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New News for Class 2

Bonus Payments to some California Providers

California doctors are to receive $50 million in quality bonuses from six health plans participating in a California coalition distributing the bonus to physicians groups in the state with the best results on standard
performance measures. Each plan, Aetna, Blue Cross, Blue Shield,
Cigna, Health Net and PacifiCare, determined their own payment levels
but all based the levels on groups' clinical quality, patient
satisfaction and adoption of information technology, said Tom Williams, executive director of the coalition, Integrated Healthcare Association.  Some 215 groups participated in the pay-for-performance program. This was the program's first year of pay-outs. Williams said the insurers have distributed an additional $50 million in pay-for-performance bonuses under programs not tied to IHA.  (Modern Healthcare 10-22-04)

Physicians Suing HMOS - "Silent PPO" Issues

See class 7 for more details on Class Action Lawsuits

This class action lawsuit can potentially impact an estimated 600,000 physicians who have treated patients insured by some of the biggest health plans over the past decade.  Medical associations and individual physicians from around the country have filed lawsuits claiming:  breach of contracts and defrauding physicians, in violation of the federal Racketeer Influenced and Corrupt Organizations Act (RICO).  Bundling, downcoding and arbitrarily denying claims are some of the methods physicians claim health plans used to reduce payments.  

District Judge Federico A. Moreno in U.S. District Court, Southern District of Florida Miami Division in September granted class-action status (certifying the physician lawsuits as a class action) to lawsuits filed against Aetna Inc., CIGNA Corp., Humana Inc., Foundation Health Systems Inc., PacifiCare Health Systems, Prudential Insurance Co., UnitedHealthcare and Wellpoint Health Networks Inc.

Growth of Outpatient Centers

HCA says it will look to freestanding outpatient centers for growth including possible
acquisitions of diagnostic imaging businesses as the uninsured and poor economy dampen patient volume.  HCA owns or operates 190 hospitals, including seven hospitals that are part of 50-50 joint ventures.  (Modern Healthcare 10/21/03 )

7/9/02 According to the July/August issue of Health Affairs, Healthcare spending nationwide averaged $3,759 per person in 1998 including insurance and out-of-pocket payments.   Healthcare spending varies widely among states, ranging from a per-person high of $4,810 in Massachusetts to a low of $2,731 in Utah.  Among other things, researchers attributed geographic variation to socioeconomic and demographic differences, insurance coverage, managed care penetration and diversity in practice patterns.  

6/5/02:  Per Chicago Tribune:  First Health Group Corp. has agreed to buy for $20 million the operations and assets from CNA Financial Corp. to administer health benefit services for the more than 1 million members of the National Postal Mail Handlers Union.  First Health, two months ago, beat out CNA for a five-year contract valued at $1.3 billion to administer the health benefit services. 

5/24/02:  Per Modern Healthcare:  A hospital in Pittsburgh, Allegheny General Hospital, decided to replace its anesthesiology group that has served it for 30 years because the anesthesiology group changed its policy of accepting all health insurance plans that the hospital accepts. The anesthesiology group, Allegheny Anesthesiology, said it rejected only Highmark's traditional Blue Cross and Blue Shield plan, which paid less than Highmark's managed-care plans.  A spokesman for the hospital's parent, West Penn Allegheny Health System, said, "The insurance issue is of key importance to us. If one patient had to pay out of pocket because of (the group's) decision, that is one too many for us." The anesthesiology group sued the hospital, Highmark and Western Pennsylvania Anesthesia last month claiming the three conspired to unlawfully recruit its employees.

The South Carolina Medical Association (SCMA) and its physician members (about 6,000 physician members) filed a lawsuit April 23 in state court in South Carolina alleging that CIGNA Health Corporation engaged in numerous unfair and deceptive practices designed to deny reimbursements to SCMA members who provide services to enrollees. SCMA's physician members allege CIGNA has routinely used a variety of means-including using black box edits that arbitrarily down code and bundle claims-that have the result of "delaying, denying, impeding, and reducing lawful compensation." SCMA argues that its physicians have been denied millions of dollars in lawful reimbursement for healthcare services provided to patients covered under CIGNA.

