parties or business associates (BA). However, BAs are considered the "weak link in the chain," when it comes to data privacy and security. 69 percent of organizations that participated in the Ponemon study have little or no confidence in their business associates' ability to secure patient data. Third-party mistakes account for 46 percent of data breaches reported in the study.
   
   
6. Organizations risk reputation fallout, according to Rick Kam, president and co-founder of ID Experts and chair of the American National Standard Institute's (ANSI) "PHI Project," a project to research the financial impact of a healthcare data breach. Identity theft and medical identity theft resulting from data breach exposure are causing patients financial and emotional harm, often resulting in patients seeking out different medical providers. According to the Ponemon study, the average lifetime value of one patient is more than $113,000.
   
   
7. Mobile will explode in healthcare, believes Christina Thielst, health administration consultant and blogger. The use of tablets, smartphones and tablet applications in healthcare is growing exponentially. Nearly one-third of healthcare providers use mobile devices to access Electronic Medical Records or Electronic Health Records (EMR/EHR) systems, according to a CompTIA study. Providers will need to balance usability, preferences, security and budgetary concerns, as well as adopt written terms of use with employees and contractors using personal devices at work.
   
   
8. Increased emphasis on willful neglect leads to increased enforcement of HIPAA, according to Adam Greene, partner, Davis, Wright, Tremaine LLP. The focus over the next year will be on the 150 HITECH Act audits and publication of the final rules implementing modifications to the HIPAA regulations. But the biggest changes may be at the OCR investigative level. Expect OCR to more aggressively pursue enforcement against noncompliance due to "willful neglect" starting in 2012, resulting in a sharp uptake in financial settlements and fines in the coming years. 2012 will be the year that OCR expects everyone's training wheels to have come off their privacy and security programs.
   
   
9. Privacy and security training will be an annual requirement, says Peter Cizik, co-founder and CEO, BridgeFront. Healthcare organizations have gotten better at putting procedures in place, but staff are still not following them. Because the majority of breaches are caused by human error, not technology failures, targeted training and awareness programs are one of the most effective ways to prevent data breaches.
   
   
10. Rise in fraudsters will increase fraud risk education, according to Jonnie Massey, supervisor, Special Investigations Unit, Oregon Dental Service (ODS) Companies. Pressure, opportunity and rationalization: these three dangerous elements of the triangle can lead to committing a healthcare-related crime. During hard economic times, there are more fraudsters and more opportunities for them to gain or keep a healthcare benefit they are not entitled to. Educating those at risk for fraud and communicating consequences may deter someone from stepping over the line or help those at risk to prevent them from being a victim of healthcare fraud.
    
    
11. Healthcare organizations will turn to cyber liability insurance, according to Christine Marciano, president, Cyber Data Risk Managers LLC. As healthcare organizations continue to implement their EHR systems, they will consider options to protect themselves and their patients. When a healthcare organization or other HIPAA covered entity suffers a data breach the cost can be damaging not only to an entity's bottom line, but also to the reputation of its brand. With the increased vulnerabilities and as part of a data breach response plan, healthcare organizations will increasingly turn to a cyber security/data breach insurance policy

Employer Positions on Health Reform: Measuring a Moving Target

By Clive Riddle, December 8, 2011

A multitude of studies continue to measure and monitor employer reactions to health reform. The big question typically included in surveys has to do with the employers likelihood of continuing to provide group health coverage. Findings have not been altogether consistent, some studies like McKinsey’s estimate earlier estimated 30% of employers would drop coverage once Health Insurance Exchanges became available, while others estimate a far lower number.

Gfk Custom Research North America this week released findings from such a study (surveying 502 private sector companies) that seems to land in the middle ground, and thus might be a reasonable assessment of employer’s current state of mind. Here’s what Gfk found overall:

• 56% of employers surveyed are likely to continue to offer employer-sponsored health insurance after health care reform is fully enacted
• 12% of benefits decision-makers say they would be very or somewhat likely to drop coverage
• 32% are unsure what they will do

But the important thing to emphasize when bandying about such numbers is the size of the employers surveyed. Gfk notes that “only four percent of decision-makers surveyed from those companies with 500 or more employees considering terminating coverage completely. In addition, decision-makers who say they are familiar with health care reform are less likely to foresee their dropping coverage (7 percent, versus 15 percent among those not familiar).”

In fact, given that HIXs (Health Insurance Exchanges) are being designed to target small businesses in addition to individuals, it is not a bad thing – and one should expect – that employers in that sector would be considering dropping their own group coverage in favor of the exchanges.

The survey also found that employers don’t believe reform will save anyone money:

• 11% believe costs of health benefits will increase more slowly than if no reform had passed
• 51% think costs will increase more rapidly because of reform.
• 38% are not sure about the effect of health reform on future costs.

