Humana gets political

Federal lawmakers recently urged CMS to investigate a letter sent by Humana Inc. to its Medicare Advantage members. Humana’s undated letter states: “Leading health reform proposals being considered in Washington, D.C., this summer include billions in Medicare Advantage funding cuts, as well as spending reductions to original Medicare and Medicaid. While these programs need to be made more efficient, if the proposed funding cut levels become law, millions of seniors and disabled individuals could lose many of the important benefits and services that make Medicare Advantage health plans so valuable.” The one-page letter is signed by Humana Medicare’s chief medical officer, Philip Painter, M.D.

Scare tactics? I’ll say!

CMS has demanded the company “immediately” stop member mailings warning that reform legislation could hurt them, and to remove any related materials from its Web site.

But CMS did not stop at Humana. It has issued the warning to cover the entire MA industry effective Sept. 21. The agency issued new guidance to MA and Part D plans to “suspend potentially misleading mailings to beneficiaries about health care and insurance reform.” AHIP has responded that seniors “have a right to know how the current reform proposals will affect the coverage they currently like and rely on.” It’s just a pity Humana decided to frame the communication to scare seniors rather than enlighten them.

But the real kicker is that Humana’s letter urged its enrollees to contact their members of Congress to protest healthcare reform. Isn’t it bad enough insurers are spending roughly $1.4 million a day on lobbying efforts in Washington to kill reform without also lobbying its members directly using shoddy ‘facts’? Where do we draw the line and say enough is enough? The numbers don’t lie. Let’s stick with the facts. Insurers are making huge profits at a time when many Americans cannot afford the product they sell. In not other industry would such mis-economics continue to survive, let alone thrive.

Luckily, CMS marketing rules require that member communications to meet certain requirements and the use and disclosure of protected health information to contact members to get them to lobby for or against certain reform legislation appears to be something that HIPAA rules do not allow. At the least, Humana will be facing fines and perhaps suspension from MA activities for a while.

However, that does not compensate for the misinformation. Unless Humana is required to send a notification to those same members informing them of its wrong-doing, it has accomplished its goal and moved real reform further out of reach.  How big a blow has a simple letter like this dealt to progression? As of the end of the second quarter, Humana had 1.5 million MA enrollees, all of whom may have recieved this letter. . .

The Cost of Healthcare, Quantified (Maybe)

The other day I read a RWJF report entitled “High and rising health care costs: Demystifying U.S. health care spending” over at http://www.healthpopuli.com/ after a fellow listserve member directed our attention to it. The report basically points out that rising malpractice rates aren’t one of the primary reasons for the increase in healthcare costs in the US, a seemingly popular belief. Instead it’s “…prices, inefficiency, and insurance administration.”  Finally we are getting somewhere close to pinpoining the real drivers, I thought. Then I read the report.

There is very good analysis in here, but it is disappointing to note that while they were identified, administrative costs were not more intensively examined. The authors do state that much of the differences we see between the US and OECD countries comes down to the lack of a universal delivery system, creating a costly fragmented system here. But the level of detail in the analysis seems to stop there.

For example, when comparing physician compensation, the findings state that in the US it is 6.6 times per capita GDP for specialists and 4.2 times for primary care, compared to 4 and 3.2, respectively. However, the authors don’t take that next step to note that in countries where there is universal care, physicians are (for the most part) salaried employees in some form or another. By contrast, the majority of physicians in the US own their own medical businesses, meaning that they are bearing the overhead and expense incurred in doing so. An analysis that factors that in would be more helpful than simply pointing at hard numbers. Without backing out those costs, we cannot know if physician compensation (I am defining compensation as the amount that physicians get to keep) is actually much higher than in OECD countries. Perhaps the authors are looking only at take-home pay, but that isn’t indicated [that said, I just looked up the McKinsey report upon which this is based, and McKinsey IS looking at TOTAL compensation, NOT take home pay - so I rest my case on that point]

The paper goes on to note that ‘MGI (McKinsey) estimated that the United States spends six times more for administration than OECD countries, not including the costs borne by providers in interacting with payers’. Why aren’t those costs included? If they were , the numbers would be much higher and help reveal that the cost of supporting the current private payer system is exorbitant. The authors get close to this idea in Table 1, Drivers of Cost Trend, where ‘changes in third party payment’ and ‘administrative costs’ are identified – when combined these two items account for 23%-26%, and that is without taking in to consideration ‘the costs borne by providers in interacting with payers’. What would the number be if those costs were included? In a study released by Ingenix recently, they state that ‘claims processing inefficiencies impose significant administrative costs on payers and providers, with estimates ranging from $210 billion to $250 billion annually’. Let’s say that again – $210-$250 BILLION, ANNUALLY! They further estimate that 14% of physician revenue is spent on claims activity; 12-24% of health plan revenue is spent on same. So why are the authors NOT including ‘the costs borne by providers in interacting with payers’ in either physician compensation or administrative spending?

