What’s Happening at MCOL – New ACO Directory 2012 and Business of Clinical Integration

By Claire Thayer April 23, 2012

This week we’ve released a new directory on ACOs: The Accountable Care Organization Directory 2012 and will be hosting a webinar event focused on the business of clinical integration.

The Accountable Care Directory 2012, compiled by MCOL’s HealthQuest Publishers, offers a unique resource for Accountable Care stakeholders and others monitoring the industry.  The Accountable Care Organization Directory includes 100 selected ACOs, as well as a listing of over 400 key persons with leadership or operational involvement with the ACO.

Join us on Wednesday, April 18^th at 1PM Eastern for a healthcarewebsummit event as nationally renowned experts Doug Hastings, Chairman of Epstein, Becker & Green, and Dr. Mark Browne, Principal of Pershing Yoakley & Associates, construct the foundation of business considerations for health care organizations in pursuit of clinical integration. This session will address payment models, structures, governance, strategic issues and more.

DME: A Modest Proposal

By Laurie Gelb, April 18, 2012

What's a "convenience item?"

For most plans, it's anything from the elevation feature of a wheelchair seat to a motorized patient lift to a track to move a shower chair into a traditional stall. In other words, it's features, equipment or supplies that you don't want to reimburse.

The rationale for non-reimbursable DME is most often that in and of itself, the "convenient" add-on or gadget doesn't treat a disorder or isn't essential for ADLs. A power wheelchair's tilt and recline functions, for example, are reimbursed because without them a chair-bound patient is more likely to acquire pressure ulcers, which are costly to treat. But vertical elevation -- that's just patients trying to belly up to bars and kitchen counters, right?

Not only.

Often, the elevation feature is used to prolong the time until a passive lift is necessary for transfers. The same is true of hi/lo beds.

So what?

Watch an assisted standing transfer with a confident patient and assistant. Then watch a lift transfer as the patient dangles from a sling, often scraping body parts against a metal frame and risking already-fragile joints and skin. Which one do you prefer from a cost standpoint?

Taking the whole wheelchair higher may also enable use of a urinal or bedpan (supplies that you don’t pay for, whereas you do pay for catheters + the infections they cause), to make it easier for tall helpers to place a lift sling (or to do pivot transfers with more agile patients), for dressing, feeding and many other purposes. If you think about those specific activities, it’s evident that neither tilt (angled seat) nor recline (angled back) can substitute for elevation in those situations.

Now back to reimbursement. Not only is elevation per se often considered a “convenience, but often it’s not even submitted for reimbursement. Many patients don't even ask for it, even if they are aware it exists, because their DMEs tell them not to bother. Sit-to-stand lifts and chairs are another example of usually-unreimbursable items that yield huge health outcomes for appropriate patients, from avoiding hospital stays for impaction to improved respiratory function.

Much very pricey DME, from mobility to respiratory aids, is never submitted for reimbursement because of time pressure (quicker to buy from the Internet or as self-pay); complexity of the reimbursement process; pressure from a DME to file the easy part; a required preauth wasn't filed in time; DME annual limits and/or specific exclusions.

Is all the DME being bought and sold via the Internet (whether Craigslist or DOTmed) or donated by others good or bad for MCOs? To the extent that it's not reimbursed, you might think that it's just fine. But then turn full circle for the sequelae of obsolete, inappropriate and/or flat-out dangerous equipment and you'll see plenty of potential costs.

Ill-considered Internet purchases and donations aren't the only threat to DME safety; wheelchair-bound/NIV patients who "give up" on or wait forever for unresponsive DME firms who avoid service visits (in part because reimbursement is so uncertain) are practically a cliché.

Visit the homes of the chronically ill, even those comparatively well off and with private coverage, and you'll see fraying slings holding patients whose fall would mean a final hospital stay; rusty equipment with unpredictable steering; BiPAP and even vents being used improperly because no one in the household knows how to titrate them and can't get anyone to help; family members (likely in your network as well) risking severe back injuries because the right equipment for transfers/showering/toileting isn't available.

Some paras and quads "eat like dogs" (often choking in the process) out of bowls because they don't have access to a helper to feed them, and of course wheelchair trays and special utensils aren't covered. Nonetheless, your budget will take a hit at some point, and nutritional status compromised by illness comes under the heading of medical need in most textbooks.

Undeniably, your DME charges for lease months and sales for what you do cover, are way more than patients can pay on the Internet or elsewhere. And this goes back to inflated manufacturer pricing, often in expectation of contracted discounts but also in some cases, simple greed.

The root cause: contracted prices and often suboptimal product quality/selection deplete your DME budget to the point that you can't see a business case for the simple items that would pay for themselves and support your case for "caring" as well. Moreover, DME caps basically tell patients to go anywhere but the traditional system to access equipment. How predictable are the outcomes of back alley DME acquisition?

To put it another way, how much do you know about Helen Jones' fall because the eight-year-old walker passed on from her great-aunt wasn't gripping the sidewalk any longer? You paid for her hospital stay and rehab for a broken hip, and she may need home health on discharge. She didn't know that her walker needed new feet (nor would she have known where to get them), because she has low vision and no one she knows has any familiarity with checking walker feet.

No one teaches us about DME; the provider/plan Web sites so thick with rich media ignore it, so the major sources of information on DME are patient forums and YouTube videos, neither of which Mrs. Jones, 82, is likely to access.

The reciprocal of DME providers’ natural desire to remain profitable, is patients who don't know the system, who don't know when/how to use network benefits and when/how not to; how to access help with equipment that they need to have, or that doesn't work how they need it to; and a system that seems massively disinterested in the change that everyone "agrees" is needed. We obsess about medication errors that leveraging IT and FMEA can fix, but don't touch a larger, increasingly relevant (checked the age trend of your membership lately?) issue.

Beyond medical costs, MCOs incur the cost of fraud. I’ve seen recent drastically upcoded invoices to MCOs from DMEs that patients and family members, exhausted from the calls needed to obtain a facsimile of necessary equipment, not to mention the burden of care, didn't even perceive, or when they did perceive them, didn't blink. Why should they care if the MCO pays more than its contract stipulates, for something they never received, when they perceive that the MCO is depriving them of needed equipment and help?