Ten Trends to Tend to in Two Thousand Twelve

By Clive Riddle, December 1, 2011

Alliteration abounds inside the MCOLBlog crystal ball. What trends and issues will significantly shape the business of health care in 2012? The MCOLBlog crystal ball knows all, sees all, and now tells all:

1. Supreme Court Affordable Care Act decision and presidential election will either cause chaos, or be impetus to for those waiting on sidelines to get moving
   
   If the Supreme Court knocks down just the Insurance mandate, a mess will ensue. If the Supreme Court knocks down the entire Affordable Care Act, supreme chaos will ensue. How to handle all the midstream programs and initiatives, how to undo some things that perhaps can’t be undone? Confusion will reign for awhile in this event, as detailed guidance won’t be handed down the same day as the court’s decision. To whatever degree stakeholders perceive the outcome of the presidential election will change - or keep - the administration, Affordable Care Act implementation activities could grind to a halt or hasten the pace. Should the Supreme Court validate the Affordable Care Act, and should the current administration be re-elected, the stakeholders who have chosen to sit on the sidelines will be pushed to get more than their toe in the water of the deep end of the pool.


2. Attempts to dodge the bullets of Automatic Medicare Payment Cuts will consume Providers lobbying resources
   
   So the SuperCommittee failed. HFMA cites that as result, and barring a subsequent agreement,  “Medicare provider payments would be reduced by up to 2 percent, while Medicaid would be spared. Hospitals would likely see an estimated $63 billion in Medicare cuts through 2021, while physician reimbursements would be reduced by $25 billion, according to forecasts by the Centers for Medicare & Medicaid Services.” Conventional wisdom is that some agreement will be reached in 2012 to avert a Medicare provider disaster, but this will be at the expense of consuming the waking hours and legal & regulatory budgets of hospital, physician and related providers and their industry associations.


3. Significant resources will be allocated towards the holy grail of reducing preventable hospital readmissions
   
   Purchasers, whether they be Medicare, Medicaid or Commercial, are driving the readmissions train through hospitals in the form of value based payment arrangements, compliance requirements, and other structures. Hospitals are generally onboard, but the question remains where the train is headed. Can- and will - true improvements in quality and utilization be achieved; and how will this be accomplished? A lot of money and resources will be spent by hospitals, medical groups, vendors and purchasers in this pursuit. The jury is still out on the ROI – MCOL’s own October 2011 stakeholder e-poll asked “do you feel the current level of national attention and initiatives regarding hospital readmissions will ultimately result in significant reductions in avoidable readmissions?” 40% answered yes, 49% maybe and 11% no. The same e-poll indicated “Identification and Case Management of High At-Risk Patients” as the top choice as the single most important factor in reducing overall hospital readmission rates. The problem for 2012 is in identifying the high risk patients. A recent JAMA article by Devan Kansagara MD et.al. concluded that “most current readmission risk prediction models that were designed for either comparative or clinical purposes perform poorly.”


4. Hospital Systems will ramp up physician integration initiatives
   
   Many hospital systems are already at various points down this path. 2012 will see them taking steps forward, not backward, and increased traffic from new travelers. Nearly three-fourths of physicians surveyed by PwC “are already in financial relationships with hospitals, and more than half said they want to move closer financially.”


5. The shift to Value Based Provider Payments will be in full swing
   
   It isn’t just about ACO payment arrangements. Value based provider payments are to officially be named the flavor of the year at all employer, health plan, government and provider network restaurants in 2012.


6. ACO progress will occur in Commercial  health plan initiatives
   
   ACO development slowed in 2011 until the Medicare Shared Savings Program Final Rule was issued, and offered somewhat more favorable conditions for at least some stakeholders, and now the brakes have been lifted from a number of provider Medicare ACO initiatives. But the timetable for these programs is longer, and the real hub of ACO activity in 2012 is in commercial health plan partnerships, which continue to spring up. An increased number of commercial ventures will appear in 2012, and results (good and bad) from early adopters will become more apparent.


7. Accelerated demise of the small physician practice
   
   The list of woes for a small physician practice is long, growing, and facing a number of impending deadlines and other “shoes” to drop. Pick your poison: Meaningful Use compliance; ICD-10 conversion;  increased overhead costs in an economic downturn; the specter of Medicare and other program payment cuts (see above); increased difficulties in recruiting junior partners to a small practice; increased patient expectations for ehr, patient portal and other technological capabilities; increased purchaser compliance requirements; value based provider payment arrangements that require greater infrastructure to succeed; and purchaser initiatives and market forces to drive patient populations into more integrated networks.


