Health for life

Check out the three page article on "U.S. Health Cares Future" in the Marketplace section of the December 12 Wall Street Journal. Using personal stories of a doc, hospital CEO, insurance executive, human resources manager and a patient, the news piece portrays the blurring business lines between insurers, buyers and providers.  Mainstream readers of the Journal are likely to think the topic is both timely and novel.  Regular readers of the Disease Management Care Blog learned about his months ago.

Who are these five canaries in the health care coal mine, these bellwethers of the insurance business, these oracles of management and what are they telling us?

1. Dr. McCullough, a salaried physician with 28% of his income contingent on quality and satisfaction.  Some measures were imposed by the local Blues plan, which was passed through to the him by his employer.

Message: Purchaser and buyer control of physician reimbursement is already big and its growing.

2. Jim Taylor, a hospital CEO who cannot buy an electronic record system unless he merges with two other hospital systems.  If the merger is approved, the hospital will also be able to take on "warranty-style" payments from insurers.

Message: "Bigger is better" for capital-constrained hospitals.

3. Chris Day, an Aetna executive who got an Arizona health system to share insurance risk.  The main sticking point was the two-way mutual sharing of internal cost and contracting data.

Message: If insurers are willing to share internal pricing data, they must really mean it and think its an important success factor.

4.Robert Jacobs, the HR person, who linked about $10 per week of employees health insurance premiums to healthy behaviors (like tobacco) and quality test results (like blood cholesterol levels).

Message:  "Dont just stand there," say the employers, "do something."

5. Louis Kandor, an 86 year old man with advanced diabetes, who is being visited by a nurse who, in turn, is employed by a care management service provider under contract by his Medicare Advantage insurer.

Message: One key to mitigating risk for every insurer (except fee-for-service Medicare) is to use nurse-led care management.

While the Journal article doesnt spell it out, the DMCB believes the anecdotes can be distilled down into three useful insights:

1. Stakeholders are scrambling to demonstrate measurable outcomes to an increasingly educated and  skeptical public.  Thats the basis for physician pay-for-performance and premium surcharges.

2) Sharing proprietary insurance data is important.  Is information the secret ingredient that was lacking during the similar - and mostly unsuccessful - insurer-provider collaborations back in the 1990s?  Well see. 

3) For those hospitals that cannot or will not take risk, the next best answer is to merge.  That will mean economies of scale, access to capital and negotiating leverage.

ACOs and insurers discuss terms

The Disease Management Care Blog likes to think of itself as having achieved "critical mass." Now that its readership has climbed into the thousands (and Twitter is now well beyond 600), medical meeting organizers want to issue press credentials, medical journals are sending it embargoed previews and spammers are working particularly hard at getting maliciously-linked comments posted. The best upside for the DMCB, however, is its email correspondence with smart professionals who have insights that run contrary to the mainstreams confirmation bias.

Heres a gently edited email from one astute observer that the DMCB wanted to share:
 
While policymakers extoll the clinical integration virtues of ACOs and the PCMH, what goes unmentioned is that these vehicles often involve provider consolidation. While coordination of care and wasteful utilization might improve, does this mean that those entities could also amass considerable market leverage or become quasi-monopolies? Could that drive up costs?

I was at an specialty provider conference in early March where it was cited (in an admittedly unscientific member poll) that 25% of institutions surveyed had themselves been part of a consolidation or site of service change, mostly from community private practice to hospital-based setting. If physicians are not being employed outright, theyre entering into professional services agreements (PSAs).  Since this has to increase negotiating clout with insurers, the other locally competing providers are responding with an in-kind physician arms race.

Given this dynamic, what will happen when a system has a become a very efficient ACO and controls primary care with a locally dominant medical home network? Even if they fail to show any cost savings, will their ability to command favorable contracts be the key to economically surviving? Darwin would be proud of these long-beaked birds.

Are our federal and state governments prepared to reconcile the twin needs of integration and competition? I can’t help but think that regulators will be outmaneuvered by these increasingly powerful health care entities and that an unintended consequence of orm will be the increasing price points and the return of sticker-shock health care inflation.