From the other side, I've seen invoices with incorrect patient names, provider names, equipment codes and diagnosis mismatches sail through (as with home health, but that's another story). The DME claims processing burden is great on the payor side as well. The complexity of regulations for the sake of cost control are only getting worse.

The US managed care maze has also kept many highly-rated European manufacturers out of the US market entirely, except for authorized facility-only distributors, who don’t want the hassle of selling to home care.

Does US access to European products matter? Well, only if you’d like your members to have access to options like wool and fleece lining for slings to protect delicate skin; smaller patient electric lifts and tracks to use in apartments, as opposed to relatives’ [insured by you?] backs; freestanding track systems to reduce mobile lift risk, better repositioning aids, etc. Oh, but wait --none of these are usually covered items, anyway. Well, therein lies part of the problem.

Now imagine that DME was reimbursed like an office visit or injection. Provider in network? Check. Correct coding? Check. Eligible patient? Check. No duplication within six months (just as we don't reimburse two fills for the same med if dose is available or two right leg amputations)? Check. Not experimental? Check. Medical/ADL use (like, not a scooter flag or strobe light)? Check. Then you process the claim.

• How much would you lose?
• How much would you and patients gain?
• How much admin cost would you save?

Sure, you'd cap coverage at one power chair per interval, and other obvious constraints. But a track to get quads into a shower, yes, you'd pay (paid for any skin infections or UTIs lately?). Or an elevator on a power chair. Or a new sling to replace the one that’s frayed past safety.

And on this planet, reputable Internet suppliers could be in-network, too. Yes, certain manufacturers would be upset by this. But, down the road, how long can you continue the game? We’re not in Kansas any more.

Could you pilot a low-complexity DME program for certain dx? Patients at risk and/or high utilizers? Maybe in conjunction with existing disease management? Of course you could. Medicare, Medicaid or private plan, everyone’s feeling the pain (quite literally).

And why would you make the effort? Because the next patient held hostage to inadequate equipment and support may be someone you know.

What’s Happening at MCOL – Changes to HealthQuest Publications and HQ Online

By Claire Thayer, April 16, 2012

This week we’ve launched the new HealthQuest Publishers web site and renamed the online subscription HQ Online!

HealthQuest Publishers offers critical market intelligence for those doing business with the managed care and other health care business sectors.  The directories and databases provide leads, contact information, mailing lists, profiles and tools for those involved with marketing, recruitment, business development and others involved with health management and managed care.

HQ online provide searchable, on-line, 24/7 access to three continually updated databases: The National Managed Care Leadership Directory, Health Care Executive Profiles, and MCOL's Health Plan Directory.

More info at: http://healthquestpublishers.com/ and http://healthquestpublishers.com/hqsub.pdf   

Three ‘Brutal Facts’ That Provide Strategic Direction for Healthcare Delivery Systems- Preparing for the End of the Healthcare Bubble

By Nate Kaufman, April 10, 2012

In August 2005, David Lereah, chief economist of the National Association of Realtors stated “All of the doom-and-gloom forecasts of a housing debacle are not only irresponsible, but downright  wrong” Lereah was not alone,  economists from Goldman Sachs, National Association of Home Builders and the Mortgage Bankers Association all stated similar opinions. Wall Street firms such as Lehman Brothers and Bear Sterns bet their companies on the strength of the housing market. Eventually the lack of financial sustainability inherent in sub-prime mortgages burst the housing bubble and the industry collapsed. (shilling)

 The lack of acceptance of the housing bubble by industry leaders is a clear example of “cognitive dissonance”.  The theory behind cognitive dissonance is “the more we are committed to believe something is true, the less likely we are to believe its opposite is true, even in the face of clear evidence that shows that we are wrong.”  (Marshall Goldsmith)  Refusal to recognize new market realities is a fundamental strategic flaw that has lead to the demise of many organizations. As Admiral Stockdale noted in his discussion with Jim Collins:  “You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be” (see Collins web site)

The recent passage of the Patient Protection and Affordable Care Act (PPACA) has created uncertainty about the future of the nation’s healthcare delivery system.  Regardless of how PPACA is implemented, or funded or modified, there are certain ‘brutal facts’ regarding the future of healthcare delivery in the United States.  In order to prepare for the ultimate impact of these ‘brutal facts,’ healthcare organizations must begin today to modify both their core beliefs and clinical practices.  By focusing strategy on these new market realities (regardless how brutal they may be), a healthcare organization can begin to position itself for success in the future.

Our Healthcare Bubble Will Eventually Burst

In their open letter to the American people published in November 2010, several months after PPACA became law, the bi-partisan Debt Reduction Task Force:

“The federal budget is on a dangerous, unsustainable path. Federal debt will rise to unmanageable levels, which will push interest rates up, endanger our prosperity, and make us increasingly vulnerable to the dictates of our creditors, including nations whose interests may differ from ours…. we must take immediate steps to reduce the unsustainable debt that will be driven [in part] by the aging of the population and the rapid growth of healthcare costs...”

Even the Congressional Budget Office (CBO) appears to be skeptical about PPACA’s ability to reduce the deficit as was reflected their original ‘base line’ projections. As a result, the CBO produced an “alternative fiscal scenario” using the more realistic assumptions that: 1) tax revenues would remain at historical levels (i.e., 19% of GDP) and 2) cost control features of the new law would only have a moderate impact. (Frakt)  This more realistic scenario further supports the Debt Reduction Task Force’s assertion that healthcare costs will contribute to the destabilization of the economy.

 Richard Foster, the Chief Actuary for CMS supported this concern when he testified before congress that the new law will increase the nation's overall spending on healthcare by $289 billion through 2019. (Modern Healthcare)

The State Budgets are in no position to absorb the cost of PPACA.  According the Wall Street Journal,

“PPACA puts cash-strapped states in a tenuous position, forcing them into one or more unattractive policy choices: cut spending in crucial areas, such as public safety and education, to compensate for the additional health care costs, raise taxes to fund the new spending, or borrow money to pay the bill and sink further into debt. (WSJ)

Thus it is a brutal reality that we are in an economic healthcare bubble that will eventually burst.  Out of necessity, both State and Federally-funded healthcare programs will intensify their pressure on providers to reduce the per capita cost of care. In the immediate term this pressure will take the form of draconian reductions in fee schedules (as we are currently seeing from some states Medicaid programs.) Over the longer term, government-funded healthcare will move from the fee for service reimbursement methodology to either bundled/episodic or population based payments. Given the historical pace with which government implements changes in payment methodologies, one  can expect these new payment systems to be phasing in between 2016-2018.