8. “Retailization” of health care will advance more than ever
   
   There are so many marketplace, health reform and other forces converging to fuel the” retailization” of  health care beyond its current orbit. Medicare, and increasingly – Medicaid, offer selection choices at the individual level. Public and numerous private health insurance exchange initiatives are in full swing (with private initiatives immune from any Supreme Court or election-day mood swings) that offer significant potential to drive a material portion of commercial health plan offerings into a full retail venue. Consumer driven plans still continue to grow, which nudge the health care consumer into more of a retail mode. Generic drugs (see below) are now often priced below health plan copayment levels, meaning consumer can shop on a retail basis for applicable generics regardless of health insurance restrictions. Employer and health plan continue to expand initiatives to further empower consumers, such as with wellness initiatives, or to offer new direct access choices such as on-site clinics. Furthermore, technology enhancements and expansion, via web portals, mobile pda apps, consumer ehr interfaces, and much more, continue to facilitate this retail environment.


9. Implications of Consumers’ further embrace of generics will be far reaching
   
   What was innovative several years ago when Walmart introduced national flat copayment-0like retail pricing for their generics, is now mainstream with major pharmacies. Generics accounted for 78 percent of retail prescriptions in 2010, up from 63 percent in 2006. Health plan and employer initiatives to drive consumers further towards generics were taken up a number of notches by these pharmacies’ retail pricing programs. Beyond increased use of generics, there are a number of implications for 2012 and beyond. Pharmacies will continue to enhance and shift  their retail marketing efforts and channels for these package priced generics. Consumers are now increasingly purchasing their generic drugs outside of their health insurance because the price is below the cost sharing requirement (see above). This could ultimately drive even more health plan prescription benefit designs into deductibles (to pull these outside prescriptions back into the fold – as the consumer would need to meet the deductible requirement.) In the short term, the situation will cause an increasing vexing problem for providers and health plans trying to maintain a complete ehr for a patient, and prevent data loss for analytics staff trying to manage these patient populations



10. Health Plan M&A Activities will continue to concentrate in government sector
    
    Many health plans are strategically trying to increase their member mix with program patients (vs commercial.) 2011 witnessed a number of such national health plan acquisitions of companies serving these populations: Cigna acquiring Healthspring; AmeriGroup acquiring Health Plus (Medicaid); WellPoint acquiring CareMore; and UnitedHealthGroup acquiring XLHealth.  2012 should witness additional acquisitions, including more Medicaid in addition to Medicare. As Medicaid has a large presence of non-profit and publicly owned plans, such ventures may also be in the form of management contracts and other structures.

Health Net Said: ACEP Said – A Dustup Over Emergency Room Use

By Clive Riddle, September 9, 2011

Yesterday Health Net released what they thought was a benign media statement on Emergency Room use, entitled “Know When the ER is the Right Choice for Care.” The health plan opened by stating “with flu season waiting in the wings, emergency rooms nationwide will likely soon be crowded with those who’ve been bit by the annual bug and who are mistakenly seeking treatment in the ER instead of in their primary care physician’s office or in an urgent care setting. In advance of these yearly throngs, Health Net, Inc. (NYSE:HNT) is working to increase awareness regarding when it’s appropriate to visit an emergency room.”

Jonathan Scheff, MD, Health Net’s Chief Medical Officer tells us “while emergency rooms play a vital role in our communities by providing lifesaving services, many ER visits are unnecessary” and goes on to say   “because the most serious cases are treated first in emergency rooms, those with non-emergency needs can expect extended waits.”

This wouldn’t seem like controversial stuff to most, but Health Net then goes on to state “the American College of Emergency Physicians (ACEP) points out that it’s in everyone’s best interest to reserve emergency rooms for those who are seriously ill or injured” and cites the ACEP’s list of warning signs for adults and for children a medical emergency that should demand immediate attention.

And it would seem Health Net might not have consulted and collaborated with the ACEP on their release.

ACEP fired back a media release the same day:  “ACEP Takes Issue with Statements Made Today by Insurance Giant Health Net, Inc. Regarding Emergency Visits.”  Dr. Sandra Schneider, President of ACEP tells us “the nation’s emergency physicians take issue with the efforts of health insurance companies to prevent emergency visits. It may save some money for them, but it’s bad for patient health and potentially life threatening. It also violates the spirit of the prudent lawperson law, which requires insurance plans to pay for emergency care based on whether an average person would believe they have the symptoms of a medical emergency.  In addition, emergency care represents less than 2 percent of the nation’s health care dollar, so preventing emergency visits will never put a significant dent in the nation’s soaring health care costs.”

