Verd-e-Blog

As a panelist at a forum yesterday entitled “The Health Care Rip-off: What Every Business Person Needs to Know”, I had the opportunity to speak with small business owners about some of the challenges they face trying to secure insurance for themselves and their employees. More than one member of the audience asked about the growing trend of cost-shifting, and whether or not we will see widespread adoption of HSA/CDHP/HDHP- type plans. All seemed to think that HSAs are not good for their businesses or their employees. Why? Because the out-of-pocket costs are beyond the ability of most people to pay, except for those in the higher income brackets.

Still, when I got back to my office I was surprised to find a story sitting in my inbox stating that Georgia’s governor signed a bill that will give high-deductible insurance plan companies million of dollars in tax breaks for selling these plans, which are tied to HSAs.

Many of the insurers offering these plans are large national corporations, several of which own and operate the banking fuctions associated with HSAs. But the logic in Georgia goes that this new move ‘will drive improvements in efficiency and quality by bringing market forces to health care’ and make patients better shoppers for care.

According to the WSJ Health Blog story, the Georgia bill ‘will exempt insurers from paying tax on premiums for high-deductible plans’. Let’s say that again - insurers will be EXEMPT from paying taxes on the revenue coming in from these plans. ‘That could mean $146 million in tax savings for insurers over five years’, according to figures from the Georgia Budget and Policy Institute. Why this tax break?

According to the politicians, it is being done to encourage more choice for consumers and to make quality, affordable health care available to all. How does giving already flush insurance companies tax breaks translate to cash-strapped families being able to afford care? I just don’t get it.

Let’s look at the reality. According to a Kaiser Health Tracking Poll, 28% of us are having difficulty paying for health care. Meanwhile, a 26,419-person survey sponsored by the AFL-CIO and Working America, released in April, reports that one in three skip medical care because of cost. That correlates pretty closely with the 28% having difficulty paying for it, don’t you think? Most of the respondents are insured and employed. Most are college graduates. More than half are union members. (You can read more about the results at www.healthcaresurvey.aflcio.org.) So how does adding a high deductible plan to the mix change any of that? Quite frankly, it doesn’t.

So let’s think this through - there are currently 6 million people enrolled in HSA-type plans. In addition to receiving the premium dollars, the insurers control many of these HSA accounts and so make plenty off of banking fees and the use of that money while it’s sitting in accounts. And now they don’t even have to pay taxes on the profits? It’s about time we told our poicy-makers that we simply will not allow insurers to continue to plunder the health care system at all cost for their profit.

Last week we released the first of our Verden Rankings, reporting on how well or poorly insurers are managing their networks from a provider point of view. The higher the score, the more likely it was that the insurer engaged in reimbursement-cutting and/or cost increases to providers. Humana obtained the highest score and so was rated as the worst network of those ranked in Q1.

It is not surprising, therefore, to read today that Humana posted higher profits of 12.5% for the first quarter, 2008. While MarketWatch reports that ‘Humana Inc. on Monday posted a rise in first-quarter profit and revenue — thanks in part to a lower-than-expected effective tax rate — and the health-care benefits firm lifted its annual forecast, helping to lift the company’s shares’, the report further states ‘Humana said its medical cost ratio for Medicare accounts climbed 0.7% to 90% during the quarter, but it was offset by a 2.6% drop in commercial accounts to 76.8%. That resulted in a slight dip in overall medical cost ratio to 86.7%’.

And there’s the kicker folks - Humana managed to hold on to 2.6% of commercial premium dollars rather than pay it out to providers for services rendered. How did they do it? Through all of the policy changes we neatly tracked through the Verden Alert system and converted to rankings at the end of the quarter. The correlation between our rankings and their financial performance is no coincidence.

Meanwhile Aetna, the lowest scoring and therefore best provider network, took a hit with its profits slipping for Q1. MarketWatch notes that even though membership numbers are up, ‘Aetna’s medical-cost ratio took a bite out of earnings, rising to 81.3% from last year’s level of 80.7%. Commercial cost ratios stayed relatively flat, inching up to 79.8% from last year’s 79.6%’ . Again, it’s no coincidence that the Verden rankings winner is the one that reported medical cost ratios increasing.

United Health’s networks - AmeriChoice, UnitedHealthcare and Oxford - ranked 3rd, 4th and 10th worst respectively. UHN, releasing its financials the day after our ranking report, reported that ‘for the first quarter, UnitedHealth’s commercial medical cost ratio also climbed to a rate of 81.5%, up from 81.2% in 2007′. That means the company paid out more of the premium dollars they brought in than they would have liked.  Chief Executive Stephen Hemsley stated ‘These financial results are not acceptable for a company with our capabilities and potential.’

