Industry shoots holes in Senate reform legislation

After months of collaboration and cooperation, health insurers launched an assault last month on the health reform legislation moving through Congress. Just as the Senate Finance Committee geared up for a final vote on a 10-year, $829 billion bill, insurers charged that the legislation would increase premiums, encourage cost-shifting and do little to control health care spending.

Industry’s main complaint is that a feeble individual coverage mandate will encourage healthier individuals to forgo coverage, jacking up the cost of insurance for everyone else. The bill is projected to expand coverage to 94% of the public, and the penalty for not obtaining insurance is seen as too low to compel the “young invincibles” to sign up.

The analysis by PricewaterhouseCoopers for America’s Health Insurance Plans (AHIP) predicts that the cost of coverage will rise by an extra $4,000 for families in 10 years due to the soft coverage mandate, an excise tax on high cost “Cadillac” plans, additional taxes on insurers and providers, and cuts in Medicare provider rates that will aggravate cost shifting to the private sector.

Similarly, a report from Oliver Wyman for the Blue Cross and Blue Shield Assn. predicts that without a strong individual mandate, medical claims in the reformed individual market will be 50% higher in five years. Curbs on age rating will boost premiums on the young, while minimum benefit levels will increase costs by at least 10%. Although tax credits and subsidies will help lower income individuals and families purchase coverage, these won’t be enough to offset higher premiums.

AHIP president Karen Ignagni said at a press briefing that coverage in the “high 90s” is needed to establish a sufficiently broad pool to spread financial and medical risks. Ignagni argued the proposed legislation does too little to bend the cost curve and implied that hospitals and doctors need to absorb a bigger hit in order to reduce healthcare spending.

MORE TO THE STORY

Congressional leaders fired back at the insurer’s claims. Some threatened to revoke the industry’s long-held anti-trust exemption, which permits state, but not federal, regulation of insurance business.

Senate Finance Committee staffers attacked the studies for failing to consider other reform provisions that might actually lower premiums and costs, noting that reinsurance could spread risk and that catastrophic plans may attract more young healthy individuals. Tax credits and cost-sharing assistance, moreover, can lower the cost of insurance and existing plans will be grandfathered and won’t have to offer more costly benefits.

The cost-shift claim, according to Senate analysts, is particularly “specious” because it assumes that hospitals will shift the full amount of Medicare and Medicaid savings onto private insurance, a claim not supported by economic theory or by the Medicare Payment Advisory Commission. On the contrary, say reform advocates, the opportunity to cover more lives will boost future earnings for insurers, who thus will be able to absorb additional fees.

The complaints from insurers did not block the committee from approving its massive reform bill October 13. But industry sent a signal to those negotiating a final bill that they need to do more to cut spending, to broaden the risk pool and to compel all parties to contribute.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.

Secure membership in changing times

MANAGED CARE’S COMPETITIVE landscape has become rough terrain with no clear paths to follow. With enrollment falling and potentially detrimental health reforms hanging overhead, plans are looking to realize gains in emerging markets and retain current members through improved service.

“Service is an important competitive battlefield in the health-service business,” says Joseph Mondy, CIGNA company spokesperson.

CIGNA recently extended the hours of its service call center to 24 hours, seven days a week, to answer questions about claims, benefits and eligibility and to assist in locating network providers. Mondy says CIGNA is the first health plan to offer this service 24/7 to members and providers.

“We see the competitive field broadening,” he says. “Other non-traditional players are getting into health services, and we have to be able to compete with them, not just our traditional competitors.”

By rebalancing the workloads of the call center staff, CIGNA was able to extend the hours without incurring additional administrative costs, Mondy says. Select representatives are also proactively reading Twitter tweets to reach out to members who might benefit from their assistance through social media contact.

Job losses caused by the recession and the cost of insurance coverage are the two main factors causing health plans to lose enrollees. Large national insurers are reporting overall membership losses of 5% or more. Humana, for example, saw its fully funded group lives fall nearly 8% in the second quarter of 2009.

TAPPING INDIVIDUAL POTENTIAL

However, many speculate that the individual market has potential now, particularly with Congress still in the process of hashing out legislation to increase coverage in the near future and employer-sponsored coverage on a downward trend.