The two organizations have different takes on using National Center for Health Statistics data. Health Net states  “according to the National Center for Health Statistics, of the more than 300,000 Americans who are treated in our nation’s ERs each day, the majority don’t require emergency care.”  ACEP cites “less than 8 percent of emergency visits are classified as nonurgent by the National Center for Health Statistics, which also says “nonurgent” does not mean unnecessary. Nonurgent visits can include broken bones and kidney infections that require treatment within two to 24 hours.”

Doctor Schneider closes with “these health plan tactics are dangerous because it puts people in situations of having to self-diagnose their medical conditions — out of fear the plans won’t pay, for example, when their chest pain turns out to be heart burn. Health plans send messages to their beneficiaries not to make any “unnecessary” emergency visits. But it’s not that simple — I’ve seen people with mild symptoms turn out to have life-threatening emergencies. ….This is a very simple message we want to share with all Americans — if you think you’re having a medical emergency, go to an ER immediately. Leave the diagnosis to the experts: emergency physicians.’”

Health Net, in its defense, closes with the tip: “for more information about when emergency care is needed, as well as about injury prevention, visit http://www.emergencycareforyou.org .” This web site, by the way, is operated by the ACEP Foundation.

The Health Care Employment Situation

Clive Riddle, September 2, 2011

With Labor Day upon us, I decided to click on over to the Department of Labor and see what was going on. As luck would have it, the DOL agency, the Bureau of Labor Statistics, was issuing their monthly report: the Employment Situation, today, so I decided to check out The Situation myself.

Interestingly, health care was mentioned in the opening paragraph of the BLS Employment Situation news release: “Nonfarm payroll employment was unchanged (0) in August, and the unemployment rate held at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major industries changed little over the month. Health care continued to add jobs, and a decline in information employment reflected a strike. Government employment continued to trend down, despite the return of workers from a partial government shutdown in Minnesota.”

A couple of paragraphs down, I learned “Health care employment rose by 30,000 in August. Ambulatory health care services and hospitals added 18,000 and 8,000 jobs, respectively. Over the past 12 months, health care employment has grown by 306,000.”

So this month, while overall national employment was flat, health care added 30,000 jobs, and for the past year, health care has accounting for 24% of employment growth overall (1,259,000 jobs were added overall nationally during the past twelve months.)

Digging down into the detailed tables of the report, I compiled some numbers and learned that health care currently employs 14,127,500 and comprises 10.8% of total non-farm employment overall. Here’s how health care employment breaks down by their sub-categories:

• Offices of physicians: 19.6%
• Outpatient care centers: 5.1%
• Home health care services: 9.4%
• Hospitals: 39.4%
• Nursing and residential care facilities: 26.5%
• Offices of physicians: 19.6%Outpatient care centers: 5.1%Home health care services: 9.4%Hospitals: 39.4%Nursing and residential care facilities: 26.5%

These employment figures don’t account for health care’s overall employment impact, once you factor in vendors to the health care industry, health care insurance, medical schools, etc. For example, the report indicates Insurance Carriers employ 2,207,900 as of August, although health insurance is just a part of that.

Of course, while many of these health care employees will be working this weekend, here’s wishing a happy and safe labor day weekend for all.

Fewer Access Problems, More Uninsured

by Clive Riddle, August 26, 2011

That is the title to the opening section of a new study released from the Center for Studying Health System Change:  Mixed Signals: Trends in Americans' Access to Medical Care, 2007-2010, Tracking Report No. 25, August 2011 by Ellyn R. Boukus and Peter J. Cunningham.

In a statement, the Center commented on this paradox by noting “about 9 million fewer people had health insurance in 2010 compared with 2007, and logically such a large increase in the uninsured population would be accompanied by an increase in access problems. However, approximately 17 percent of the U.S. population in 2010—about one in six people—reported not getting or delaying needed medical in the previous 12 months, down from 20 percent—one in five—in 2007, the study found.”

So how can that be? The statement goes on to answer this question: “the decline in access problems was driven primarily by fewer problems for insured people, likely reflecting recession-related decreases in the demand for medical care and subsequent easing of health system capacity constraints.”

The study authors also say that access for the insured improved much more than for the uninsured.  Ellyn R. Boukus, M.A., health research analyst with the Center, and coauthor of the study tells us “while overall access problems declined, the access gap between insured and uninsured people widened in 2010, especially for lower-income people and those with health problems.”

