Costs Too High?
Well, more news and comments out lately about the cost of health insurance, or actually the premium trend being too high. Additionally, articles on the cost of healthcare and it being too high. So, let's give this some quick thought: What's the difference between "price" and how "cost" is often referred to?
To me, the price of a product or service is what you have to pay to get it. For example the price of a gallon of gas two weeks ago in Mendocino CA (there is only one station in this small and charming community on the northern coast) was$5.79 per gallon. No competition for gas up there so they seem to price accordingly. In healthcare the "cost of care" is commonly referred to when talking about a population such as "Medicare lives." Cost of care for a population is not driven by the price of a unit of service alone, but by the combination of the number or services (utilization rate) and the price per unit produced for that service. Well, then is the problem the price per unit or the number of units purchased, or a combination of both?
After years ihealthcare, my view is this: the price per unit is rarely the issue anymore, at least where major payment sources such as Medicare and Medicaid have either driven price reduction or prevented any meaningful price increase trend, as they control the payment amount. Certainly there are exceptions in both of those payment categories and in the private insurer marketplace, but generally the issue is not the price paid per unit of service. More significantly, the issue is the number of units of service incurred by individuals within these payment categories.
The issues driving this increase in utilization are fourfold:
- First an increase in need for services due to population aging and population health status;
- Second the drive of services on the supplier side. Providers operating at the margin of necessity of care often provide more services because they are financially encouraged to do so (aka income), and they want to avoid the risk of malpractice litigation for overlooking necessary care;
- The lack of price sensitivity to the person who receives those services. Most insured individuals don't pay out of pocket costs, and most care providers don't provide pricing information, so even if the individual were to seek competitor pricing information, it is nearly impossible to find the best combination of price and quality.
- And finally the improvement of technology, where today we are able to provide services and care unheard of even 10 years ago, with resultant impacts on both lives and healthcare cost.
So what is the solution to these challenges? My thoughts on that coming next time.
Should Medicare premium information be shared with PPO providers?
CMS and the Center for Medicare and Medicaid Innovation (CMMI), in an effort to provide a more coordinated and satisfactory patient experience when it comes to the delivery of healthcare services, has placed much focus on improving Medicare program transparency around access to services, provider quality measures, clinical outcomes and fair pricing.
It is fair to ask whether or not providers - who are responsible for the delivery of clinical diagnosis and treatment to Medicare beneficiaries - should have knowledge about the beneficiaries' benefit plan and premium costs, including copayments and coinsurance. There is reasonable argument on both sides of this issue regarding patient privacy, the right to know or not know, as well as the opinion that a provider or supplier does not need to know a beneficiary's premium payments to price the service or item provided.
Those in favor of providing provider and suppliers with premium information might suggest that the information helps the provider find less expensive treatment alternatives when the benefit plan and related financial requirements would otherwise prove problematic. Others would opine that the provider's number one concern should be the patient's needs and hoped-for outcome.
There is, however, another reason that it might make sense to share premium information with providers and suppliers: Providers, like the patient, usually do not appreciate the financial relationship between the monthly dollar amount assigned to each patient for provision of medical care and the actual cost charged for providing that medical care. Knowing that relationship may have the desired effect of providers, suppliers and the patient agreeing on a treatment approach that is more judicious regarding the ordering of procedures, tests and supplies that may not be necessary in every case for the desired treatment outcomes.
At the end of the day there is a limit to the financial resources available for the funding of medical services. If everyone involved in the provison of medical services and supplies understands those limitations, then decisions on how those resources are expended may beome more measured without sacrificing service quality or treatment outcomes.
My Talk at AHIP's Medicare Conference
I had the pleasure of addressing a standing-room-only crowd at the AHIP Medicare conference yesterday, sponsored by our friends at TMG Health, our 4th year together there. That speech always keeps me on my toes, especially this year -- a tough, smart audience that demands a tough, smart message on how to survive in the new Age of American Austerity. Here are the main points of what I said:
- Volatility and Accountability will define the sext several years in Medicare. Volatility: rates, the Medicaid dual eligible explosion, the Congressional "Super-Committee", industry consolidation, and the 2012 elections. Accountability: it's already here. Star Ratings bonuses, minimum MLR regulations, compliance, rate reviews, RADV audits, and Accountable Care Organizations.