Both the Shared Savings ACO Program and ‘First Generation’ Clinically Integrated Networks Will Not Produce Desired Results - Buyer Beware 

An Accountable Care Organization (ACO) is a group of providers (physicians, hospitals etc.) that share accountability for the cost and quality of care they provide. PPACA established a “ Shared Savings Program” for Medicare fee for service patients in which ACO providers would share in cost savings should the ACO meet certain quality and cost benchmarks.

The ACO concept has been pilot tested under the “Physician Group Practice Demonstration Project.” (PGP.)  Ten of the nation’s most integrated medical groups participated in the PGP demonstration. The demonstration provided groups the “opportunity to earn performance payments derived from savings for improving quality and efficiency of delivering health care services through better coordination of care and investment in care.” (CMS fact sheet)

After four years, these ‘all star’ group practices achieved a 40% success rate. That is, during the first year only two groups received a shared savings payment. By the fourth year five groups received a payout. Ultimately, over the four years, only sixteen shared savings payments were distributed out of a possible 40. (i.e., 10 groups times 4 years.) Among the brutal facts from the PGP demonstration project are:

1. It is difficult for even the most integrated medical groups to generate significant savings on Medicare fee for service patients
2. When a group received shared savings payments, the magnitude of these payments were not sufficient to cover the infrastructure cost associated with operating an ACO.

The Center of Studying Health System Change recently noted:

"the economic and market rewards [for ACOs] may not materialize for a long time, if ever,"… "None of the organizations [in the PGP] indicated positive return on investments related to improvement activities,"  (Modern Healthcare)

There is little hard data documenting the primary source(s) of the cost savings that generated the shared savings payments. Both the PGP participants and CMS reported anecdotally that the savings came from reductions in both admissions and high cost procedures e.g., imaging. It is a brutal fact that ROI for the ‘successful’ PGP participants was negative even before accounting for the loss of admissions and procedural revenue.  From a financial perspective, the PGP participants would have been much better off not participating in this ACO-like demonstration.  From the PGP experience it appears that the only parties that will receive financial benefit from the establishment of a Medicare-ACO are the lawyers and consultants retained for this purpose- buy beware!

Many physicians and hospitals have formed ‘clinically integrated’ networks which they believe will evolve into ACOs. While these networks have noble goals and some have positive results, few have demonstrated the competency to significantly lower the cost of care. Even Advocate Physician Partners, a joint venture clinically integrated network in operation for over 15 years could not document “medical cost savings” in real green dollars but stated that improvements in the cost of care are “inferred.” (see health affairs)

One could argue that even though it is unlikely that ACOs and first generation clinically integrated networks will fail to achieve cost saving benchmarks, these ACOs will eventually evolve into an effective delivery model. However, as the noted futurist Jeff Goldsmith points out, the track record for past efforts for physician-hospital collaboration has been ‘dismal’ and there is no reason to assume that this time it will be different. (goldsmith)

Based on the brutal fact that ACOs and ‘first generation’ clinically integrated networks’ will not generate sufficient cost savings to be relevant, it is recommended that healthcare organizations skip the first generation models and move towards the creation of ‘second generation clinically integrated networks’ capable of managing risk and targeting the 20% of the population that consume 80% of the cost. The most current research on reducing the per capita cost of treating Medicare patients conclude:

“Health reform policies currently envisioned to improve care and lower costs may have small effects on high-cost patients who consume most resources. Instead, developing interventions tailored to improve care and lowering cost for specific types of complex and costly patients may hold greater potential for “bending the cost curve.” (Reschovsky)

 Also, rather than pilot test an ACO model on Medicare and/or commercial fee for service patients where reductions in admissions will impact the revenue of the health system, it is recommended that these networks ‘cut their teeth’ on the self-funded pool of hospital employees and dependents, where a reduction in admissions/cost results in savings for the organization.

Critical elements for a successful ‘second generation’ clinically integrated network include: primary care-based medical homes, digitally connected electronic medical records with point of care protocols, disease management programs and a culture committed to improving the cost and quality of care for a population of patients vs. maintaining individual provider income and autonomy. (Kaufman)

Physician Autonomy and the Organized Medical Staff Will Become Less Relevant

On January 13, 2011 CMS published the proposed rule for the Value-Based Purchasing Program for Medicare inpatient services (VBP.) Starting October, 1 2012, hospitals can earn incentive payments based on the care they deliver to Medicare inpatients. These incentive payments will be funded by a one percent reduction in the base DRG payment. Thus hospitals that underperform will see a relative reduction in their Medicare payment rate. The VBP incentive will be based on adherence to clinical processes, (e.g., Aspirin prescribed at discharge for AMI patients) and patient experience ( e.g. communication with doctors, responsiveness of staff etc.) CMS will eventually include mortality-related measures in VBP as well. In addition, as part of the National Patient Safety Initiative, by 2015 9% of a hospital’s Medicare reimbursement will be “tied to public reporting of errors and provision of safer more reliable care with particular focus on hospital acquired infections and readmissions.” (cms proposed regs)

Traditionally the  medical staff had the responsibility for monitoring and maintaining high quality care within a hospital. While hospitals have always borne the financial risk for the cost of care ordered by its physicians, VBP now puts a hospital’s revenue at risk for their physicians’ clinical practices and communication skills. The evidence is clear from Geisinger, Thedacare, Virginia Mason and others that the standardizing care through thoughtful process redesign can improve efficiency, quality, safety and patient satisfaction. Most medical staffs have been unwilling to tackle an issue associated with the variability of cost and quality of care unless it exceeds broad limits.

It is a brutal fact that hospitals can no longer afford to delegate the responsibility and accountability of the cost and quality of care to the independent medical staff composed of physicians practicing and promoting the traditional autonomous, highly variable model of care. Hospitals will have to develop a work with the members of their medical staffs to:

1) modify bylaws to require conformance to patient safety, patient satisfaction, process and quality metrics as a condition of keeping hospital priveleges, and

2) develop the clinical infrastructure with a new breed of physician leaders in which medical directors will have the authority and accountability for cost, quality and patient satisfaction in their serviceline.