Here’s some key findings from the study:

• The proportion of insured people reporting an unmet medical need declined from 6.2% to 4.5% between 2007 and 2010.
• 17.5% of the uninsured reported an unmet need in 2010 compared to 16.6% in 2007
• 75.2% of the 52 million people reporting access problems identified cost as an obstacle to needed care in 2010 compared with 69.0% percent in 2007.
• 95.3% of the uninsured cite cost as a barrier compared to 65.9% of the insured in 2010
• In 2010, 9.3% of people with incomes below 200 percent of poverty ($44,100 for a family of four) reported an unmet need compared to 3.0% for those with incomes at or above 400 percent of poverty
• This 2010 ratio of 3.1 (9.3%/3.0%) for low incomes peoples unmet needs/higher income unmet needs compares to a ration of 2.2 in 2007
• 16.9% of those in fair or poor health reported forgoing needed medical care in 2010 compared with 4.6% of those in good, very good or excellent health (16.9% vs. 4.6%)
• 30% of uninsured people in poor or fair health reported they went without needed care in 2010
• Among all people citing a health-system obstacle, the biggest declines were associated with the following reasons: inability to get an appointment soon enough (10.2 percentage point decrease); takes too long to get to the provider (6 percentage point decrease); inability to get to provider when the office was open (5.7 percentage point decrease); and inability to get through on the telephone (5.5 percentage point decrease)

Kaiser Permanente by the Numbers -2nd Qtr 2011

By Clive Riddle, August 19, 2011

Kaiser Permanente earlier this month released highlights from their quarterly financial operating results.  Not being a for-profit publicly held plan, Kaiser’s numbers don’t always get the same level of attention as their national counterparts. Here’s some selected figures worth reviewing. Please note as an integrated system, they are combined results for Kaiser Foundation Hospitals, the Health Plan, and various subsidiaries.

• Combined operating revenue was $11.9 billion for the second quarter 2011, compared to $11.0 billion in 2Q 2010. For the six months ending June 30, 2011, total operating revenue was $23.9 billion, compared to $22.0 billion for the six months in 2010.
• Operating income was $390 million in the second quarter of 2011, compared to $313 million in the same quarter last year.  Year-to-date (thru June) operating income was $1.0 billion, compared to $794 million for the same period in 2010.
• Net non-operating income was $273 million in the second quarter of 2011, compared to $91 million in the same quarter last year.  Net non-operating income was $564 million in the first six months of the year, compared to $316 million in the same period last year.
• Net income for the second quarter was $663 million versus net income of $404 million in the same period last year.  Year-to-date net income (thru June) was approximately $1.6 billion, compared to $1.1 billion for the same period in 2010.
• Capital spending in the second quarter of 2011 was $735 million, versus $576 million in the same quarter of last year. Capital spending for the first six months of 2011 was approximately $1.4 billion, compared to $1.0 billion in the same period last year.  Kaiser notes they have opened 13 new and replacement hospitals and 86 medical office buildings in California over the last five years.
• Kaiser Permanente membership increased 208,000 members during the first six months of 2011, now totaling more than 8.8 million overall.
• Currently, kp.org serves over 100 million visitors each year. Year-to-date in 2011, members have securely viewed 34.8 million laboratory results, exchanged 6.2 million emails with their Kaiser Permanente caregivers and refilled 4.6 million prescriptions online.

Not a bad showing. Operating revenue for the first half year is $1.9 billion more than the first half of 2010;  net income is $0.5 billion more over last year for the first six month, and membership went up, not down.

 Executive Vice President and Chief Financial Officer Kathy Lancaster shared in a statement that “our year-to-date operating margin of 4.3 percent was in line with our financial plan. Our operating results, coupled with a sound investment strategy, enable us to reinvest in health care facilities, technology and programs that are essential in continuing to meet the needs of our members, patients and the communities we serve.” 

Should you want to check out how the major publicly held health plans performed in the second quarter of 2011, listen to the MCOL Quarterly Reports Podcast (August 2011) featuring Doug Sherlock, of Sherlock Company.

Big Bump in Emergency Department Use of CT Scans

By Clive Riddle, August 11, 2011

Keith Kocher, M.D., M.P.H., a clinical lecturer in U-M Department of Emergency Medicine, was lead author for a 14 page paper just published in the August issue of Annals of Emergency Medicine:  “National Trends in Use of Computed Tomography in the Emergency Department” [doi:10.1016/j.annemergmed.2011.05.020]. They examined national data for CT Scan use in EDs from 1996 to 2007, using CDC’s National Hospital Ambulatory Medical Care Survey, that involved 1.29 billion weighted records of emergency visits , 97.1 million of which included patients who received a CT scan.

Kocher’s team found that the “rate of CT use grew 11 times faster than the rate of ED visits during the study period. The study also showed that the use of CT scans was less common early in the study period, but rose significantly over time. Just 3.2 percent of emergency patients received CT scans in 1996, while 13.9 percent of emergency patients seen in 2007 received them.”