- The State of the Union in Medicare Advantage (MA) and Part D is strong. All predictions of the demise of the program following health reform were wildly premature. MA will grow about 7% this year, and over 40% of beneficiaries aging into Medicare have chosen MA in the last two years. Local PPOs with the drug benefit integrated remain the product of the future in MA, as do Special Needs Plans given the tsunami of dual eligibles -- a $300 Billion market alone. We think MA will pass 15 million members by the end of 2015.
- Medicaid managed care is risky (BIG) business. We've already seen major awards this year in TX, LA and KY. CA is prepping the biggest RFP in US history: 150,000 duals in plans by end of 2012; all duals in plans by end of 2015: a $21 Billion opportunity. WA, FL, NH, NE, MI and HI are all preparing to move duals into plans.
- Volatility: many of us thought we "gave at the office" in health reform when the ACA whacked over $120 Billion from MA rates over a 7-year period. There's more austerity to come from the Congressional "Super-Committee" on the debt. Best case scenario? The Super-Committee fails, sequestration occurs, and we get hit with a 2% cut in 2013, 2014 and 2015, compounded. And what about the "doc fix"? If they don't fix the SGR and docs take a 29.5% cut in Medicare reimbursement in 2012, MA gets hit by about 7% in 2013, and the beneficiaries take it in the shorts. Bar the exits! Consolidation is intensifying in both payer-payer transactions, and payer-provider deals like United/Monarch (CA). And then there's the elections. My money as of today is that Obama gets re-elected by the narrowest of margins, Democrats lose the Senate, and we have another 4 years of economic doldrums with the HUGE exception of the ACA's implementation in 2014.
- Accountability: it's already here, a cornerstone of the ACA. It's embodied throughout, in Star Ratings bonuses, Accountable Care Organizations, with growing incentives for chronic care improvement, member satisfaction, and compliance. The cornerstone is transparent data reporting. Berwick's legacy will be his embedding the "Triple Aim" in the DNA of CMS. And CMS says it will terminate MA plans with less than 3 stars for 3 years running. A "good" star rating is not a hedge against the rate cut: it is an existential issue -- and a management revolution.
- What to Do?
- Aggressive revenue management in the near term. Master risk adjustment and audit-proof the function by embedding it where it belongs in Medical Management, move from claims extracts and chart reviews to Prospective in-home Evaluations, and be a Star Czar.
- Care coordination and chronic care management over the mid-term (3 years). It will take years to see results, but this is what it's all about in the mid-to-long-term. High-touch with the frequent flyers.
- Commit to a Culture of Compliance. The regulator is the purchaser, and you keep this account happy by following their rules. To. The. Letter.
- Revisit the service model and move from reactive to proactive. Health care is still a service business and Boomers are tough customers.
- Establish and Invest in Medical Homes, Accountable Care Organizations, and Exclusive Provider Organizations. In the end, it's all about the docs.
Questions? You can always reach our team at ghg@ghgadvisors.com.
PS Join me for another talk September 25-26 in Arlington at the Opal Events MA Strategic Business Symposium. Complimentary passes are still available today.
Law of Averages: How does it add up to a complete health picture of your members?
I attend a number of industry conferences, and at a recent event hosted by Opal in San Diego, I heard the following:
- The average 75 year old has three chronic conditions and takes five medications
- The average 75 year old Medicare Advantage (MA) member spends 12 hours a year in doctor visits
- The average amount of time a patient actually spends with the doctor during one of his visits is only 13 minutes
- The average 75 year old Medicare members sees between five to seven different doctors a year (whether primary care, covering physicians, urgent care, hospitalists, or specialists)
- To conduct a comprehensive health assessment, a physician needs to spend between 45 to 65 minutes with a MA member
This highlights the need for EMR, collaborative care models, and medical homes. It also illustrates the need for annual comprehensive exams and an engaged model around medical management.
If you do the math, a MA member is spending a mere 156 minutes with physicians each year. And 55 of those minutes should be spent with some clinician who will collect and record an accurate and updated health picture. Whether it's a primary care physician, a specialist acting as a primary care physician, or a physician evaluator in the home, some clinician has to collect this information for each health plan MA member each year. The challenge is the time differential.