Things get really fuzzy when the authors adopt the position of only looking at cost drivers from the perspective of analyzing what actually drives changes in the spending trend. In doing so, they arrive at conclusions such as ’standard assumptions about how a change in health insurance affects an individual’s spending on health care lead to a conclusion that health insurance is not a dominant driver of spending trends’. However counter-intuitive this might seem then, utilization is not a key cost driver; as this study examines, it is the cost per unit of utilization that best represents overall costs, and that per unit cost is composed of the key drivers identified in this study. But once the authors have made that claim, it shifts their commentary from being about end costs of delivery (the numbers initially referenced in the study) to shifting to utilization when it comes to discussing insurance. Therefore they fail to examine the end cost of securing that insurance, which ultimately is THE cost that needs to be examined because that cost includes the profit margins made by insurers, and the associated administrative costs to secure those profits in the process.

It would appear that by missing this point, the conclusions arrived at based on the numbers used are therefore somewhat skewed. That is, the authors are looking at such universal numbers as physician compensation as a percentage of GDP but without applying the cost associated in being a physician in the US system (a very different cost structure than in OECD countries); they are not looking at the cost of premiums as compared to what percentage of those premiums are actually SPENT on care delivery; and they are not examining the cost associated the fragmentation involved in the different middlemen associated with payment delivery. Notably, the section on managed care begins by stating ‘because of data limitations, most of the literature defined managed care as health maintenance organizations (HMOs), entities that play a much smaller role in health care financing today’ – so there is the realization that even the quantification of these entities is difficult,
and due to the identification and research on only perhaps one type of insurer it raises methodological concerns about the research itself. Perhaps because of the lack of comprehensive data on private insurance, the authors choose to make the following closing argument for improving efficiency – ‘payment mechanisms potentially more consistent with efficiency include a single per episode payment that goes to all providers involved in a major acute procedure and capitation payments to a medical practice for the management of patients’ chronic diseases’ – with no consideration about HOW such a single payment would be administered across multiple providers of care. To me, this simply sounds like another level of payment administration being added to the fragmented mix, and a costly one for providers at that.

Finally, at the end of the paper the authors address administrative costs. And yet, they do not scratch the surface here other than to simply note ‘a multipayer system can be made more efficient’ and suggest that more ‘administrative controls’ such as prior authorizations are being ‘re-introduced’ as a way to help with restraining spending. This leads me to believe that the authors have limited experience in the processes involved in administration and revenue cycle management. The opportunity to improve efficiencies in payer-provider interactions there is considerable; adding prior authorizations to procedures drives up physician costs, rather than simply limiting utilization is a way that is significant enough to minimize utilization. The argument cannot continue to be that insurers administrative burdens are a necessary cost in order to keep utilization down. Certainly these administrative burden HAVE resulted in less SPENDING by the insurers, but how much is based on decreasing utilization and how much is due to lack of payment by insurers for services rendered in the event that the rules are not adhered to is open to debate. Therefore, this does not translate to supporting administrative burden as a necessary cost.

To conclude, the authors state under ‘the need for additional information’ that their ‘understanding of high and rising costs is fairly solid. . . yet go on to say ‘paying multiple providers for acute episodes of care requires advances in patient classification and risk adjustment. Paying for medical homes similarly needs better risk-adjustment models and the gathering of data on resources that go into care coordination. To put it differently, existing research has given us a satisfactory understanding of the problem. Now the energies of researchers should be directed toward developing and implementing solutions’. I’m all for directing energies toward implementing solutions. However, I challenge that while the authors may have a reasonable understanding regarding spending, they have not adequately understood the single biggest COST driver of all: health care insurance companies. Until researchers adequately explore just how much cost is involved in allowing these organizations (that have an inherent conflict-of-interest) to set policies on payment, utilization, and provider cost burdens, we cannot move toward meaningful reform in that area. I back up this comment by pointing out that most insurers do not pay for nutritional counseling at the primary care level, do not pay for smoking cessation counseling, do not pay for pediatric counseling and developmental screenings – all of the things that may help to reduce illness in society (and therefore reduce costs). So how can the other lofty goals of improving health and wellness, focusing in on best practices, development of better guidelines, etc and so on, be implemented in a system where insurers have effectively killed primary care and preventive medicine?