Not If But When

The nation’s rate of spending on healthcare is unsustainable. As with the housing bubble, the fundamental economics cannot support the status quo and yet many healthcare thought leaders and politicians dismiss claims of a healthcare bubble as “doom-and –gloom.” Others choose to ignore the brutal fact that AAPACA may exacerbate the cost crisis rather than moderate it.

Those that recognize the existence of a bubble and prepare for its brutal realities can actually benefit when the bubble bursts. This was clearly the case with the housing bubble where Michael Burry and his investors earned hundreds of millions of dollars betting against mortgage-backed securities (Wikapedia.) Healthcare organizations that believe in the brutal realities of the healthcare bubble can also position themselves for success when the bubble bursts. These organizations will dismiss the incremental approaches such as Medicare Shared Service ACOs, first generation clinical integration, physician co-management and focus on meaningful transformation into a provider system that is comprised of data driven, digitally connected, physician-lead TEAMS consistently delivering  evidence-based, patient-centered health care, able to treat higher volumes of patients, at lower predictable costs per episode, demonstrating measurable high quality and providing an exceptional patient experience.. As Don Berwick stated Healthcare is hungry for something truly new, less a fad than a new way to be. (VA Mason) 

A Different Way to Fix Medicare

By Kim Bellard, April 5, 2012

Two recent public statements made me both smile and despair about saving Medicare.

The first was President Obama’s recent attack on the budget proposal put forth by Rep. Ryan and passed by the House.  The President has no shortage of issues with that budget, but one of his specific attacks was the way Ryan proposes to reform Medicare, by turning it into a premium support program.  The President and many other leading Democrats charge that the approach would be the end of Medicare as we know it. 

“Ending Medicare as we know it” is a curious bogeyman.  The benefit design is overly complicated and archaically incomplete (forcing most senior to buy Medigap policies), the program is hyper-regulated, it has a terrible track record on combating fraud and abuse, and it is one of the biggest fiscal time bombs for the country.  This is what we are fighting to keep?  The thing Medicare does uniquely well is its near universality, and the existing program structure is not the only way to accomplish that goal.

The critics don’t seem to recognize that the Ryan proposal wouldn’t impact existing beneficiaries, and doesn’t really look all that different from the way they plan to have the under-65 obtain coverage through the health insurance exchanges under the Affordable Care Act (ACA).  By the same token, Republicans shouldn’t be too smug, because it’s hard to rationalize their support for delivering Medicare for all through the private market via public premium support with their bitter antipathy for ACA.  They are two sides of the same coin.  In both cases, the important question is whether the premium support/subsidies would actually be realistic – as opposed to becoming balancing items for future budget cuts. 

Short of a single payor system, it’s hard to see a long or even moderate-term future that doesn’t end up looking like something built on the Ryan-Wyden frame.  Medicare can only limp along so long in its current form.  It’s too bad the partisan politics cannot recognize the areas of commonality and work towards compromise. 

More encouraging was the recent call by nine physician specialty societies to reduce the use of many common tests and procedures.  Each society offered up five such tests or procedures.  “More isn’t necessarily better,” said Dr. Christine Cassel, president of the American Board of Internal Medicine.  “There are a number of things that not only aren’t necessary and potentially costly, but also have a risk of harm for the patient.”  The specialties are launching a “Choosing Wisely” campaign to encourage the various stakeholders to discuss potentially unnecessary care.

Well, kudos to the various specialty societies for finally admitting this, although one has to wonder: why now?  Perhaps they were worried that the IPAB, the review board charted by ACA to recommend ways to slow Medicare spending, would do this for them.  It would have also been nice had the call been accompanied by some teeth.  I.e., are they going to monitor the use of these tests and procedures?  Are there any consequences to physicians who continue to use them unabated?    

Which brings me to fixing Medicare.  We need to recognize that not all care that is delivered is appropriate – and not all physicians are equally good at delivering it.  Yet we continue to pay providers while largely ignoring those facts.   There are “value-based purchasing” approaches in ACA, but are far too modest to have significant impact.  Accountable Care Organizations may well be “the” answer, or at least part of an answer, but they still beg the question of how to identify more effective providers.  This is an area where the federal government can help:

• Quality measures: Give the various medical specialty societies one year to propose how quality should be measured for each specialty, subject approval by CMS.  The societies would most likely object to both the mission and the timeline, but, honestly, they’ve had decades to think about it.  Whatever measures they propose would have to be quantifiable, be based on patient outcomes, and reflect at least in part patients’ views about their care.  They also must not discourage physicians from seeing sicker patients.
• Measuring quality: once the measures are established, there should be a year to collect the applicable data for each physician.  Obviously, obtaining the data through EHRs would most likely be most accurate, but inability to collect data from a physician practice would not be an excuse.
• Tiering physicians: Medicare payment levels would be based on tiers of performance.  I.e., the top thirty percent of physicians would be paid, say, fifty percent above the fee schedule for E&M codes, and perhaps an extra twenty percent on procedure codes.  The next thirty percent of physicians might get an extra twenty percent on E&M.  The next thirty percent would face a reduction of twenty percent on both E&M and procedure codes, and the bottom ten percent (and practices not reporting) would also receive the twenty percent cut, but also would be on “probation.”  Two continuous years of bottom ten percent performance would cause them to be ineligible for Medicare payments.
• Public disclosure: The performance results and tiers of physicians would be readily available and disseminated to Medicare beneficiaries, who hopefully would use them to seek out better performing physicians.  Ideally, Medicare would change its coinsurance so that beneficiaries using higher tier providers pay lower copay amounts (since the payment levels – and thus the corresponding coinsurance amounts – would be higher). 

Of course, the same approach could, and should, be applied to hospitals and other Medicare providers.  There is an implicit assumption that higher quality providers are not also higher cost providers, although that has not been solidly demonstrated.  Cost/benefit could be part of the metrics, but with the specter of rationing and “death panels,” we may not be ready for that. 