Doctor Kocher tells us "this means that by 2007, 1 in 7 ED patients got a CT scan. It also means that about 25 percent of all the CT scans done in the United States are performed in the ED. There are risks to overuse of CT scans, because each scan involves radiation -- so if they’re done for marginal reasons you have to question why. For example, patients who complained of flank pain [pain in the side] had an almost 1 in 2 chance of getting a CT scan by the end of the study period. Usually most physicians are doing that to look for a kidney stone, but it’s not clear if it’s necessary to use a CT scan for that purpose. I think a lot of the increase is related to changes in how doctors practice medicine and the availability of CT scanners. They provide lots of information quickly and so doctors and patients see CTs as a means of arriving at diagnoses efficiently and conveniently. Couple that with the fact that CT scanners are commonly housed in or near the ED itself, and the barriers to getting the test done are lower than in the past."

On the other hand, they note that “patients who received a CT scan in the beginning of the study had a 25 percent chance of being admitted to the hospital directly from the ED, while by 2007, this rate had been cut in half…[and that] this difference suggests that CT use may also prevent ICU admissions, perhaps shifting these hospitalizations toward a non-ICU bed. In general, however, the effect of CT use in the ED and hospitalization or transfer appeared to diminish after 2003 when the adjusted rate flattened and stabilized between 10.8% and 12.8% despite a continuing increase in overall CT use.”

They also note that “for all of the 20 most common reasons patients came to the ER for treatment, the study found that CT use increased during the study period. However, CT use was particularly high for the following complaints” [% of visits with CT scans indicated] impairments of nerve, spinal cord or brain function (50.7%); flank pain (43.3%); convulsions (38.9%); vertigo, dizziness or light-headedness (36.3%); headache (32.5%); abdominal pain (31.7%); and general weakness (25.6%).

Milliman: More Room in the Medicaid Inn Needed in 2014

By Clive Riddle, July 29, 2011

Milliman’s Robert Damler and Paul Houchens have just released a white paper:  “Social Security and modified adjusted gross income: Estimated impact to Medicaid enrollment under the PPACA.”

Their abstract states “The Patient Protection and Affordable Care Act (PPACA) provides for an expansion of Medicaid eligibility for individuals who have an annual household income at or below 138% (including the 5% income exclusion) of the federal poverty level (FPL). Recent discussion has turned to individuals who may qualify for Medicaid even though their households have significant Social Security or Supplemental Security Income (SSI). Using the 2009 American Community Survey (ACS) data published by the U.S. Census Bureau, this paper explores the potential number of individuals receiving Social Security or SSI and other family members within the household who may have been excluded from the Medicaid population expansion analyses because of the differences between defining household income under the public surveys and the modified adjusted gross income (MAGI). The MAGI methodology will be used to determine eligibility for Medicaid and exchange subsidies under the PPACA.”

What this all means is Damler and Houchens have identified and quantified an additional source of potential Medicaid enrollment that had not figured into most Medicaid projections currently in use. They do caution that while their results are based on the 2009 American Community Survey, “results using other publicly available survey data or internal government resources may differ significantly.” Hence the different numbers currently in use.

But what if Damler and Houchens are right?  They conclude that “based on calculating household income with and without non-taxable Social Security and Supplemental Security Income included, we estimate from the ACS data that approximately 2.3 million additional individuals nationwide will be eligible for Medicaid beginning in 2014, because of the exclusion or partial exclusion of these income sources.”

However, Damler and Houchens note, these 2.3 million bodies didn’t just appear from nowhere.  They would have largely qualified for subsidies anyway under the state health insurance exchanges. The added cost implications are in who pays for them (state vs. federal-  and their Medicaid eligibility increases state costs according to the authors) as well as benefit design (Medicaid benefits are richer, thus the costs will be higher under the Medicaid program.)

The authors also point out that not all 2.3 million newly Medicaid eligible persons will “take up” Medicaid enrollment. They estimate 897,000 (as of 2009) currently have employer coverage and many will elect to remain under those plans. Another 86,000 have military coverage who may also retain current coverage. Less likely to stay put would be 329,000 paying for their own individual coverage or the 698,000 uninsured (these numbers add up to less than 2.3 million as they reflect the 2009 actual ACS data, before adjustment to 2014 numbers.)

Regardless,  states, HIX and Medicaid stakeholders should pay attention to the implications. The authors do provide state by state estimates in their analysis.

An Extreme Concentration of Expenditures

by Clive Riddle, June 30, 2011

NIHCM Foundation has released a new data brief: Understanding U.S. Health Care Spending – a fifteen page report based on analysis of data from the National Health Expenditure Accounts from CMS and the Medical Expenditure Panel Survey from AHRQ.

NICHM emphasizes that their “analyses document the extreme concentration of expenditures, with just 5 percent of the population responsible for almost half of all spending, and demonstrate the importance of rising spending for hospital and physician services as the primary drivers of expenditure growth.”