I therefore call on the authors to re-examine their ‘fairly solid’ ‘understanding’ of high and rising costs. They, and other researchers, must take a much closer look at how insurers’ policy decisions have impacted the ability of providers of care to actually provide the lowest-cost, best-outcome focused care. With that level of scrutiny, comprehension about the impact of those policies can finally be assessed and the impact of private insurers on COST can accurately be quantified and thus called upon to improve.

Quantifying Savings Won’t Be Enough for Insurers

Rhonda Rundle over at the Wall Street Journal today reported on an interesting study conducted to determine the cost-effectiveness of obesity surgery. I can’t imagine it’s been the only one of its kind, but this one seems promising because the findings, published in the September issue of the American Journal of Managed Care, states that the cost is offset within two to four years due to medical cost savings on co-morbities such as diabetes, high blood pressure and sleep apnea.

However, the study is coming under fire because it was sponsored by Johnson & Johnson’s Ethicon Endo-Surgery unit, a maker of surgical devices and instruments used in weight-loss surgery, throwing the authors’ integrity in to question. Well, the money has to come from somewhere. That said, it might have been a good idea for the journalist to perhaps mention some other studies that support the general premise of the findings, such as ‘Effects of Bariatric Surgery on Mortality in Swedish Obese Subjects‘ published in the NEJM, that concluded that ‘bariatric surgery for severe obesity is associated with long-term weight loss and decreased overall mortality’.

The America’s Health Insurance Plans spokeswoman responded to the results of the study with the slightly bizarre comment “I don’t know if these results would be replicated in other populations.” While the population is not clearly identified, the authors used health insurance claims data for more than 3600 patients who underwent a bariatric procedure and for a matched control group to estimate the length of time required before the procedure breaks even (return on investment period) from the insurer’s perspective. The authors find that procedure-related costs are fully recovered after 53 months. For laparoscopic procedures, the estimated return on investment is reduced to 25 months.

The WSJ story postures that this may increase pressure on health insurance companies to cover gastric bypass surgery. Most insurers specifically exclude weight-loss surgery from their coverage, regardless of proven medical efficacy. Oddly, insurers will cover treatment for diabetes, sleep apnea and so on, but evidently, the short-term cost in doing so outweighs the higher price tag associated in the short run with covering surgery that might relieve the patient of these co-morbidities.

Which leads me to my point. Health plan members routinely switch insurers every couple of years. It does not pay – from the insurers perspective - to front the high cost of surgery, when the logic goes that as the member gets sicker, they are likely to be another insurer’s expense down the line. Or not, depending on whether that person can continue to secure health insurance in the future.

So the caution here is that in quantifying break even periods for life-saving procedures, it sends a message that coverage decisions should be predicated upon achieving returns on investment in the short run, for the insurer who is ‘paying’ for it. Should we really be asking that question? How about asking where is the return on society’s investment? What is the ROI to the employer groups paying huge premiums to insurance companies if only the short term profit motive is taken in to account?

Consider this – over the last 10 years, the property / casualty and life / health insurance industries have each enjoyed annual profits exceeding $30 billion. The insurance industry takes in over $1 trillion in premiums every year. It has $3.8 trillion in assets, more than the GDPs of all but two countries in the world. The CEOs of the top 10 life / health insurance earned an average of $9.1 million.

So I have a postulation of my own – employers should start quantifying insurers on the long-term return for their investments. Short term profit gain for insurers usually comes at the expense of long term gain for everyone else.

It’s Going To Be A Bumpy Ride

In the face of membership declining by an estimated 800,000 for 2008, the Dow Jones Newswires reported Tuesday that United Healthcare is cutting operating costs, capital spending and headcount to focus on a more regional structure.  The headcount cuts are expected to be as high as 4,000. These cuts are due to be largely focused on IT and clinical operations. But wait – isn’t that where UHC’s core competencies lie, in IT and clinical operations? It certainly doesn’t lie with customer service and innovative provider partnerships.