So watch for things to change in these networks rapidly in Q2 and Q3. Network providers are likely to be hit hard in the coming months in order to compensate for it. Will UnitedHealthcare be the number 1 ranked worst network by end of Q2? We’ll have to wait and see . . .

Today we released the first of our quarterly reports. The goal of the Verden rankings system is to evaluate how well or poorly managed care companies (Payers) are performing from the perspective of physician practice management. The data used to rank these Payers comes directly from the companies themselves, as gathered by the Verden Alert subscription service. This service monitors insurer sites for any policy and procedure changes and alerts subscribers based on their participation and specialty whenever changes are posted.

Not all Payers are created equal and the cost of doing business with some will be much higher than others. Our purpose in analyzing this data was to take a look at which companies are relatively efficient at managing their networks, and which ones simply move administrative burden to the providers’ plate.

Our analysis is composed of five categories in which each insurance company was given a score. The more points accumulated, the worse the company fared. Data selected for measurement were those with an effective date occurring between 01/01/2008 and 03/31/2008 (Q1 2008).

1. Cost to Provider (CP)
Cost to Provider takes into account policy changes or initiatives affecting reimbursement, and those that added more or less administrative time or complexity to a process in order to adhere to changes. Examples include implementation or withdrawal of pre-authorization, precertification, notification, and referral processes; timelines or modified processes that require more or less resources in order to comply with changes; and claims, coding or data errors or improvements resulting in more or less efficiency. These points accounted for 50% of the aggregate score.

2. Volume of Change (VC)
Volume of Change takes into account the total amount of policy and procedure change across all categories - medical, administrative, pharmacy and reimbursement – experienced by an insurer’s network.

3. Clarity of Communication (CC)
This indicates how well or poorly insurers make information available on their web sites. These days, most insurers utilize their web sites as their primary communication tool for notifying network participants of changes to policies and procedures. The expectation is that providers will monitor these sites for updates in order to keep themselves informed as part of their contractual obligations with an insurer. Measures include whether insurers’ clearly identify a new or modified policy, its effective date, and what change occurred. The easier it is to find medical policies and updates on the site, the fewer points accumulated. Penalties go to insurers that keep their policies and network news behind a log in barrier.

4. Notification Period (NP)
NC measures the time that elapses between posting notification of a policy or procedure change and the date upon which the change became effective. We graded insurers on how much notice they gave providers of their intent to change a policy or procedure – the less time between posting and effective date, the higher the score. We believe that at least thirty days of notification is necessary for providers to respond and adapt to the change, and those insurers that post 30 days ahead of effective date accumulate no points.

5. Posting Integrity (PI)
PI measures policies posted on-line with a retro-active date, or policies altered without an update or revision date being added. Tracking insurers’ web sites every day allows us to see when notifications have been back-dated or altered. Because we view this practice as highly deceptive we allocated a separate metric to this issue and insurers observed retro-posting or altering information without notification are tagged with a penalty score.

Of the 160+ insurance companies the Verden Group tracks on a national basis, eighteen companies made the list for our first ranking. We based this decision on robustness of data gathered within the defined time period. Look for additional Payers in future quarterly listings.

Our Findings:
Aetna came out of ahead of its competitors by a large margin overall. It scored the best in the Clarity of Communication and Cost to Provider categories. Humana was found to be the costliest of the networks measured, while Anthem and UnitedHealthcare tied with the highest volume of change to manage. HealthNet is the worst for notifying its network of changes ahead of time, while Oxford scored the best in this category. UnitedHealthcare was the only Payer to receive penalty points this quarter for posting integrity occurrences.

Go here www.theverdengroup.com and click the green banner to access the full report.

In the last week, the Houston Chronicle and the Washington Post have both issued stories on the topic of concierge care from the perspective of patients and managed care companies. Meanwhile my esteemed colleague, Chip Hart, has been busy making the case by analyzing numbers specific to pediatrics.

By now, most of you know that primary care practices are the hardest hit in terms of reimbursement for services rendered and vaccines administrated. In order to alleviate the sheer volume of work faced by these practices in order to keep revenues up, some are beginning to offer their patients the option to pay a fee in order to receive less compressed care and better personal service. So what is all the fuss about?