Personally, I’d also wipe out the Part A, Part B Part D distinctions and institute a more modern, comprehensive design with unified deductibles and coinsurance, as well as the unlimited maximums ACA imposes on private plans.  The advisability of Medigap policies has to be questioned as well.  Those policies reflect seniors’ desire to limit their exposure, but may end up protecting them a little too much.  Having consumers face some direct financial consequences to health care choices is not a bad thing, as long as those consequences have appropriate limits. 

I have no doubt that such a change would be a tsunami for our health care system, with both intended and unintended consequences.  We probably would not get it entirely right straight out of the gate.  I also have no doubt such proposed changes would meet with fierce opposition from lobbyists and Medicare loyalists.  It’s hard to argue against pay-for-performance in principle, but they could fairly point out that we have neither the desired measures nor effective mechanisms with which to collect them.  Those may be valid points, which simply underscores the point: why not? 

American politicians like to brag that we have the best health care in the world.  It may well indeed be available here, but no one can plausibly claim it is uniformly distributed or easy to find.  Proximity and familiarity cast a rosy glow over local providers.  We can and should do better.  So let’s use the big Medicare stick to finally start measuring and paying for better performance.  

What’s Happening at MCOL – Predictive Analytics, MSSP & Star Webinar

By Claire Thayer, April 3, 2012

On Thursday this week…we’re hosting a webinar event that explores how the Medicare Shared Savings Program and the Medicare Advantage Part C “Star” rating program relate to one another. During the session, we’ll look at what types of Medicare members are less likely to be compliant under these programs and therefore require more targeted communication or intervention. 

Did you see the Zombie lists on healthsprocket?  On April 1st, several selections were added:

• Impact of Zombie Apocalypse or Supreme Court Decision on Affordable Care Act
• Proposed Outsourced Regulatory Oversight of Key Healthcare Components
• Meaningful Use Requirements in 4,000 BC
• Provider Time-Travel Provisions to Negotiate in Value Based Purchasing
• Top Five Dental Coverage Concerns for Vampires
• Out of Network Coverage Issues for Extra-Terrestrials
• Strategies to Minimize Zombie Coverage under Health Plan
• Secret Individual Broccoli Mandate Provisions Included in Affordable Care Act

Read all the selections at: http://healthsprocket.com/

Changing Economics in an Era of Healthcare Reform

By Nate Kaufman, April 2, 2012

Health systems are beginning to prepare for healthcare reform.  Significant resources are being focused on developing Accountable Care Organizations, medical homes, and preparing for bundled payments and population-based reimbursement.  However, current economic trends combined with an analysis of the impact of key healthcare reform initiatives, will require health systems to take significant cost out of their system in order to maintain positive financial performance. Few organizations have the culture or the expertise to implement a cost reduction effort of this magnitude.

These are the Good 'Ol' Days (For Cost Shifting)

Since the late 80’s the hospital industry has subsidized losses from Medicare and Medicaid by demanding premium rates from commercial payers. In 2008, the hospital industry’s aggregate payment to cost ratio from Medicare was 90.9% ;  88.7% from Medicaid and 128.3% from commercial payers.[1] The impact of cost shifting will be diminished as a result of the new healthcare reform law, the aging of the population, continued compression of government/ private reimbursement and increased patient responsibility.  This will require most health systems to reduce their current operating cost structure by 10-15%. The following is a discussion of the key factors driving the need for more focus on efficiency.

Change in Payer Mix

Over the next five years there will be a significant shift in the number of people covered by highly profitable private health plans to deficit-generating government-sponsored plans.  Expanded coverage for the uninsured will not be sufficient to mitigate the negative impact of this shift.  CMS estimates that by 2016, as a result of the new healthcare reform act (PPACA) and the aging of the population, the number of beneficiaries covered by the relatively high margin private insurance will decline by approximately 9 million.  These profitable patients will be lost to government-sponsored plans with non-negotiable provider rates (i.e., Medicare, Medicaid and exchanges.) The financial benefit of providing coverage for the 25.3 million uninsured, most of whom will receive government-funded insurance, will not be sufficient to offset the deleterious effects of the shift away from commercial health plans[2]

Declining Medicare and Medicaid Margins

Future payment increases from Medicare and Medicaid will not keep pace with the historical trend in hospital cost inflation. This will further suppress the margin contribution from government-funded reimbursement making the cost shifting hurdle for private insurance even higher than in the past.  In their 2010 Report to Congress, Medpac acknowledged that since 1996, hospitals margins from Medicare have declined by approximately 1 percent per year.[3]  Their data shows that the average hospital lost 7.2 cents on every dollar of care provided to Medicare patients in 2008. (Note: the Medpac methodology is different from AHA.)  Even before the $155 Billion hospital payment reduction in PPACA, Medpac expressed its intention to force hospitals to operate more efficiently by continuing to provide updates to hospitals at rates that are significantly below cost inflation. Medpac believes that it is possible to provide quality care and breakeven on Medicare:

Medicare margins are low and expected to remain negative… however...a set of hospitals has been able to maintain relatively low costs, while maintaining relatively high quality of care. Roughly half of these providers are [currently] generating a profit on their Medicare business.[4]     

With respect to Medicaid, the Kaiser Family Foundation reports that for FY 2010, a total of 33 states restricted hospital payment rates including 14 states that froze rates and 19 states that reduced rates. For FY 2011, 17 states plan hospital rate freezes and 13 states plan hospital cuts for a total of 37 planned rate restrictions.[5]

Increased Patient Responsibility Will the Limit the Ability to Cost Shift

As patients are forced to pay a greater percentage of their healthcare costs, higher provider charges will result in increased bad debt and lower utilization rather than increased income.  The fastest growing component of bad debt in hospitals is unpaid co-payments and deductibles from patients with insurance.[6]  One health system studied by McKinsey reported that their unpaid balance for patients with insurance was growing by 30% per year, much faster than bad debt from patients without insurance.