For physicians, this could be good news, but only if it leads to more efficient processes as well. Less resources to manage high cost administrative tasks like referrals and preauthorizations could mean that United will soon modify those practices, thus alleviating some administrative burden (and cost) from providers. However, if its management history is anything to go by, that’s not likely to happen soon. This is further supported by decisions being made today – cut staff and you lose talent, at precisely a time when UHC needs to compete on service and market presence. It would appear that Wall St comes before all else, and this kind of blinkered thinking may very well be how UHC got to this point in the first place.

While the article goes on to report that the CEO, Stephen Hemsley,  says ‘increased benefit buydowns and continued trends of customers migrating to lower-priced plans’ is to blame for the lack of members, he says nothing about its own role in creating an environment where declining membership HAS to be the natural outcome – pricing products beyond the reach of many means fewer people can afford them. Price hikes can only go so high before people begin to forego the product.  Conversely, with fewer members, there are less premium dollars to go ’round, which in turn is bound to affect its Medical Cost Ratios. Unfortunately, this will simply look like medical costs trending ever higher, which isn’t necessarily the case, further bolstering increases to premiums. Except it would appear that the market has finally reached its limit on price. Amen.

Therefore, despite Wellpoint CEO Angela Braly’s assertions that they ‘will not sacrifice profitability for membership’ it looks like United is on the brink of having to do exactly that. I, for one, am looking forward to seeing premium prices come down. 

But the bigger question remains, will United be smart enough to stop dancing to the tune of Wall St and really hunker down and do the work it should have been doing all along, namely, managing the numbers by being an innovative, efficient company rather than just being a profiteer at the expense of employers and providers.  Slashing talent won’t make them a better company, it will only help them meet the next round of numbers. And so the cycle continues . . .

Once the lift from United’s slash-and-burn deflates, you can be sure it will turn to physician reimbursement next unless it figures out in the meantime that the way to ensure sustained profitability – albeit lower than its record-breaking history – is to partner with its stakeholders and get the unnecessary (administrative) costs out of the equation first.

The first glimmer of hope that UHC may be coming to its senses and looking at managing the company rather than the numbers is the fact that its new strategy is focused on ’balancing the company more in favor of a regional business model’. After years of heavy-handed tactics with newly acquired regional companies to comply with UHC’s one-size-fits-all national uber-structure, this is a big departure from business-as-usual.

Regardless of how it all turns out, hold on to your hats. It’s going to be a bumpy ride.

The Under-insured Issue

Some tout Consumer-Direct Health Plans (CDHPs) as a reasonable way to keep costs down for employers and give consumers some ’skin-in-the-game’ in terms of how health care dollars are spent. Evidence suggests that the only portion of the population that truly benefits from these high-deductible, health savings hybrids are those professionals in the $100K and above income bracket. Those that find it hard to make ends meet in the first place have a hard time coming up with the cash to meet deductible amounts too. And when faced with a choice, healthcare is often postponed due to watching the pennies.

Now data is emerging that helps give a clue to where we are headed with all this CDHP stuff – under-insurance.  The Commonwealth Fund released a report this month that indicates the rate of underinsured in the insured population.  According to findings, in which the writers interviewed adults ages 19 and older from June through October 2007:

- Respondents were identified as underinsured if they spent 10 percent or more of their income (or 5 percent if they were low-income) on out-of-pocket medical expenses, or if they had deductibles that equaled 5 percent or more of their income.
- An estimated 14 percent of all non-elderly adults were underinsured in 2007, and more than one of four were uninsured for all or part of the year. Adding these two groups together, 75 million adults—42 percent of the under-65 population—had either no insurance or inadequate insurance in 2007, up from 35 percent in 2003.
-Those with annual incomes of $40,000 to $59,000, the underinsured percentage rate reached double digits in 2007. Barely half of those with incomes of 200 percent to 299 percent of the poverty level were insured all year with adequate coverage.

If 75 million are under-insured, and 47 million are uninsured, what does that say about insurers ability to provide access to care for all? Wasn’t that the mandate identified when for-profit health insurance was first proposed, that in going to a ‘free market’ system there could be affordable health insurance for all?

Instead, it would appear that the mandate has been largely forgotten, as evidenced by words uttered by Wellpoint’s CEO last quarter to shareholders: ’We will not sacrifice profitability for membership’ (my all-time favorite quote these days). Is there a reason why we (society) should continue to pump billions of dollars through these organizations in order for them to make billions in profit while not providing the access to coverage that was the very basis for their existence?