For Humana, membership grew 17% in the second quarter in HumanaOne, the company’s individual business unit. It began writing single policies in 2002 and now has 350,000 enrollees.

“We built the business unit from scratch in a three- to four-year period,” says Doug Bennett, Humana director of corporate communications.

Bennett recommends that plans maximize their Internet presence to connect with individuals seeking coverage. For example, he says, writing online content in plain language can make a site more search-engine-friendly.

Tami Quiram, HumanaOne director, says the individual market has been somewhat untapped because employees losing their group coverage tend to consider COBRA as their only alternative. Direct marketing and live call center assistance is the best way to reach that segment, she says.

“It’s really a retail business with people making independent decisions,” she says. “There’s nothing more consumer-centric than an individual making decisions about the tradeoff between premium and benefit.”

According to David G. Knott, senior vice president and global practice leader, Booz & Company, insurance exchanges—heavily advocated by health reform thought leaders—will offer plans opportunity in the individual and small-group market.

“That’s going to be an important change because it forms exchanges around purchasers who did not have much negotiating clout when they were buying benefits in the past,” he says.

Plans will need to improve their marketing, segmenting and selling in the individual market, even though most plans have largely focused on business-to-business relationships in the past. Building a brand with marketable products and offering post-enrollment service to individual buyers who don’t have a human-resources advocate will help differentiate plans in an exchange. Competitive exchanges could also drive prices down, however.

“For plans already serving those markets and relying on those segments for some of their profit margin, they also need to think through how they keep their profit picture in tact,” Knott says.

In addition to targeting the individual market for future enrollment growth, plans also have an opportunity to address underserved racial or ethnic segments. These groups are less likely to have health coverage and less likely to have a regular healthcare provider.

Regence BlueCross BlueShield in Seattle recently won a national award for its Conserjero program to help Spanish-speaking members navigate the healthcare system. It is the initial segment Regence has identified as an emerging market with growth potential. And it’s no wonder, considering Latinos are expected to comprise 30% of the U.S. population by 2050.

“For Latinos, it’s about family and community,” says Francisco Garbayo, assistant director of emerging markets. “We are great consumers, and we buy things for different reasons than the general population might. If you understand the culture cues of that market, you can build a campaign that addresses those cues.”

The Regence campaign reaches the Latino market through community avenues and involves the family instead of the typical individualistic marketing strategy, Garbayo says. For example, health fairs and community events offer opportunities to provide education about how the U.S. healthcare system works and to promote the company’s toll-free number for Spanish-speaking consumers.

According to Garbayo, the program has helped influence new business. In fact, employers with significant Latino populations have increased that group’s health plan enrollment to as much as 95% with the help of Conserjeroeducation tools.

“It’s a pretty healthy, young population,” he says. “One of the things you look for when you market is return on investment, and that comes in many forms. Brand loyalty, for example, is a huge advantage in marketing to a Latino population.”

IDENTIFY HEALTH DISPARITIES

Rhonda Moore Johnson, MD, medical director for Highmark Inc., anticipates more diversity in employer groups in the coming decades and believes member-centric service needs to address health disparities. There is an opportunity to identify and correct disparities, which begins with collecting racial and ethnic data from members, she says.

A policy brief from Mathematica Policy Research published last month found that employers lack awareness of healthcare disparities and are uncertain of the legal implications of sharing race data. Highmark asks for race data directly, but emphasizes that the information is optional and is only used for quality improvement.

“The business case is that all this information [about health disparities] is available,” Dr. Johnson says. “We know the trends in this country in terms of higher rates of chronic disease. We know the rates of care for minorities lag behind non-minorities for some chronic conditions.”

In 2009, Highmark saw an increase of 27% in Hispanic/Latino commercial PPO members who underwent colorectal cancer screening after receiving personalized education about the importance of colorectal cancer screening. According to Dr. Johnson, improvements in prevention like this wouldn’t be possible without the collection of the members’ data and the match up against clinical performance.

The New World of Joint Ventures

More than ever, we are seeing the need for ambulatory surgery center (ASC) companies wanting to partner with physicians to initiate honest dialogue early on in the process of structuring a private placement offering. Such dialogue includes discussions about the goals and objectives of the offering, as well as the specific challenges. Many physicians have experienced personal financial loss and they are sensitive to the current economic state of affairs. The good news is that ASC partnership opportunities often outperform more “traditional” forms of investing and this reality is not lost on the physician community. Along with the possibility of higher than average returns in ASC deals comes the challenge of increasing thresholds of guarantees for all parties involved, covering a broader landscape of the debt service.