How does the physician morph 13 minutes into 55 minutes? This is probably not a case for efficiency, but a change in scheduling or approach. Whether in the home or in the office, we need to create an environment at least once a year that allows Physicians to do that complete wellness exam or health status evaluation in which they ask questions about everything, from activities of daily living to nutrition to chronic condition to medications to behavioral health.
The next step in beating the averages is using this picture. This health status report needs to be integrated, not only with all the member's doctors' plan of treatment, but also with health plan medical management or perhaps even in the member services department. We need to find new ways to help the member navigate the healthcare system to survive the law of averages.
Note: You can join CenseoHealth September 13th to hear more thoughts on integrating risk adjustment and quality of care initiatives during an MCOL-hosted webinar event. Click here for more details.
America's Hospital Patient Safety Problem in 1 Awesome Graphic
The graphics geniuses at MedicalBillingandCodingCertification.net have come out with another of their charticles examining the American health-care system. The quick takeaway? "The United States ranks dead last out of 19 developed nations in preventable deaths at hospitals." The problem is preventable and the solutions pretty straightforward. The charticle is fascinating and scary. Enjoy.
Prices in Healthcare
For months now the national and local news has focused on the price of gas. $3.79 per gallon this week in my part of the San Francisco Bay area. At Costco it is $3.59 per gallon, if you are willing to wait in line. Of course there is a website that will tell you gas prices and map them by location. Need to price a new television? Go online and price shop. Interested in quality of the television? Check out Consumers Reports or another such source. Standing in the audio store? Pull out your iPhone, bring up the RedLaser application and scan the bar code. It will give you the price of that television in some other nearby stores.
So how about healthcare? Well I shopped my Lasix eye surgery years ago for price and quality. I of course paid for all of it. I also get my dental care from a great, but not cheap, dentist. I need a crown, his staff quotes me the price. I have dental insurance, which pays a part of the price and they tell me that amount and the amount of the price I pay. I can shop if I need to for better prices, but I don't for another dentist.
So let's take a simple healthcare procedure. I need my appendix out. (Not really, and I still have mine....but an example.) I want to know the price from hospital choices in the area. Can the hospital tell me? Can anyone tell me? My neighbors know the gas prices, but could they answer a question on healthcare price? Can I get the info online? Can I get much info about which surgeon is the best person to take out my appendix, let alone his price for doing so?
So think about it. How well does this type of purchase work when we don't know the prices, let alone the typical quality of the service we are buying? More on this subject next blog when I get into: prices vs. costs, the impact of insurance, and other such fun areas of healthcare.
PBM merging pharmacy and medical claims: The time is right
Pharmacy claims exist in a health plan in two distinct silos. Medical pharmacy claims are billed to the medical benefit using a professional claim format such as a CMS 1500. Claims are coded with HCPCs rather than NDCs and are generally much higher cost pharmaceuticals than their retail counterparts. Medical claims are generated by physician practices, home infusion suppliers, specialty pharmacies, outpatient clinics, and hospitals.
Retail pharmacy claims are processed, adjudicated, and paid by a PBM contracted by a health plan. These claims are processed in real-time at the point of service which is usually a retail pharmacy. Health plans receive adjudicated claims data for these retail claims from the PBM and are stored in data warehouse obscurity.
For most plans, the two data bases are not combined beyond the highest level of totals for the combined drug spend. Consequently, there is lost opportunity for plans to achieve comprehensive medication management and integrated case management. Pharmaceutical outcomes for most diseases are not independent of medical treatment. Without combining the data for both pharmacy claims and medical claims, it is impossible to monitor total drug therapy utilization and to evaluate the true cost of therapy.
By combining pharmacy and medical claims, the plan can evaluate opportunities for optimizing pharmaceutical care, for example before a patient is moved to a more expensive biological agent dispensed by a specialty pharmacy. The member may be receiving both retail and medical claims for the same condition. With medical and pharmacy claims data combined, current therapy can be matched up with nationally recognized treatment guidelines and recommendations can be made to providers. Health plans can better achieve clinical quality goals with a combined data set.