In the case of insurers, some don’t want physicians to charge these fees to their members citing contract provisions excluding them from doing so, while others do not have a problem with it. However, many are concerned that about access to care issues, because by offering concierge care physicians naturally have to restrict the number of patients they are willing to see in order to make the time available to satisfy that offering.

Today we are beginning to see to the effects of lower reimbursement on the number of physicians entering primary care specialties, and realize that shortages are becoming a big problem. By setting up such offerings, this will restrict access to physicians even further, or so the argument goes.

But is that really the case? It might be, were it not for minute-clinics and other competitors moving in to the marketplace to help compensate for the volume spilling over from established practices. The reality is, many physician practices do not want to be clinics or mills. These doctors want to provide the best care they can, but current managed care policies do not allow for that.

So let the minute-clinics be the mills for strep tests and ear infections, if that’s what some consumers want. But let the physicians limit the number of patients that walk through their doors in order to regain some quality of care and put the sanity back into practicing medicine. In doing so, it might just help redress the imbalance that insurers have so successfully created.

For more information about concierge care, check out MDVIP.

Has the tipping point regarding profitability versus viability finally come? Fed up with escalating premiums, employer groups appear to be aggressively shopping around, and in many cases dropping coverage for their employees altogether.

Today the New York Times reported that shares of WellPoint plummeted more than 16 percent in after-hours trading Monday after the company lowered its profit forecast, citing higher medical costs and lower-than-expected insurance enrollments. Humana and Aetna shares dropped 10% and United dropped 9% following this outcome. 

With the shift by employer groups to self-funded plans (meaning insurers simply pass along the costs of employee health costs with an administrative fee to the employer) and with more individuals becoming responsible for finding and funding insurance coverage for themselves, enrollment is not what it used to be in the large insurer market.

According to Sheryl Skolnick, a health care analyst with CRT Capital in Stamford, Conn., and quoted in the NYT article, with regard to insurance premiums, “prices are higher than people feel they are able to afford,” especially for individuals who buy their own insurance because they do not have coverage from an employer.

So, have insurers premiums finally reached the tipping point where their prices are too high to be sustainable? I believe so. And until these companies start offering products such as catastrophic insurance (without requiring a separate managed care plan) and lower priced, appropriately managed, affordable plans I don’t think this will turn around any day soon.

The good news? Perhaps this will reduce the trend of physician reimbursement gouging that has been sustaining profits and begin to put the emphasis on insurers’ operational efficiency to drive excess dollars in the future. And no, that doesn’t mean insurers should further cut their customer service staff and cut back on the resources necessary to manage all of the myriad and convuluted processes that these companies have built up over time. Rather, a focus on lean and efficient simplified processing, less complexity in medical and administrative policy making, and more accountability that leads to partnering with the other stakeholders in health care might be the way forward for these behemoths.  Or, they can simply lumber along and wait for the market to finally, finally!, correct for the abuses of the past.

The Wall Street Journal reports “UnitedHealth reported a 3.5% rise in quarterly net income, as the health-insurance giant benefited from strong growth in its prescription-solutions unit”.

From what we have seen through our tracking of policies, ’prescription-solutions’ means drug pre-authorizations, tiering and other administrative hurdles that have been added to the cost of running practices. Physicians carry the administrative cost, UHC profits. Nice, right?

If you read the article, you’ll note that there is much talk about United’s improved service, yet the member numbers don’t hold up. Maybe you’ll be as confused as I am when you read Mr. Helmsley’s comment ”Our service levels have recovered strongly”, followed by ‘UnitedHealth continues to expect a 2%, or about 550,000-member, decline in commercial enrollment in the first quarter’ and ’the outlook for the decline in risk-based commercial members is now closer to 400,000 than to 350,000, Mr. Hemsley said.

Furthermore, the article goes on to state ’In the fourth quarter, UnitedHealth saw a 75,000-member decline sequentially in commercial risk-based membership and a 480,000-member decline year over year. Total commercial enrollment was flat sequentially at nearly 25.53 million and down 175,000 year over year, as fee-based commercial membership increased’.

Let’s see: decline in enrollement + increased profits = improved service. Yep, that makes perfect sense alright.  

I don’t see a quantification of HOW service levels have improved, other than discussion of PROFIT as an indicator. But as anyone who has studied statistics will know, correlation does not equal causation.