In years past, it was much easier to secure financing for the line of credit, equipment and lease guarantees to develop a surgery center joint venture. The financial institutions are now taking a much harder look at the ASC management companies, the management teams and their management history when negotiating financial terms. In many cases, lenders are requiring recourse loans to protect themselves; whereas, in the past there have been more opportunities for non-recourse loans to finance these projects. The reason this change in lending policy presents a challenge to management companies whose model is based on a joint venture structure, is that now the physicians partners are being asked to personally guarantee their pro rata portion of the front end debt required to get these projects off the ground.

In the marketplace, we see this trend preventing some physicians from participating in a joint venture because in some cases they are required to personally guarantee 200 percent to 300 percent more than their initial cash investment. We are finding many physicians are not as comfortable signing on for additional debt beyond their initial cash outlay without an intimate knowledge of the mechanics of the deal and a significant level of trust with the ASC company and/or hospital/ASC joint venture partner.

Some of the terms of the debt service require patience and diligence on the part of the ASC representative negotiating on behalf of the entity. Yet, we are still seeing an active deal market with a successful level of participation from the physician investors. To overcome the recourse debt hurdle, ASC management companies are getting creative. One solution for a credit-worthy ASC manager is to guarantee the start up debt and charge a surety fee to the partnership. The surety fee, which is charged back to the partnership, is established at a fair market value and is similar to an insurance policy for the physician members. This arrangement can eliminate the need for the physician investors to personally guarantee additional debt, which makes these investments more attractive.

Securing the “right mix” of specialists as owners is also a strong selling point to potential buyers of the current center as this bolsters the physician’s commitment to perform procedures at the center. Having a restrictive covenant in place also enhances the outlook to potential buyers for future success.

Another trend we are seeing being discussed much more frequently by both hospitals and ASC companies who recognize the benefits of partnering with their medical community is the notion of investing in the real estate component of medical facilities and not simply in the operations. With the threat of legislation being passed that might preclude prospective physician ownership in designated medical facilities, conversations are being discussed with prospective physician partners about the unwind provisions of the private offering memorandum. I was recently at a hospital meeting where this exact discussion was being had among 20 current physician partners and an executive vice president of a large hospital system. One of the physicians offered the idea of swapping current shares in the whole hospital for newly created shares in a new medical office building adjacent to the new hospital should an unwind actually occur. The majority of the physicians in the room liked this idea and it was noted for further consideration.

For many of us in the ASC industry, we have thought that ASC partnerships would be immune from this type of legislative threat. An Office of the Inspector General-published Advisory Opinion 08-08 seemed to substantiate this position by indicating an interest in promoting, rather than restricting, the development of physician-hospital ASCs, so long as appropriate measures to protest against fraud and abuse are included. The OIG approved an ASC joint venture owned by a nonprofit hospital and a group of surgeons, even though the joint venture did not satisfy any applicable anti-kickback safe harbor guidelines for the ASC. Yet, the June 2008 MedPAC Report to Congress titled, “Reforming the Delivery System” stated that, “physicians who invest in facilities have a financial incentive to refer patients for additional admission or procedures….” The key here is the inclusion of the term “procedures” and not just admissions. While many feel this threat is unlikely in the short-term, ASC companies and outpatient hospital partners are encouraged to lobby at both the local and state level. As ASC Association president Kathy Bryant has advocated, members of Congress need to understand the benefits of ASCs: cost-effectiveness, high quality care and community benefits. The association also offers “tool kits” on their Web site at www.ascassociation.org/openhouse for the industry to utilize as a guide in developing their own events.

Having completed over 200 healthcare-related syndications, we at The Securities Group feel that these types of investments remain strong as viable alternatives or supplements to a diversified portfolio for physician investors. Successful deals we see created are approached with a few factors: the ability to be flexible and open to alternative scenarios to the “traditional model” of private offerings; to consider expanding the partners involved to include hospitals and/or real estate developers especially if real estate is included beyond the typical operations investment; initiating and maintaining clear, honest dialogue among prospective investors as a deal is being structured and soliciting their feedback throughout the development process; targeting and securing the right mix of physician partners; being both patient and creative with financial institutions as financing is being discussed and secured; and being active among local and state legislators about the benefits of ASCs for the community and the healthcare system as a whole.