It’s time we looked at what the health care ‘insurance’ companies are doing to return value to the populace at large, and to scrutinize the strategies they are employing that is leading to conditions of under-insurance. From where I sit, those strategies are designed to return maximum profit to the companies and push as much cost as possible to consumers and providers of care.

Demand for transparency and efficiency from the insurers is building. Medical cost ratios (MCRs) – which indicates the ratio of premiums brought in to health care costs paid out – are easily manipulated, and the components that make up the health benefit expense are not evident from financial filings. Is marketing included in there? How about broker incentives?  Is that where premium dollars are best spent? Spednign aside, how are these corporations run? How efficient are these operations? Do they operate as lean machines, or costly bureaucracies?  In many other industries, the more efficient you are, the more profitable you can become. Shareholders hold the boards of these companies responsible for ensuring that. Yet the same demand for insurers to do the same – operate efficiently, employ technology and processes to keep costs to a minimum, and maximize value to consumers – has not been forthcoming.

Why? Well, profits have been very lucrative so far. Insurers actually gain from being inefficient, rather than the other way ’round. The less adept you are at processing claims, the more premium dollars you hold on to. The more complex you make your product and the ability to get reimbursed for providing care to members, the easier it is for these insurers to hold on to the cash. Tie that together with pricing discipline – the refusal to reduce the price (premiums) in order to increase share (more people who could afford to purchase it) - we see profits continue to be strong.

But the end of the run is coming soon. Unsustainable cost-shifting to employers and employees and increasing numbers of uninsureds should help to force the issue. The only question left then is ‘when?’ Perhaps when preventive care has been destroyed and health epidemics such as diabetes and coronary disease climb to collosal levels, or when there are too few geriatricians and internal medicine specialists to take care of the Boomers.

An ounce of prevention is also better than a pound of cure. But then again, there is profit to be made on a pound of cure . . .

 

Never-Events Follow Up

Last January I posted a piece on ‘Never Events’ . In it, I reflected on punitive action versus supportive action. I am therefore very pleased to read in today’s AIS Health Business Daily that the Blues Plans have stepped up to do just that – support better outcomes – by helping hospitals reduce hospital-acquired infections (HAIs) through the use of electronic tools and incentive programs. The plans include Horizon Blue Cross Blue Shield of New Jersey, Blue Shield of California and Excellus Blue Cross and Blue Shield of New York.

The primary tool used is something called the MedMined electronic infection-monitoring system, and is being offered through Cardinal Health, Inc. (a medical and surgical supplies company). That system supplies an electronic tool that monitors all patients in the hospital for infections as well as an on-site trained infection-control specialist. The tool also is tied to the hospital’s financial system, “so you can see how much a patient without an infection costs, compared to what a patient with an infection costs [for the same procedure],” explains Cardinal Health spokesperson Troy Kirkpatrick.

In addition to Cardinal offering grants to hospitals for adopting patient safety products, the Blues health plans will share the costs of the system for the first few years. According to the AIS story, a health plan could cover 60% of system costs in the first year and 40% in the second year, with the hospital paying for the remaining expenses. By the third year, the hospital would pay all system costs, with savings from reducing hospital acqured infections (HAIs) offsetting that expense.

Apparently, the MedMined tools helped reduce overall HAIs by 3.2% at pilot hospitals in 2007, according to an issue brief from the Blue Shield of California Foundation. That organization has already spent $5 million on the initiative and is working with California’s Healthcare-Associated Infection Prevention Initiative (CHAIPI) to reduce HAIs through MedMined and also through a “learning collaborative” effort among participating hospitals. “Among CHAIPI hospitals, reductions in HAIs resulted in 4,641 fewer hospital days and $2,163,437 in bottom-line savings.…In all, the initial investment in CHAIPI has generated a minimum five-fold return in costs avoided, for a total of more than $9 million” over a period of 18 months, according to the foundation.

This is a very positive development and illustrates how collaborative efforts, rather than puntive ones, can not only help advance medicine and safety but systematically decrease costs for everyone.

Kudos to the Blues for leading the way on this and for taking a stake in securing better outcomes. For further details about the individual plans involved and the results so far, you can read the AIS story here.

HSAs – Another Way to Boost Insurers’ Bottom Line

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.

 

 

It’s No Coincidence

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 . . .

Verden Rankings Q1:2008

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.

 

The Debate Over Concierge Care

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.