   See: SCMA's press release on the suit, at http://www.scmanet.org/

Study "Busts Myth" that Higher Medicare Spending Means Higher Quality Health Care

2/18/02:    According to an online report written by  Dartmouth Medical School researchers in Health Affairs Magazine, Medicare pays more than twice as much per beneficiary in certain parts of the country than it does in other areas, and the higher-spending in these regions has not translated into more effective care or better outcomes.  The article indicated that Medicare could save as much as $40 billion if spending in high-cost areas was reduced to the levels of more efficient
regions. According to John E. Wennberg, one of the study's authors, "It is a myth that more Medicare spending means better health, or longer life expectancy, and yet our Medicare system has been operating based on this myth for a long time" .

See the article at: http://www.dartmouthatlas.org

For some interesting reports see the Dartmouth "Quick Reports" giving state by state information on topics such as: variations in the use of discretionary surgery; variations in end of life care; Community Profile Reports that compares how the variables in the various Quick Reports compare to the United States average for each of the nation's 306 hospital referral regions.

DHHS Funding FY2003

2/10/02:   Secretary Tommy G. Thompson, Department of Health and Human Services (DHHS), commented on the four of the most prominent components of the President's budget for HHS: (1) bioterrorism, (2) health security for America such as Health Tax Credits, SCHIP, Community Health Centers, (3) welfare reform, and (4) special attention to disease prevention such as this year HHS and its agencies will aggressively take on preventing the onset of diseases such as diabetes -- a disease that clearly is preventable with a better diet and exercise and also prevention is an area of focus with 20 million in new money for a Healthy Communities Initiative -- a community-based approach to focusing on how we can live more healthily and prevent illness; and $84 million, including an increase of $10 million, to prevent health problems caused by medical errors. This patient safety initiative will help us use new technology and research to tackle the fact that up to 98,000 American die annually because of medical errors -- the wrong prescriptions, the wrong doses or mistaken combinations of drugs.

  Thompson announced that the administration's fiscal year (FY) 2003 budget proposal includes $489 billion in funding for DHHS, a 6.3% increase over FY 2002 levels. Funding for bioterrorism preparedness is one of the administration's top priorities, with a proposed budget of $4.3 billion for DHHS', a 45% increase above FY 2002 spending. The proposal provides $518 million to improve hospitals' ability to respond to biological or chemical terrorism and $100 million for bioterrorism training for healthcare professionals. Thompson said that modernizing Medicare will continue to be at the forefront of the administration's agenda and the FY 2003 budget proposal earmarks $190 billion over ten years for Medicare improvements, including a subsidized prescription drug benefit. During testimony February 6 before the House Ways and Means Committee, Thompson stressed DHHS' commitment to implementing the Medicare discount drug program proposed by the President last year to help seniors lower their out-of-pocket drug costs by as much as 25%.  

See  the DHHS press releases regarding the FY 2003 budget proposal, at: http://www.hhs.gov/news/press/2002pres/20020204b.html

3/5/02:  The the Centers for Medicare & Medicaid Services (CMS) published a final rule establishing payment rates under the hospital outpatient prospective payment system (OPPS) for 2002 (see:  March 1, in the March 1 Federal Register, 67 Fed. Reg. 9555). The rule makes technical corrections to a final payment rule issued on November 30, 2001.  Also, CMS ssued a final rule creating a new fee schedule for
ambulance service payments under Medicare using a pre-established fee for services provided as compared to payments for ambulance services on providers' cost and charges. The final rule requires ambulance service providers to accept the Medicare approved fee as full payment, which means beneficiaries will pay no more than 20% of the approved amount, after meeting their annual $100 Medicare Part B deductible.