Michelle Trammell is president and Chase Neal is vice president of The Securities Group, a privately-held broker/dealer firm specializing in healthcare partnerships with physicians.

Weight-Loss Drug Shows Promise and Other Health News

Experimental Weight-Loss Drug Successful in Clinical Trials

Contrave, an experimental weight-loss drug developed by Orexigen Therapeutics Inc., has been shown to significantly aid weight loss in three late-stage clinical trials, the Associated Press reports. Findings from two trials showed that patients lost on average 17.6 pounds and 17.5 pounds, respectively. A third trial involved people with type 2 diabetes and showed that patients lost on average 13.5 pounds, according to the AP. The three trials each lasted 56 weeks and about 3,800 patients in total participated. Orexigen announced that it plans to seek approval from the Food and Drug Administration for Contrave in 2010. Common side effects of the drug included nausea and constipation. A few patients experienced more serious complications, including gallbladder infection and seizure.

Read about weight-loss ingredients the FDA says may endanger your health, along with 28 weight-loss products that contain them.

10 Salt Shockers That Could Make Hypertension Worse

Does too much salt cause high blood pressure, or doesn’t it? Two new studies out yesterday in the journal Hypertension tip the scales in favor of reducing sodium, particularly for those Americans—1 in 4—who have high blood pressure, U.S. News’s Deborah Kotz reports. One study found that reducing salt intake from 9,700 milligrams a day to 6,500 milligrams decreased blood pressure significantly in blacks, Asians, and whites who had untreated mild hypertension. Another study found that switching to a reduced-salt diet helped lower blood pressure in folks with treatment-resistant hypertension. Cutting sodium intake, though, involves a lot more than setting aside the salt shaker. Kotz lists 10 foods high in sodium that could make hypertension worse. The culprits include cottage cheese, which may pack more than 900 mg of sodium into a 1-cup serving, and dill pickles—one of which typically contains 830 mg of sodium, Kotz writes.

Find out whether drinking alcoholic beverages can spoil your plan to lose weight. In June, U.S. News dished about the high-calorie offerings of popular restaurant chains. And consider why you should avoid dining out: Researchers have found that restaurants are full of environmental cues—from plate size to bread condiments—that encourage us to eat more.

Is a Cash-Only or Direct-Pay Medical Practice Right for You?

With the unemployment rate above 9 percent and some 46 million Americans lacking insurance, the market for affordable healthcare is ripe. There’s a growing movement toward cash-only medical practices, which do away with third-party billing and waiting for reimbursement and put responsibility for payment squarely on the patient. Cash-only, or direct-pay, medical practices cater to the uninsured or those with high-deductible health plans that kick in only for major expenditures. Across the country, there are now 500 to 1,000 family medicine practices operating on a cash-only model, according to one experts estimate. The cash-only model is based on the idea that rather than charging higher, so-called retail rates for uninsured patients while negotiating discounted rates with insurance companies for covered patients, it’s fairer—and possible—to offer flat and reasonable rates to all, U.S. News’s January Payne reports.

Here are some tips on getting affordable health insurance for young adults, along with a quick guide to health insurance lingo. Consider 7 ways laid-off baby boomers can find health insurance.

Selecting a GPO

The average supply and equipment spent for a surgery center could be hundreds of thousands of dollars per operating room per year. When supplies and equipment comprise the majority of your surgery center’s budget, it makes sense to focus on cost management. One way to effectively accomplish this is through a group purchasing organization (GPO) that best meets your needs. If you’re unfamiliar with GPOs, you should know that they are a key way to aggregate purchasing volumes to deliver the best pricing on supplies and equipment.