Need an example of what is going on at the local level? Check out St. Lukes in Idaho and their ongoing battle with Trinity. St. Luke’s is a CMS designated ACO (on page 33) and is buying up assets left and right, employing physicians, and doing so in almost a direct anticompetitive way. I think that currently St. Lukes is doing a lot of forward thinking things, but if St. Luke prevails and Trinity does indeed go out of business as they state they will, it will leave a monopoly in that mostly rural state. When that happens, St. Lukes can set the price point.  Will they use that power to coordinate care or maximize revenue?

Believers in ACOs and the PCMH would do well to take a look at the Trinity perspective.

D.C. deals with health insurers

As Disease Management Care Blog readers are aware (for example, here and here), Obamacare forces health insurers to spend at least 80% (small group) to 85% (large group) of their premium income on health care, leaving only 15% for "other," including administrative overhead and profits. If that 80%-85% "medical loss ratio" (MLR) threshold is not met, insurers have to rebate the difference to their customers.

 While the White House has been happy to extoll the millions of dollars that were repaid to consumers (even though the individual checks were hardly eye-popping and then there is the risk that theyre taxable), the DMCB is interested in what actually happened to the commercial insurers.  Did they game the system and garner even higher profits?  Or, have they gotten their comeuppance, are now losing money and have to pursue other lines of business, like covering zombie attacks?

This article in the latest Health Affairs looked at that impact of the law when it went into effect on January 1, 2011.  The authors used NAIC data to examine the impact on the individual (N=1,219), small group (N=804) and large group market (N=750) insurers.

Individual, small group and large group numbers are broken out below. If there is a *, the change is statistically significant.

In the individual market, from 2010 to 2011:

Median medical expenses, as a percent of premium, increased      by 5.5%*.
Administrative expenses, as a percent of premium, decreased            by 2.6%*.
Profit (otherwise known as "operating margin" or the bottom line) decreased by 1.3%*. "For profit" insurers fared even worse, with a decline in operating margin of 2.2%* vs. their nonprofit competition with a decline in 0.8%.

2011 operating margins were overall negative:

Individual overall -0.1%.
Nonprofits:  -3.5%.
For profits:  0.4%.

In the small group market:

Median medical expenses increased by 0.7%.
Median administrative expenses declined by 1%*.
The bottom line increased by .5%. Nonprofits saw an increase of 1.2%* vs. the for profits having a small decline of .3%.

2011 operating margins were positive, ranging from 2.8% to 3.8%  across the non and for profits, respectively.

In the large group market:
Median medical expenses declined by 0.7%.
Median administrative expenses declined by 0.9%%*.
Profit increased by .7%*. Nonprofits saw an increase of 0.1%* vs. the for profits having a increase of 1.2%.

2011 operating margins were positive, ranging from .7% to 2.6%  across the non and for profits, respectively.

The DMCBs take:

Obamacare had a single digit impact on health insurers.  More was spent on health care and less was spent on administrative costs.  While the shifts were relatively small, those changes represent swings of hundreds of millions of dollars to the bottom line in an already thin margin business. If the purpose of Affordable Care Act was to beat up on the health insurers, it was more of a push than a shove.

Small and large group profitability increased and operating margins were positive, while the individual market struggled. As readers may recall, the inability of individuals to obtain coverage at any price was a big factor in the eventual passage of the Affordable care Act. While the future individual market may eventually benefit from an influx of healthy young "invincibles" armed with an accompanying bolus of insurance subsidies, Obamacare ironically hurt the individual market in 2011. If health care utilization didnt go down in 2011 as a result of the economy, it could have been a lot worse.

That tells the DMCB that, contrary to the insurers reports of doom and gloom, the 80%-85% MLR rule hasnt been a catastrophe.  On the other hand, it hasnt been good news for the individual market.  If the young invincibles dont 1) respond to the individual mandate, 2) use functioning insurance exchanges and 3) sign up, it could portend further stress on that sector of the health care economy.  No wonder the Obama Administration is pushing that so hard.