Here’s some selected data making these and other points, from their report:

• National Health Expenditures in 2009 annually averaged $8,086 and 17.6% of the GDP, compared to $4,599 and 13.8% ten years earlier in 1999.


• 84% of this spending covers personal health care services and products, including $2,471 annually for hospital care; $1,646 for physicians & clinical services;  $548 for dental & other professional services; $1,066 for home health and long term care; and $1,066 for prescription drugs and DME


• The remaining 16% ($1,289 annually) of national health spending is for public program administration, public health and investment.


• Analyzing portions of the population (civilian, non-institutionalized) and the percentage of health care expenditures they represent (using 2008 data): 15.6% of the population had no health care spending; 50% with the lowest spending accounted for only 3.1% of expenditures; while 63.6% of all spending was incurred by the top 10% of the population with the highest spending; 47.5% of spending by the top 5%; and 20.2% of spending by the top 1%.


• Put another way, the lowest 50% of the population for health care spending averaged $233 annually, while the top 50% average $7,317. The top 30% averaged $11,196; the top 10% averaged $23,992; the top 5% averaged $35,820; and the top 1% averaged $76,476


• Considering proportions of spending by age, those age 65 and up account for 3.6% of the population in the lowest 50% of spending; but 45.1% of the population in the top 5% of spending


• Regarding drivers of the change in healthcare spending from 2005 to 2009 (which totaled an average increase of $1,259 per capita during that time): hospitals accounted for 34% of the increase; physician & clinical services accounted for 18%;  home health and long term care accounted for 16%; prescription drugs and DME accounted for 14%; other spending accounted for 12%; and dental and other professional services accounted for 6%

The report concludes that “these systemic factors affect growth in both public and private health spending:”

• new medical technology


• growing rates of obesity


• fee-for-service payment incentives


• growing economic prosperity (remember the timeframe starts in 2005 and ends in 2009)


• expanding insurance coverage (Medicaid – not commercial)


• defensive medicine and more intensive use of diagnostic testing


• an aging population

Results from Health Plan Contracting e-Poll: Value Based Payment Models

By Clive Riddle, May 25, 2011

With respect to contracting opportunities, insiders say that value based and newer payment models continue to offer the most promise, analytics advances are this year’s darlings, and ACOs hold less hope.

Meanwhile, insiders think cost pressures from the economic downturn are even more of a challenge than last year, and they’re not quite as concerned about market consolidation as they were a year ago.

In conjunction with the 2011 Health Plan Contracting Web Summit, MCOL conducted an e-poll on contracting issues. Participants were asked “what are the greatest opportunities from a contracting perspective” and “what are the greatest challenges from a contracting perspective” in addition to if their organization is a provider, plan or other. These same questions were asked in conjunction with last year’s Health Plan Contracting Web Summit, allowing for comparison to last year’s results.

Here’s a summary of e-poll results for the past two years:

Greatest Opportunities	2011	2010
Emergence of value based and newer payment models	29.6%	26.7%
Advancements in analytics capabilities	19.4%	7.5%
Increased covered population due to health reform	13.9%	17.5%
Consumer engagement initiatives	12.0%	10.8%
Advancements in electronic health records and transactions	10.2%	16.7%
Formation of Accountable Care Organizations	7.4%	16.7%
Potential growth in patient centered medical homes	3.7%	3.3%
Other	3.7%	0.8%
Total	100.0%	100.0%

Greatest Challenges	2011	2010
Cost pressures due to economic downturn	33.3%	28.1%
Increased mix of government program vs. commercial covered populations	16.7%	14.9%
Issues related to new health reform provisions	15.7%	14.1%
Increased complexities of benefit design	11.1%	8.3%
Other	8.3%	4.1%
Continued market consolidation	7.4%	14.1%
Consumer engagement Initiatives	6.5%	9.9%
ICD-10 transition	0.9%	6.6%
Total	100.0%	100.0%

Here are the top two responses for 2011 broken down by type of organizational category:

Top Response
Provider	Emergence of value based & other applicable newer payment models (26.4%)
Purchaser	Emergence of value based & other applicable newer payment models (38.7%)
Vendor/Other	Emergence of value based & other applicable newer payment models (25%)

2nd Highest Response
Provider	Advancements in analytics capabilities (24.5%)
Purchaser	Increased covered population due to health reform (22.6%)
Vendor/Other	Tie: Analytics and ACOs (20.8%)

2011 Predictive Modeling Priorities

by Clive Riddle, May 12, 2011

The Predictive Modeling Web Summit and Predictive Modeling News jointly sponsored a survey of health plan and healthcare professionals conducted by MCOL on “Prioritizing Predictive Modeling Activities.” Participants typically have a more active interest in predictive modeling. This survey has been previously conducted since 2008, allowing the current results to be compared to previous responses.