If you’re somewhat unfamiliar with your supply chain, here are some things that might surprise you:

• Operating an underproductive supply chain results in overspending.
• When your facility or system purchases supplies and equipment from a GPO, you pay a contracted, discounted price because the purchasing power is aggregated among thousands of surgery centers, physician offices, hospitals and IDNs.
• Spending months researching big-ticket pieces of equipment and then negotiating the price only to receive retail pricing results in overspend. A GPO can ensure your receive the best value that considers the total cost of ownership — pricing, technology warranty, service and upgrades.
• Receiving quotes from vendors on capital equipment without verifying accuracy is dangerous. At Broadlane, we have found vendor quotes are wrong nearly 60 percent of the time.

If you are wondering what you can do to improve your supply chain, selecting a GPO is probably the most effective and efficient method. I encourage you to examine all GPOs and supply chain alternatives to help deliver the best results for you. Some things to consider when making your selection include:

• How can you make sure the contracted supplies, equipment and services take ambulatory surgery center needs into account? Investigate whether your GPO has an advisory committee that includes ambulatory clients.
• Does the GPO determine contract pricing through volume commitment tiers? If the GPO requires the surgery center to achieve a certain volume of pricing to achieve lower prices, this can be a disadvantage, since large IDNs and hospitals obviously purchase a higher volume to achieve a lower contract unit price.
• How will you navigate purchasing through the GPO? Some GPOs offer dedicated account service for ambulatory clients. This helps when setting up the contract portfolio and learning about other special savings and services.
• Will you have access to special bulk or group buy opportunities with other GPO clients to achieve special pricing when purchasing large quantities? Many GPOs offer these opportunities to help lower supply and equipment prices even further.
• Can you buy capital medical equipment at a discounted price? Purchasing expensive equipment through your GPO oftentimes can present huge savings — the same savings a large IDN would receive.
• Will your GPO help you standardize and maximize discounts? Using different vendors for commodity items like alcohol preps, exam gloves and wound care is not efficient. Maximizing your discounts by standardization can deliver immediate, sustainable savings.

One final thought to leave you with is the change in procedure reimbursements and the rising costs of healthcare and supplies. To ensure the supplies and equipment you’re purchasing fit within new reimbursement guidelines, it is important to work closely with your GPO and their knowledge regarding purchasing and reimbursement.

David Ricker is president and CEO of Broadlane.

Perfect Storm of Economic Factors Make Management Services Essential

Industry Experts Sound Off

A proposed rule from the U.S. Department of Health & Human Services requires all physician practices and other providers to adopt a new ICD-10 code set by 2011, and use it for coding diagnoses on all HIPAA standard transactions. So we asked information technology experts from the ASC industry to respond to this question:

How can facility owners/operators mitigate the challenges and costs associated with potential practice management and billing system software upgrades?

Prepare now! Establishing cross-functional transition teams and plans now will help ASCs identify the impact of ICD-10 on key business processes. Begin speaking and negotiating with both payors and vendors to gauge their preparedness and determine what cost they plan to pass along to clients. If you haven’t yet automated procedure documentation and coding, do so now, as it will cut down on the time and cost of comprehensive staff education. Every vendor will likely have a different plan, timeline and cost structure. Finally, designate a monitor. By designating one individual to monitor changes to the mandate, an ASC can ensure the most appropriate use of resources to achieve compliance in a timely manner.

Sean Benson

Director of Marketing

ProVation Medical/ Wolters Kluwer Health

ICD-10 coding should not be a surprise to anyone in the healthcare management industry since it has been around since 1999 and its predecessors go back as far as 1900, when ICD-1 was implemented. The major challenges facing facility owners and operators will be in educating their clinical and coding staff to the new coding standards, dealing with the phased in adoption by different insurance carriers as with any new standard, and the readiness of their software vendor. The benefits projected by HHS are: more accurate payments for new procedures; fewer rejected claims; fewer improper claims; better understanding of new procedures; improved disease management; better understanding of health conditions and healthcare outcomes (no monetary estimate made); and harmonization of disease monitoring and reporting world-wide.

Ron Cousino

Director of Client Relations

Experior Healthcare Systems

I believe there are three actions that an organization can begin that will reduce the impact on converting to the ICD-10 code set. First, begin dialogue with your IT vendor now. Make sure they have a well-defined plan on how they will meet the requirements for filing claims and contingencies for the inevitable problems that will arise. Secondly, identify your primary payors and begin dialogue with them as soon as possible. Make sure your IT vendor is party to those conversations, too. There are going to be some payors that switch on schedule, others that may migrate earlier or later-you and your billing system have to be ready for those challenges. Finally, staff education will be critical. Understanding the terminology and the requirements will help spot problems before they can affect your operations and cash flow.