CMS Issues Report On National Healthcare Expenditures

National Health Expenditures measure spending for health care in the U.S. by type of service delivered (hospital care, physician services, nursing home care, etc.) and source of funding for those services (private health insurance, Medicare, Medicaid, out-of-pocket spending, etc.). Expenditure estimates for 1960-2000 are currently available in data files or in published articles.  On January 7, 2002, the Centers for Medicare & Medicaid Services (CMS) issued a report on measuring national healthcare expenditures for 2000.  Healthcare spending increased 6.9% in 2000, up from 5.7% in 1999. Medicare spending was up 5.6% in 2000 following growth of only 1.5% in 1999. The largest rate of growth was in prescription drug spending, which was up 17.3%.

    According to National Health Expenditures highlights:

    Prescription Drug:    Increasing demand for drugs is related to a shift in payment from out-of-pocket sources to third parties that paid for 41 percent of prescription drugs in 1990 and grew to 68 percent by 2000. Together with the aging of the population and the introduction of new therapies for chronic conditions, this contributed to the number of retail prescriptions per capita rising to 10.5 per person in 2000, up from 8.3 in 1995. Because the number of blockbuster drugs entering the market slowed in 2000, the pace of growth eased slightly.

    Hospitals:    Spending for hospital care increased 5.1 percent in 2000, accelerating to $412 billion from a 1999 level of $392 billion. Hospital revenues grew 1.6 percentage points faster in 2000 as inpatient hospital discharges rose and outpatient revenues grew more rapidly. Hospital services have comprised a steadily smaller share of overall healthcare spending over time--32 percent of national health expenditures in 2000, down from 42 percent in 1982.

    Implications:    Several factors portend an increase in health spending trends: rising health sector wages, legislation that increased Medicare spending, reports of increasing insurance premiums through early 2001, technology, and consumer demand for less restrictive insurance plans. At the same time, signs of an economic contraction emerged. Consequently, pressure will mount on both public and private payers to pay for accelerating health care costs with decelerating revenues, forcing a reexamination of health care priorities in both sectors.

See the CMS report, at:    http://www.hcfa.gov/stats/NHE-OAct/.

12/05/01: HHS Office of Inspector General has posted Audit Reports - Pharmacy Review of Pharmacy Acquisition Costs for Drugs Reimbursed Under the Medicaid Prescription Drug Program of the Colorado Department of Health Care Policy and Financing

Most States use average wholesale price (AWP) minus a percentage discount,which varies by State, as a basis for reimbursing pharmacies for drug prescriptions. Therefore, the objective of this review was to develop for the Colorado Medicaid program an estimate of the discount below AWP at which pharmacies purchase brand name and generic drugs. In Colorado, our estimate of the overall discount below AWP for the invoice prices reviewed was 19.64 percent for brand name drugs and 65.32 percent for generic drugs. Our national estimates, included in reports previously issued, were 21.84 percent and 65.93 percent, respectively. We recommended that the Colorado Department
of Health Care Policy and Financing consider the results of this review as a factor in any future changes to pharmacy reimbursement for Medicaid drugs.

9/10/01:  According to an article in amednews.com, "Five Places to Pinpoint Shrinking Cash Flow," by Karen S. Schechter, there are five primary areas practices should investigate for shrinking cash flow:  

(1)    Cash Controls.   Reconcile differences between general ledger and billing reports.  Errors may be due to posting errors in the billing system or that deposits are not being posted to the general ledger.  Ongoing discrepencies indiate that formal cash managment constrols are needed and should be monitored daily.  Compare monthly patient revenues posted in the billing system to the amount posted in the general ledger to make sure the totals are the same and if not, reconcile the differences.

(2)    Billing.    Office visit/procedure charges typically should be submitted to insurance company within one work day and hospital and surgery charges typically within five days.  Be aware of filing limitations where if a claim is not submitted within a specified time frame the claim will be denied (usually 90 days).

(3)    Collections.    Start following up and collections on an unpaid claim within 30 days.  Work claims on a daily basis to ensure appropriate cash flow, such as follow up on claim considered not clean by an insurer or not received by an insurer or some other hold up. 