In addition, once the data are combined, both types of data can be reviewed for fraud, waste, and abuse. Outliers can be identified and sent to validation. Recovery of excess payments can occur. Trending and other opportunities can be identified such as finding duplicate billing both from the pharmacy and a physician's office, duplicate claims from a single provider, or other aberrant provider reimbursement patterns.
For many plans, particularly the smaller ones, the technical resources required for merging the two data sources often are not available. Combining medical and pharmacy claims is a service by which a PBM can bring added value to the plan.
The current PBM model of focusing solely on pharmacy claims needs to evolve into a more robust, comprehensive tool for plans to achieve better control of pharmaceutical outcomes. PBM platforms have the capability to fit the role. The time is right for the PBM industry to step up to the challenge of helping plans manage both improved outcomes and lower costs.
Medicare's Looming Risk Transfer
Please read Dr. Jaan Sidorov's Health Affairs blog on "Medicare's Looming Risk Transfer" where he describes how the ACA and Democrat and Republican proposals to reform Medicare "transfer substantial portions of Medicare's monetized risk from the government to one or more third parties."
Too Much of a Good Thing
Ever find yourself in the cereal aisle, staring blankly at the mosaic of options, your enthusiasm for the task waning with each passing second?
Everyone has heard (and experienced) the phenomenon of being overwhelmed by choice. Now, a new study, published in Health Affairs and conducted by Harvard Medical School appears to show that as the number of Medicare Advantage plans exceeds a certain threshold in a market, participation in the program actually decreases. This study has much in common with what has become known as The Paradox of Choice: too many choices overwhelm our brains and lead to indecision--- ultimately restricting us instead of freeing us. Thus, after a certain point, more choice means less freedom. As reported in Medical News Today:
The researchers gathered data on 21,815 enrollment decisions from 2004 to 2007 that 6,672 participants had made. They compared enrollment decisions made by participants with varying cognition levels, as well as types of plans offered in their areas.
They found that as long as the number of plan options being offered was fewer than 15, a rise in the number of plans resulted in an increase in Medicare Advantage enrollment. However, when there were over 30 options the number of enrollments actually dropped - this was the case in 25% of US counties. [emphasis added]
There is more interesting stuff in the study, including the impact of choice on members with varying levels of cognitive functioning. For more on the Paradox of Choice, listen to Barry Schwartz fascinating TED talk from 2006. A pre-emptive political point: Note that his quibble is with the way we promote more "freedom," not "freedom itself.
Remember, Mom: Digital is Forever.
Humana has launched a social network for its Medicare Advantage and Part D members called "Humanaville." No word yet if members have started posting embarrassing pictures of shenanigans in the skilled nursing facility...
Actually, it's not exactly a social network like Facebook. Rather, the design and functionality more closely resembles Second Life, in which users build an avatar and move within a multi-dimensional space, meet others, barter/trade, etc. This is not the first medical network of its kind. The Starlight Children's Foundation maintains a space for chronically ill teens called Starbright World, which more closely adheres to the Facebook model.
No doubt the plan should be given credit for pushing the boundaries of member engagement. However the model--and more specifcally the decisions made by Humana for the members within the model--seems to adhere to an older model of communication. At a cursory glance it appears Humana is attempting to carefully script and guide users' experiences, rather than create an environment, a social utility, full of user-defined content.
Like society at large there must be rules of engagement in these environments. But the brilliance of the social media model as an economic force (that's why Facebook is in the news... it's not because of Farmville) is that by allowing participants to wander around at will "liking" stuff and joining groups they track people's actual interests. This means that by the time Facebook puts a particular Old Spice ad in front of you the algorithm already knows: you're a man, you have a slightly juvenile sense of humor, and you care how you smell.
There is much talk in clinical circles about the tyranny of the internet on two fronts: in making every patient an expert via WebMD et al., and in the public rating of physicians. An entire industry called "Reputation Management" has sprung up in the last two years to protect physicians (and lawyers, and others) from the ignominy of having patients share their experiences with each other. This is a losing battle. It remains to be seen if payers or providers will rise to the challenge of the digital age--which has heretofore been defined by the inability of choice-makers to control it--or if they will revert to type and attempt to narrow choice and access to information along prescribed paths that lead inevitably to the next sale.