 Enrollment in high deductible employer-sponsored health plans climbed from 9% in 2009 to 11% in 2010. Low-income families with high deductibles are more likely to “delay or indefinitely postpone medical procedures.”[7] The increase in patient financial responsibility combined with the poor economy have contributed to the year over year decline in physician visits[8]  and  an unprecedented decline in admissions to not-for-profit hospitals.[9]

Increased Regulatory Oversight on Private Health Plans Will Create Downward Pressure on Provider Rates

The healthcare reform environment has not been kind to the private insurance companies. A number of states have laws or are preparing legislation to enable their insurance commissioners to block or reduce proposed premium increases.  In addition, PPACA gives the HHS Secretary the authority to regulate excessive rate increases.  Last year in Massachusetts, when proposed rates of increase in private insurance premiums were rejected by the Department of Insurance, the insurance companies proposed freezing or reducing payments to hospitals and large physician groups.[10]

The Cost of Physician Integration

The mad dash towards the development of ACOs will only exacerbate the cost issues in most health systems. The infrastructure costs associated with forming and operating a high-functioning ACO are significant and return on this investment is uncertain at best. The law stipulates that ACO’s will be rewarded for improving quality and reducing cost. The majority of these cost reductions will come from reductions in the volume of specialty consultations, high-end procedures and hospital admission.  There is no evidence that the health system’s “shared savings” payments from its ACO efforts will offset the infrastructure costs, the loss in volume, revenue or the political capital being invested in this effort. 

If You Keep Doing the Same Thing, Don’t Expect Different Results

Many health systems continue to operate as though cost-shifting will remain a viable strategy in the long term. Their primary focus is fiddling with ACOs as their organizations begin to bend under the stress of flat to declining revenues.  A new radically-intense focus on the cost of care is essential if a health system is going to succeed in the future.  Getting in shape for 2016 will require the following:

1. Define the efficiency targets for the organization and stick to them. Leadership is critical for setting the course for the organization.
2. Engage the physicians and hospital staff in discussions about the need to significantly reduce the cost of care in the organization.
3. Hold all members of the organization (including medical directors) accountable for:
   
   
   1. non-negotiable, performance based, cost budgets based on industry best practices and
   2. attracting profitable growth in their service lines
4. Develop a plan to reduce the cost structure of the organization to breakeven on Medicare rates. Note: Private payers will continue to pay at rates above Medicare but the ability to absorb declining Medicare margins through cost shifting will be limited.
5. Rationalize your portfolio of services and facilities, eliminating duplication and divesting of services that generate deficits  the organization can no longer afford to absorb.
6. Workforce reductions will not generate sufficient savings. Employ established redesign methods e.g., LEAN to eliminate waste and unnecessary variability of care.
7. Use objective critical analyses to ensure optimal performance of IT, revenue cycle, supply chain and clinical documentation systems. This usually requires an audit by an independent third party
8. Using physician leaders,  create a culture within the employed physician group that is aligned with the objectives of the health system.
9. Begin a process of true clinical integration with your physicians focusing on the basics of  redesigning the delivery of care, but don’t try to be an ACO by 2012. Most health systems will not be ready by 2012.  The only thing worse than not having an ACO, is operating an ACO that fails to achieve desired results.  Eventually  every health system will be held accountable for their cost and quality, either on a per episode or per capita basis but most current models of clinical integration involving retrospective review will not be sufficient.  Becoming an effective clinically integrated organization will take time, discipline and ultimately a cultural change among members of the medical staff. Critical success criteria for  clinically integrated  delivery systems must include the following:
   
   
   1. Physicians in critical specialties must participate and be willing to standardize their clinical practices based on the best science in medicine.
   2. All providers must be able to share an EHR that includes hardwired point of care protocols.
   3. There needs to be sufficient primary care capacity using extenders as the first line of care.
   4. Engaged physician champions must drive the process.
   5. There should be a programmatic approach to chronic diseases such as diabetes, CHF etc.
   6. Hospitalists, intensivists and other key physicians in the care process must be trained in the latest care delivery techniques and be evaluated based on cost, quality and service metrics.
   7. Physicians that do not meet key cost and quality metrics must be sanctioned.
   8. There must be an infrastructure able to manage the delivery system, monitor metrics and report outcomes.

The healthcare delivery system will not change overnight. Organizations that begin repositioning today can phase in the cost reduction strategies necessary to succeed under the post-reform environment.  Transforming a health system will be expensive.  Healthcare leaders will need to optimize income in the fee for service delivery system in order to fund long term investments in their physicians, IT systems, process redesign, clinical integration, etc. The irony is that the primary source of the dollars to fund this transformation will come from cost shifting... get it while it lasts.

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[1] AHA; Trend Watch Chartbook 2010, Table 4.4

[2] Center for Medicare Services (CMS);  Richard Foster Memo | Apr 22, 2010, Table 2

[3] Medpac; Report to Congress: Medicare Payment Policy| Mar 2010; Hospital Inpatient and Outpatient Services, Assessment of Payment Adequacy, Updating Payments,  pp 41-66

[4] Medpac; Report to Congress: Medicare Payment Policy| March 2010; Hospital Inpatient and Outpatient Services, Assessment of Payment Adequacy, Updating Payments,  pp 60

[5] Commission on Medicaid and the Kaiser Family Foundation;  A Look at Medicaid Pending Coverage and Policy Tends Results for a 50-State Medicaid Budget Survey for State Fiscal Years 2010 and 2011; Prepared by Vernon K. Smith, Ph.D., Kathleen Gifford and Eileen Ellis, Health Management Associates; Robin Rudowitz and Laura Kaiser,  | Sep 2010

[6] Mckinsey Quarterly; The Next Wave of Change for us in Healthcare Payments| May 2010,  page 2

[7] Reuters; Cost-Sharing Health Plans Lead Poor to Make More Tough Choices | Nov 23, 2010

[8] www.AMEDNEWS.com; American Medical News | Sep 20, 2010

[9] Moody’s; Flat Admissions Put Pressure on Not-for-Profit Hospitals | Oct 20, 2010

[10] Boston Globe, Insurers May Slash Rates to Hospitals | May24, 2010

Is There Life After Mandates?

By Kim Bellard, March 29 2012

This week the health policy, legal, and political worlds have been focused on the Supreme Court hearing oral arguments about the constitutionality of the Affordable Care Act (ACA).  If the passage of ACA was a once-in-a-generation piece of legislation, the Supreme Court review has been the inevitable sword of Damocles hanging over it.

After two years, ACA remains unpopular, with roughly equal percentages of the population opposed to it as supporting it (see, for example, Pew or Kaiser Family Foundation surveys), with the mandate requirement of the bill driving much of the unpopularity.  Ironically, the provisions that health insurers must cover all comers, without preexisting condition exclusions, are widely popular, even though the mandate was included explicitly to offset the risk of those provisions. 