(4)    Accounts Receivable Management.    Look at key accounts receivable management indicators such as gross collection rate (receipts divided by charges, indicates the amount of money coming into the practice in comparison with charges; and for most specialties is typically 70% to 80%), net collection rate (receipts divided by the difference of charges minus adjustments; generally this rate should be greater than 90%), accounts receivable ratio (shows how fast the charges are being paid, this can range from 1.2 to 2.5 months depending on the specialty meaning that it takes an average of 36 to 75 days to receive payment and no more than 20% to 25% of the accounts receivable should be greater than 90 days old) and adjustment rate (indicates what percent the charges are being adjusted, the lower the percentage the better, and if the ratio is greater than 30% it would be prudent to look at the amounts in the individual adjustment accounts to see if there are any unusually large accounts).  High adjustment ratios and low collection rates could be caused by inappropriate fees or unnecessary write-offs such as not getting paid by the insurance companies what should be paid due to lack of knowledge as to what the insurance company should pay or not pursuing appeal activities.  Details matter and can impact cash flow! 

(5)    Managed Care Contracts.    Consider reviewing a group of explanation of benefits from several insurers and compare what the practice is being reimbursed with what insurers should be paying.  Also, consider using the top 20 CPT codes to compare the practice's top 5 to 10 payers are reimbursing and if any are the same as the charge consider increasing the charge to get the maximum allowed. 

Perspective

Choice superecedes costs.  Shift costs onto consumers.  Providers have more bargaining clout and are at healthplans throats.  Increase use of quality based incentives to compensate providers.  Substantial gaps between practice and evidence based medicine will result in investment in technology by health plans to analyze "physician and hospital practice patterns" to control costs through quality incentives.  From Kiaser "Health care Marketlace" at kaisernetwork@kaisernetwork.org:

7/13/01 HEALTH CARE MARKETPLACE 

Analysts Say Health Care, Prescription Drug Costs Driven By Consumer Demand; Expect Costs to Shift To Employees

Efforts to control health care costs have taken a "back seat" to demand for more "freedom and choice," health policy analysts said at a July 12 roundtable discussion hosted by the Center for Studying Health System Change. At the sixth annual discussion, titled "Wall Street Comes to Washington: Market Watchers and Policy Analyst Evaluate the Health Care System," panelists agreed that "declining corporate profits" will force employers to shift more health care costs to workers. Norman Fidel, senior vice president at Alliance Capital Management, said that employers will not "remain competitive" if they continue to "absorb" premium increases of 13% to 15% each year, adding, "[T]he only solution is to put costs on the consumer." Panelists also said the "landscape" of the health care industry has "changed dramatically" over the past five years: providers, particularly prominent hospital systems, have gained "bargaining clout" with health plans and are "at each others' throats." Panelists predicted that health plans will shift from "restrictive care management practices" and invest in technology to analyze "physician and hospital practice patterns" to control costs through quality incentives. "Substantial gaps" exist between "what is done in the marketplace by practicing physicians and what we know from evidence-based medicine to be more appropriate ... the extent that managed care companies can identify those gaps and help close those gaps through quality incentives ... can have a very positive impact on costs over an extended period of time," Merrill Lynch Managing Director Roberta Walter Goodman said (HSC release, 7/12). A kaisernetwork.org Webcast of the roundtable discussion is available online. 

12/3/01:  Section 4523 of the Balanced Budget Act of 1997 (BBA) provides authority for HCFA to implement a prospective payment system (PPS) under Medicare for hospital outpatient services, certain Part B services furnished to hospital inpatients who have no Part A coverage, and partial hospitalization services furnished by community mental health centers. The provisions of this section were further modified by sections 201 and 202 of the Balanced Budget Refinement Act of 1999 (BBRA).

All services paid under the new PPS are classified into groups called Ambulatory Payment Classifications or APCs. Services in each APC are similar clinically and in terms of the resources they require. A payment rate is established for each APC. Depending on the services provided, hospitals may be paid for more than one APC for an encounter.