According to this The Hill article, President Obama took a break from tackling red lines, gun control, immigration orm, Trayvon Martin, the economy to make an appearance at a July 22 Obamacare promotion-planning meeting that included a host of A-list celebrities.  Theyll be needed to convince the young invincibles to pony up hundreds of dollars for health insurance that they dont want.

Despite the DMCB spouses unflattering assessment of her husbands media chops, the Disease Management Care Blog thinks it should have been in that White House room. 

It has a lot to contribute.

For example, American Idol finalist Jennifer Hudson was there.  How about a new CMS-sponsored talent show, says the DMCB, that is hosted by Ms. Hudson, called American Muddle? Enter the early crooning favorite, Hope Igeddadok, singing a reprise of that Dire Straits hit, "Money for Nothing."

And what about Improv comedy artist Amy Poehler? After a great stint at SLN, she went on to star in the hit comedy show, Parks and Recreation.  The DMCB suggests a pro-Obamacare commercial that features Deadlock and MakeItUpAsWeGoAlongination.

And fresh from being tossed under the campaign bus by Valerie and Michelle, Oprah Winfry is back in play. Given Oprahs masterful interview of disgraced bicyclist Lance Armstrong, positively spinning Obamacare and the IRS should be a piece of cake. First up, the IRS Chief Counsel!

Alicia Keys was there and can she sing! She can be this "Girl Is On Hire" for Obamacare in an MTV video-advert.

And it was no accident that Bon Jovis people were there, what with a song list that includes "Livin on a Payor," "Panel Says Dead or Alive," "Its My Right," "You Give Hope a Bad Name," "Runaway Costs," "Bad Medicine" and "Shot Through the Heart and Well Still Pay."

Last but not least, folks must have been excited about Will Ferrell. Since his Bush impersonation has run its course, Ron Burgundy may be the best choice for some faux-news insights.  He can provide periodic updates on how the health insurance exchanges are going: "Theyve done studies you know," "Sixty percent of the time it works every time," "In a glass case of emotion," and "Stay classy, Obamacare."

If anyone in the White House is reading this, just drop an email.  The DMCB is ready to roll up its sleeves and help.

Maybe theyll put up a plaque honoring Mr. Obama?

The health care newsie Disease Management Care Blog thought it had seen it all.  Now this.......

In a striking policy about-face, the Obama Administration has adopted a market-based approach to setting prices and controlling utilization. Everyone agrees that letting prices rise in response to demand disproportionately harms lower income Americans. We also know its another drag on an already fragile economy. Last but not least, its vexing the Presidents political base. 

Nonetheless, the Administration is being resolute. Putting political expediency aside, the White House has courageously put their faith in an unabashed conservative philosophy by arguing that long-term benefits of higher prices will ultimately pay dividends in wise consumerism, innovation and quality.

Wow.

As a result, the White will House forgo any "demand" or "supply" side interventions.  There will be no price regulation based on prevailing costs and projected outcomes. Theyll spurn the suggestions of myriad legal, economic and regulatory expert panels.  Theyll resist activist calls to expand the role of the Federal government. 

Politics?  Sure, but the machinery in West Wing knows how to manage that. They know a normally friendly news media will report some inflammatory anecdotes about how low income Americans are being forced chose among lifes other basic necessities. Theyll just ride out the news cycle and counter with populist attacks about "profits" and "fat cats" and "corporate jets."  While the messy politics sort themselves out, Mr. Obama has faith: supply, demand and the marketplace will take us where we need to be.

Is this about health care you ask?  Hardly.  Education?  Nope.  Housing? Negative. The Disease Management Care Blog points out that this is the Administration posture on an arguably equally important part of our collective national well-being: transportation and energy prices.  Mileage standards and Detroit bail-outs aside, The DMCB thinks this is quite a reversal.

A harbinger of things to come?  We can only hope. 

Image from Wikipedia