I have to confess that the mandate never bothered me too much.  I’ve been following health policy long enough to remember that the idea of a mandate is neither new nor a Democratic proposal; it has as many Republican roots as Democratic.  I also remember that candidate Obama opposed the mandate before he became President.  Still, the slippery slope – aka, the Judge Scalia “buying broccoli” – arguments are not without merit: where does the federal government draw the lines of its authority?  The Solicitor General Verrilli had no good response for that line of questioning, which may have doomed ACA.  In the oral arguments earlier this week, several of the Justices showed skepticism towards the mandate, but were less clear about its potential severability – i.e., can ACA survive without the mandate?

There are two reasons why I’ve never been too troubled by the mandate.  For one, it’s not that strong a mandate in the first place.  The mandate never applies to low income individuals – who are most likely to be without insurance – and the penalty for not having insurance caps out at $2000 per family/2.5% of family income.  Depending on one’s age and income, not having insurance might be a rational trade-off; the mandate won’t sweep all those low risk young people in.  Despite having a mandate there for five years now, The New York Times recently reported that 120,000 residents of Massachusetts – some 2% -- still remain without insurance, of whom only 48,000 paid a penalty, so we shouldn’t expect ACA’s mandate to work miracles either.

More importantly, the mandate is, in my mind, less important than the subsidies.  Despite the horror stories trotted out by the Administration and other supporters of ACA, by far the vast majority of people who lack health insurance lack it because they cannot afford coverage, or choose not to buy it – not because they cannot qualify for it.  As evidence of this, HHS admits that only 50,000 people have enrolled under the high risk pools set up by ACA as an interim measure – far short of the 375,000 initially projected.  Think about that: 50 million uninsured, and the most optimistic estimate projected less than 1% of them would take advantage of guaranteed access to health coverage – and those projections proved wildly high.  HS has tried dropping rates to entice more high risk individuals, but they’re not buying.  The problem isn’t access, it is cost.

There is considerable passion on both sides of ACA – people seem to either love it or hate it (and Kaiser Family Foundation says 40% think it has already been struck down!).  The law was carefully designed so that most of the taxes/penalties would not kick in until after the 2012 elections, yet here we are with ACA as one of the focal points of the election anyway, with the Supreme Court decision expected to be delivered in June, just in time for the final campaigns.   One likes to think that the Supreme Court will base its decision purely on the constitutionality of the law, as opposed to the desirability of what the bill accomplishes or the politics of the situation – but that would be naïve. 

Despite the pundits’ predictions, it’s pointless to predict how the Court will rule.  If the mandate does end up being stripped out, there are several options that could help take its place (assuming anything can get through the hyper-partisan Congress).  For example, simply keep the subsidies and the high risk pools.  We might need the health insurance exchanges to help set the market prices for the subsidies, but maybe not.  We could also allow uninsured persons an annual limited enrollment period, similar to how an employer plan operates, and as a last fallback we could always open up the Federal Employees Health Benefit Plan to uninsured citizens – it is one of the largest health insurance programs in the country and so could accept the risk, and it is already closely overseen by the federal government. 

Of course, with a small shift in the political winds, conservatives may find themselves hoist by their own petard – instead of a mandate to buy private coverage, some future Congress could pass a broad-based tax to fund universal coverage, which would almost certainly be constitutional.  Such a program could come with a public option – or simply with “Medicare for all.”  Some cynics think that has been the goal of ACA all along.

I can’t help but to equate, on some level, the opposition to a mandate to the recent (and ongoing) furor over covering contraceptives.  Opponents of contraceptive coverage do not seem to recognize a difference between being required to pay for something they object to from being required to do that something themselves.  We all pay for things that we may morally object to: my federal taxes pay for members of Congress to go on junkets, my state taxes fund the death penalty, and even my auto insurance premiums subsidize premiums of drivers with DUIs.  I don’t approve of those actions, but I’m not forced to drive drunk or to perform the lethal injection.  It’s the same for subsidizing other people’s contraceptive coverage, or coverage generally.  People who live in a democracy, particularly the uniquely American version of democracy – have to accept that they don’t always get their own way, that compromise is necessary.  Other people have rights too.  Democracies require shared sacrifices.

The sad thing about the debate on the mandate, like ACA in general, is that it simply doesn’t address the real problem: exploding health costs and how to reshape our health system to better deliver value.  Mandates and insurance reform should be corollaries to the outcome of that debate, not the core of the debate.

Managing Medicaid Patients with Physical and Behavioral Health Dual Diagnoses through Advanced Analytics

By Claire Thayer, March 28, 2012

MCOL’s Healthcare Web Summit announces a complimentary webinar event, co-sponsored by Elsevier/MEDai: Managing Medicaid Patients with Physical and Behavioral Health Dual Diagnoses through Advanced Analytics, scheduled for Tuesday, May 1st, 2012 at 1PM Eastern.  This webinar will provide a high-level briefing on how using a combination of analytical tools can be used to improve clinical and financial outcomes in state Medicaid programs, particularly for high-cost, high-risk Medicaid beneficiaries with dual medical and behavioral diagnoses.

More information: http://www.healthwebsummit.com/medai050112.htm

Fail to Prepare, Prepare to Fail

By Lindsay Resnick, March 27, 2012

For health plans looking at the period leading up to the Affordable Care Act’s 2014 big launch, it’s a critical time. We’re about to see the most jarring market reforms ever. Even with the uncertainty of the Supreme Court decision and 2012 election, can Plan’s really afford to sit on the sidelines and watch valuable time tick away? The retailization of healthcare is coming, and preparation is key.

Which of reform’s changes are going to stick…which will fade away? How will existing competitors react…which new ones will appear in your markets? Can you move from a B2B to B2C marketing culture?

Tough questions need to be asked (and answered) about legacy core competencies in tomorrow’s reformed marketplace. In other words, sustainability of your health plan’s value chain—the series of individual activities within your enterprise that when linked together, combine to add comparative value to a final products or services.