The Centers for Medicare & Medicaid Services (CMS), formerly HCFA, (see class 10, New News) issued a final rule in November 30, 2001 Federal Register, 66 Fed. Reg. 59855, revising the Medicare hospital outpatient prospective payment system (OPPS) to implement applicable statutory requirements, including provisions of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000. The rule also describes changes to amounts and factors used in determining payment rates for Medicare hospital outpatient services paid under the prospective payment system. The rule, effective January 1, 2002, also announces a 68.9% pro rata reduction on transitional pass-through payments.

See:  http://www.access.gpo.gov/su_docs/fedreg/a011130c.html and see "Rules" under "Centers for Medicare and Medicaid Services"

According to the Chicago Tribune, (May 8, 2001, section 3, page 3), "Critics Changing Their Tune on AMA's Political Leanings":  Big HMOs get bigger despite the exodus of consumers from HMOs in Illinois.  Total HMO enrollment in insured plans fell 8 percent to 2.4 million last year from 2.6 million in 1999, according to the Illinois Department of Insurance.  "consumers are leaving pklans for less-restrictive plans, while smaller HMOs are shutting down or merging with larger players."  Blue Corss and Blue Shield of Illinois, Aetna Inc. and Humana Inc , 3 of the 5 largest HMOs in Illinois, had healthy increase in their enrollment last year.  

According to this article, some claim that the AMA is becoming more aligned with Democrats than with Republicans.  AMA critics claim that the Republican leanings two years ago of the AMA played a role in the firing of Dr. George Lundberg as editor of the journal at the time it published a study that found most college students did not consider oral sex as having "had sex" during Bill Clinton's impeachment proceedings.   

According to the Chicago Tribune, (May 1, 2001, section 3, page 3), "Advocate Health Plan May lose Life Support From Parent":  Advocate Illinois Masonic Medical Center is looking at various undisclosed options in regards to its Illinois Masonic Community Health Plan Corp. covering about 4,000 enrollees as it does not fit the business strategy of the hospital's new parent Advocate Health Care.  By law, Advocate is required to provide Community Health subscribers six months notice before terminating any contracts.  Advocate became the health plan's owner because of a merger earlier this year with Illinois Masonic Medical Center, which founded the HMO in 1984.  According to a recent filing with the Illinois Depart of Insurance, Community Health has been profitable, earning $402,680 last year on nearly $6.2 million in revenue.  

Like an increasing number of hospital operators around the country, Advocate is more interested in being a provider of medical care rather than a payer for care.  Foru years ago, Advocate sold its Health Direct health plan to Humana Inc. for about $20 million.  Advocate is the Chicago area's largest provider of care, it operates nine hospitals and has affiliations with more than 4,000 affiliated physicians.  

Also, according to this article:  doctors in training at Sinai Health System are proposing to the hospitals' management that would allow them to form a labor group without bring in in a union or another party to settle grievances.  The 160 residents at the west side hospital have formed a house staff organization they say will give them input on medical training and hospital operations.  The residents propose that instead of a union they are open to having a contract with Sinai which is the parent of Mt. Sinai Hospital and Schwab Rehabilitation Hospital, that would allow both sides to discuss a defined list of issues and if things can't be resolved then an outside arbitrator both sides have already agreed to is brought in.  

April 13, 2001:  The Health Care Financing Administration ("HCFA"), Web site Program Memorandum No. A-01-51,instructs Medicare intermediaries on how to calculate payment-to-cost ("PCR") ratios. The PCR ratios are needed to determine transitional corridor payments or transitional outpatient payments that restore some of the decrease in payment that providers could experience under the outpatient prospective payment system ("OPPS").
See the program memorandum at:
http://www.hcfa.gov/pubforms/transmit/memos/comm_date_dsc.htm and go to No. A-01-51; or
See: http://www.hcfa.gov/pubforms/transmit/A0151.pdf.

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