Participants were asked to respond to two items:

1. Please categorize your organization.
2. Suppose you had to prioritize how an organization could spend its funds on predictive modeling initiatives involving health benefits, and you were given a list of 10 items to prioritize. How would you rank them? (1= highest priority / 10 = lowest priority; rank them 1 through 10).

The items to rank were as follows, with their abbreviated version, referred to subsequently, indicated in parentheses: 

• Identification of High-Risk Patients for Care Management (Identify)
• Plan Design Development (Design)
• Fraud Prevention (Fraud)
• Treatment Guideline Development (Guideline)
• Provider Profiling for Network Development (Profiling)
• Provider Payment Rate and Restructuring (Payment) *[worded differently in previous years]
• Premium Rate Development (Premium)
• Medicare / Medicaid Population Financial Modeling (Medicare)
• Target Marketing Based on Customer / Prospect Risk Scores (Marketing)
• Formulary Development (Formulary)

Here’s what the survey found:

• In 2011, 56.8% of respondents listed Indentify as their number one priority, compared to 51.5% in 2008
• For 2008 through 2011, while there was variation by respondent category for all other items, Identification of High-Risk Patients had the top average priority ranking, and was the mode for the number one priority with all three categories (payer, provider and vendor).
• The next-highest priority mode in 2011 was Treatment Guideline Development, but by category had a mode of 2 for providers & vendors and a mode of 6 for payers..
• Treatment Guidelines and Provider Profiling had significantly higher priority modes in 2011 than in the past while Target Marketing had a much lower priority mode in 2011 than in past years.

The average ranking by item for this year and in 2008 is as follows:

Item	2011	2008
Identify	2.30	2.54
Guideline	4.25	4.75
Design	4.63	4.25
Profiling	4.84	5.16
Payment*	4.86	5.41
Medicare	4.92	5.71
Marketing	5.26	5.84
Premium	5.87	5.59
Fraud	5.93	N/A
Formulary	6.07	6.35

n= 81 in 2011; 88 in 2008

Voluntary Benefits: Pet Health Insurance

By Clive Riddle, April 27, 2011

The lack of an Affordable Care Act for Pets hasn’t held back the pet health insurance industry. Voluntary benefits in general enjoy popularity with larger employers, who can offer a discounted perk without paying for it. While the recession bit into sales for pet plans and other voluntary benefits as discretionary income and the number of eligible employees took a dip, the outlook for pet health plans remains strong.

Veterinary Pet Insurance (VPI), the nation's oldest and largest provider of pet health insurance, just issued a statement that during 2010 “the company added nearly 400 large companies and associations to the list of more than 2,200 groups that offer pet insurance as a voluntary employee benefit. The addition of these group accounts made VPI Pet Insurance available at a discount to a record 13 million people for the year.”

Under the voluntary benefit agreements, employees receive a 5% discount on insurance premiums, and many may pay via a payroll deduction.

Deana Single, director of group accounts for VPI tells us "when it comes to health insurance benefits, many companies are having to deliver bad news. These costs are continually increasing for many companies and their employees. Fortunately, VPI Pet Insurance can be added to a company's benefits package at no cost to the business."

VPI listed national firms that added their voluntary benefit in 2010 included: Kohl's Corporation; Morgan Stanley; Hewlett-Packard Company; BMW North America, Inc.; McDonald's Corporation; The Boeing Company; Quiksilver, Inc.; and American Eagle Outfitters, Inc. VPI notes that “at the end of 2010, one out of every five Fortune 500 companies offered VPI Pet Insurance as a voluntary employee benefit.”

Laura Bennett’s Embrace Pet Insurance Blog on Pet Business Trends 2011 cites that national pet insurance “gross written premiums (GWP) reached $290 million in 2009 and are projected to reach $327 million (12% growth) at the end of 2010. The three largest pet insurance companies in the US, Veterinary Pet Insurance, Hartville Group, and Pet Health Inc, together representing 78% of the market, will show modest growth of 5.5% in 2010 compared to 16.5% in 2008. The remaining companies will report growth of 47% in 2010 compared to 82% in 2008.”

Laura predicts that “overall premium growth in 2011 will be pulled in two directions. Two factors will drag down GWP growth: the slower growth of the top three pet insurers as they work to offset a more mature book of business; as well as the inevitable decline in sales and renewals from 30% (and higher) premium increases that are being implemented by some of the younger, faster growing companies.”  Her overall assessment of the pet market? “Pet-related spending in 2011 will show an increase over 2010 levels but not at the robust rates we saw prior to the recession.”

Thus for voluntary pet insurance, and other voluntary benefits, the increased popularity from employers clears one hurdle, but the individual purchase hurdle still remains an obstacle that only an improved economy might fully remedy.