It’s time for a serious look at four critical areas of focus.  Here are some questions to spark internal debate and begin an ACA transformation assessment:

1. Brand Position What’s your unique selling proposition in a reformed marketplace likely to see increased competition and disintermediation the individual and small group markets by Exchanges?
2. Customer Segmentation Are you quantifying and profiling new customer segments that you’ll be serving in 2014: previously uninsured, pre-ex time-bombs, newly subsidized, abandon employees, Medicare boomers, etc. to be sure you have the right product mix?
3. Customer Acquisition Are marketing’s multi-channel lead generation tactics (e.g., traditional direct response, digital, social media, mobile) being optimized across all distribution outlets (e.g., field agents, telesales, online, mobile, retail)?
4. User Experience Is your health plan delivering a personalized customer experience driven by retention metrics and built around superior member engagement using a managed touchpoint discipline?

Retail healthcare, product standardization and price transparency levels the playing field. Health plans need to refresh their toolkit of customer acquisition and retention tactics. It means protecting and expanding relationships with their existing customer base across product-lines and market segments. And, to grow market share it means strengthening direct-to-consumer marketing tactics and bolstering sales distribution to facilitate (and influence) customer choice.

For a free copy of the Solutions Brief, "Healthcare Reform Readiness: A Transformation Toolkit", click here:  http://bit.ly/z3VLkE

The 3rd Annual Contracting Web Summit

By Claire Thayer, March 23, 2012

MCOL’s Healthcare Web Summit announces The 3^rd Annual Contracting Web Summit, scheduled for Thursday, May 10th, 2012 at 1PM Eastern.  The Third Annual Health Plan Contracting Web Summit will address value based contracting, bundled payments, readmissions financial incentives and more. Join us for the live 90 minute webinar and also access pre-recorded sessions featuring national experts providing key insights, trends, strategic recommendations, actionable intelligence and more on these critical topics.

More information: http://www.healthwebsummit.com/contracting.htm

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. “

Health Plan Readmission Strategies: Contracting and Care Management Approaches

By Claire Thayer March 17, 2012

MCOL’s Healthcare Web Summit announces Health Plan Readmission Strategies: Contracting and Care Management Approaches, scheduled for Wednesday, May 9th, 2012 at 1PM Eastern.  Health plan readmissions management encompasses a variety of approaches that often incorporate new provider payment structures, data tracking, education and engagement. Some initiatives are designed for specific care delivery settings, while others are system-wide programs. Please join Drs. Joe Gifford and Robert Herr from Regence, and Dr. Brian Wolf from BCBSRI as they provide a Medical Director's perspective on aspects of their organization's current approaches to drive accountability by reducing unnecessary readmissions.

More information: http://www.healthwebsummit.com/readmissions050912.htm

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. 

Health Plan Readmission Strategies: Contracting and Care Management Approaches

By Claire Thayer, March 14, 2012

MCOL’s Healthcare Web Summit announces Health Plan Readmission Strategies: Contracting and Care Management Approaches, scheduled for Wednesday, May 9th, 2012 at 1PM Eastern.  Health plan readmissions management encompasses a variety of approaches that often incorporate new provider payment structures, data tracking, education and engagement. Some initiatives are designed for specific care delivery settings, while others are system-wide programs. Please join Drs. Joe Gifford and Robert Herr from Regence, and Dr. Brian Wolf from BCBSRI as they provide a Medical Director's perspective on aspects of their organization's current approaches to drive accountability by reducing unnecessary readmissions.

More information: http://www.healthwebsummit.com/readmissions050912.htm

Reducing Readmissions: Collateral Effects

By Claire Thayer, March 13, 2012

MCOL’s Healthcare Web Summit announces Reducing Readmissions: Collateral Effects, scheduled for Thursday, March 29th, 2012 at 1PM Eastern and co-sponsored by Payers & Providers.  Changes to the Medicare program will financially penalize hospitals whose patients are readmitted within 30 days of their discharge. The readmission penalty affects other providers as well, including physicians and hospitalists in particular. Join Warren Hosseinion, M.D., the chief executive officer of the hospitalist firm Apollo Medical Holdings and Daniel C. Cusator, M.D., vice president of The Camden Group, as they discuss upcoming changes in the finance of hospital readmissions, and how the effects will ripple far and wide.

More information: http://www.healthwebsummit.com/pp032912.htm

The Microinsurance Opportunity - Understanding the market and its implications

By Claire Thayer, March 12, 2012

MCOL’s Healthcare Web Summit announces The Microinsurance Opportunity - Understanding the market and its implications, scheduled for Thursday, April 19th, 2012 at 1PM Eastern.  Microinsurance has emerged over the last decade on a global scale. First seen as a poverty alleviation strategy, it was embraced by donors and NGOs as a compliment to the burgeoning micro credit field. More recently commercial insurers and reinsurers have been more significantly involved.  Join Michael McCord, President of the MicroInsurance Centre and Rick Koven, an independent consultant working with the Centre, as they provide an understanding of the market and its implications for the emerging microinsurance opportunity.

More information: http://www.healthwebsummit.com/micro041912.htm

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

Pioneer ACOs: Quantifying Risks & Identifying Opportunities

By Claire Thayer, March 5, 2012

MCOL’s Healthcare Web Summit announces Pioneer ACOs: Quantifying Risks & Identifying Opportunities, scheduled for Wednesday, May 23, 2012 at 1PM Eastern.  This session discusses the elements of risk associated with Pioneer ACOs as well as potential strategies for controlling costs and identifying opportunities for savings. Organizations not participating in the Pioneer ACO program but either wishing to monitor Pioneer ACO issues and activities, or wishing to adapt applicable risk and cost control strategies discussed to other populations, can also benefit from this session.

More information: http://www.healthwebsummit.com/milliman052312.htm

Improving Chronic Care Outcomes: Depression Management Coaching

By Claire Thayer, March 3, 2012

MCOL’s Healthcare Web Summit announces Improving Chronic Care Outcomes: Depression Management Coaching, scheduled for Thursday, April 12, 2012 at 1PM Eastern.  This event is co-sponsored by the Center for Health Value Innovation.  Hear from leaders in the Center, Chief Medical Officer Jack Mahoney MD, and President Cyndy Nayer, along with Fred Newman, Founder and CEO of Interface EAP Coordinated Health Solutions. There are real-world outcomes to be shared, and questions that attendees will want to ask about outcomes-based contracting for emerging services.

More information: http://www.healthwebsummit.com/chvi041212.htm