Craig Veach

Senior Vice President of Operations

Amkai

Now is the time to ask your practice management and billing providers about ICD-10 conversion. Ask if ICD code fields are “hard coded.” If they are: a warning sign. Also, ask about NPI conversion history. Vendors with properly structured systems finished the conversion early: in either 2006 or early 2007. If that isn’t the case: a second warning sign. Another major challenge will be education of coding staff. If your ASC uses a billing vendor, ask about training plans. If coders are on your staff, plan now for a major investment in education and training, and a substantial productivity hit during the transition.

Bill Gilbert

Vice President of Marketing

Advantedge Healthcare Solutions

The new ICD-10-CM codes incorporate better detail but will also greatly increase the complexity of coding with over 68,000 ICD-10-CM codes versus roughly 13,000 ICD-9-CM codes. This increased difficulty will invariably lead an increase in denied/rejected claims as all parties learn to use the new system. We believe that having digital charts will be extremely important during this transition by allowing facilities to better manage their revenue cycle. We have an application that allows facilities to cost-effectively digitize paper charts and significantly reduce time and effort necessary to resubmit rejected/denied claims. This faster turnaround results in quicker reimbursement and greater working cash flow to the center. The new coding system is necessary and we are working to make the transition as smooth as possible for our partners.

Jeff Blankinship

President and Chief Executive Officer

Surgical Notes

According to the World Health Organization (WHO), “It is not possible to convert ICD-9 data sets into ICD-10 data sets or vice versa. ICD-9 has 6,969 codes while there are 12,420 codes in ICD-10 (14,199 with the fourth-character place of occurrence codes in Chapter XX (External Causes of Morbidity and Mortality).” In our software system, we already accommodate the use of the fourth character in the ICD-10 code set. HST already has one strategy in place to mitigate the transition to ICD-10. One important point that may be missed in this discussion is that the payors and Electronic Claims Clearinghouses must also update their systems to properly handle the ICD-10 code set.  During this transition period, ASCs be on heightened alert to process any rejections and their associated causes. The best mitigation is for ASCs to be well-informed, educated and have processes in place that the entire business office staff can follow.

Tom P. Hui

President and Chief Executive Officer

Healthcare Systems and Technologies

Facility owners and operators need to confirm with their billing and practice management software vendor if their existing system will support both ICD-9 and ICD-10 and replace it with one that will have the capability prior to 2011. As with the NPI transition, many carriers may not be able to convert to the ICD-10 diagnosis system by the deadline and may still only support ICD-9. Software systems will need to support both versions and provide the capability to select either one, so that claims can be submitted to the carriers in the right format to ensure that they will be processed and paid.

Mel A. Gunawardena

Chief Executive Officer

Medigain

The impact to healthcare IT is vast, touching virtually all functions including registration, clinical, quality, billing and reporting. Vendors must aggressively plan to ensure their products support ICD-10 end-to-end, as well as maintain legacy ICD-9 data. “Getting there” requires far more than modifying fields and reports; applications must also reflect many new provider and payer business rules and processes. Perhaps the largest technology consideration is the pre-requisite move to the X12 5010 transaction set. The transition will require significant application modifications plus extensive inter-system testing to ensure processes and workflow are not interrupted. The broad scope of this change will be greater than the HIPAA changes of 2003, since the focus on interoperability and the prevalence of interfaces has increased substantially in recent years.

Lindsay McQueeney

Director of Product Management

SourceMedical Solutions

Inventory Overload

Do you ever look at your crowded wire racks and store rooms and wonder if you will have room for anything else?  One way to reduce inventory is to standardize.  Standardization helps the bottom line by giving you more volume leverage when negotiating with suppliers and increases the amount of product turnover.  If you have multiple ophthalmic surgeons that have common preferences create a standard procedure pack that everyone can use and then order the additional supplies (blades, cannulas, drapes, etc) which may be required.  Boxes of blades and cannulas are much easier to store than a number of bulky procedure packs.  This may also help the efficiency of your staff since all surgeons will have more commonality of supplies thus reducing confusion.