Looks to me like UHC are equating improved dollars to improved service, regardless of declining enrollment. How can that be? Wouldn’t it be the other way ’round, that improved service would mean an increase in enrollment? Perhaps service is the least of what is feeding the bottom line numbers. In addtion to the stated ‘prescription-solutions’, SEC filings suggest that acquisitions, policy change initiatives and lack of claims payments are all helping to boost the bottom line. That has nothing to do with improvements.

So what I want to know is, when is a journalist going ask “What have you actually done to improve SERVICE?”

Private health insurers have jumped on the band wagon when it comes to not paying for preventable injury or illness occuring through hospital errors. Medicare instituted non-payment of errors last October.

Aetna, Wellpoint, and some other large insurers are starting with a shorter list than Medicare’s so-called ‘never-event’ list. Primarily focused on the most egregious errors such as bed sores, falls and hospital infections, the list could expand quickly as these initiatives are implemented.

The idea is that insurers will no longer pay for mistakes, and hospitals cannot bill patients directly for the cost of care associated with fixing these problems, in an attempt to improve patient safety. But is that going to be the outcome? What about the patient who, say, has a sponge left inside after an operation? Will a procedure be performed gratis to remove it, or will it simply be left there instead?

If insurers are truly seeking to improve safety and lower the overall costs of care, it strikes me that responding punitively is not the right answer. Rather, why not help support safety by paying for screenings that help identify MRSA in patients coming in to the hospital, and reward those hospitals that have significantly fewer errors over time.

Indeed, every effort should be made to prevent errors in the first place, so shouldn’t the focus be on paying for preventive measures rather than on not paying for fixes when they occur?

Otherwise, this will just become another reason for insurers to not pay for needed care which will cycle through the system adding more expense elswhere. Meanwhile patient welfare may be compromised when things go wrong, which can only exacerbate the problem going forward.

I am beginning to think change might be afoot in the ivory towers of insurers.

With Aetna’s chief running around talking about reform, and United Healthcare committing to improve service, it would seem so. Now Carefirst, one of the few remaining not-for-profit Blues plans, has a new CEO with some strange ideas.

Strange for a CEO of an insurance company that is. Chester ‘Chet’ Burrell took the reigns December 1 and since then has been meeting with the likes of hospital executives and others that formerly have had ‘contentious relations’ with Carefirst in the past. Why? To reassert its role as a ‘policy entity with nonprofit values’. Can such a thing still exist? If we are to believe Mr. Burrell, then apparently it does.

“Yes, it’s an insurance company, but it has a community mission,” Burrell said in a recent interview. “We want to be catalytic for productive changes in the health system.” While much of what he is proposing is modest, such as increasing electronic claim submission adoption to lower costs, some of his other ideas are quite radical including potentially offering grants to help physicians adopt EMRs more affordably.

Burrell also said he is looking to hospitals and affiliated networks of doctors to coordinate care, especially for the most expensive patients, who often have multiple chronic conditions and visit a variety of specialists.

Could it be that physicians will once again be allowed to practice medicine instead of pulling double-duty as clinicians and administrative gate-keepers?

I’ll be keeping my eye on Chet, and all the rest of them.
 

The penalty for not buying health insurance in Massachusetts could soon quadruple to $912 a year, the Boston Globe reports.The state is considering increasing the maximum penalty for not buying insurance to persuade those who can afford it, but still haven’t bought coverage, to comply. 

What I can’t figure out is what they will do with the fine money. Why not use it to purchase health insurance? If you can force a person to pay a fine, why not convert it to pay the premium and solve the problem going forward?

I am so sad to write that Benazir Bhutto has been killed. It is not just Pakistan’s loss - and for all that means, it is tremendous - but also the world’s loss. A courageous, outspoken, fearless yet reasonable, diplomatic and engaged human being was just wiped from the map.

Do I agree with her politics? I don’t know, it isn’t my country, so what can I say about politics local there? But, I can identify with the rhetoric, the passion, and the bravery that necessitated her extraordinary return to Pakistan, and her desire to press for January 8th elections at all costs.

For my colleagues and friends that live in Lahore, I wish for peaceful streets and no violence in that (or any Pakistani) city.

Meanwhile, I’ll be hoping for peace and democracy to prevail over terror - not in a platitudinal way; my people are from Belfast; but in a way that all sides can come to value the merit of diplomacy and dialogue, as such recent foes as McGuinness and Paisley can do now.

RIP, Benazir Bhutto. Many may think this isn’t the right forum, but to me, if you don’t stand for something, you stand for nothing. And nothing means you have no standing. . .