Yesterday, another U.S. Court of Appeals (this time the Second Circuit which sits in New York City) held the Defense of Marriage Act is unconstitutional, Reuters reports. Here’s a link to the 2-1 decision. At this point the U.S. Court of Appeals for the First Circuit which sits in Boston and a federal district court which sits in San Franciso have reached the same conclusion. Both of those cases are pending before the Supreme Court which has not yet decided to hear the cases. But the FEHBlog is sure that the Supreme Court will take the case and ultimately reach this result principally on federalism grounds because the Constitution vests the States with authority over domestic relations. Less than ten states currently recognize same sex marriage. If the Supreme Court holds against the statute, then same sex spouses would be entitled to enroll under FEHBP self and family coverage.

The Highmark saga continues. Recently, the FEHBlog noted that Highmark’s deal to invest in a major Pittsburgh hospital chain, West Penn Allegheny, had fallen apart when West Penn walked away from the deal. Healthcare Finance News reports that earlier this week, Highmark, a Blue Cross licensee, had committed $65 million to create a “strategic affiliation” with Erie PA based St. Vincent’s Health System.

Following up on news articles about how hospitals may be using electronic medical records paid for by the Government (most recently to the tune of $7.7 billion) to increase their Medicare reimbursements, EHR Intelligence reports that four Senate leaders have sent HHS Secretary a letter about the program inquiring about this issue and requesting a meeting. This letter comes on the heels of a House leadership call to halt the program according to Modern Healthcare.

The FEHBlog has noted Medicare and health plan efforts to reduce surgical complications. Modern Healthcare reports that “Efforts to reduce post-surgical complications such as infections could lead to substantial drops in hospital revenue, according to a study published online in Health Affairs that examined the business case for such programs.”  The study’s authors recommend to tactical responses — increase patient volume and negotiate shared savings agreements with health plans.

Well, we creep closer to the beginning of the next Federal Benefits Open Season on November 12, and the FEHBlog is shocked and chagrined to realize that he overlooked noting the release of OPM’s Open Season Significant Plan Changes benefits administration letter earlier this month. This annual letter provides tables of the FEHBP and FEDVIP changes for next year.  OPM also provided a set of FastFacts for enrollees affected by the changes.

While Congress is in recess until the beginning of Open Season, Kaiser Health News is reporting that Hill staffers are confident that a deal to avoid a 30% cut to physician reimbursement under Medicare Part B will occur in the lame duck session. That’s good because retroactive fixes to the sustainable rate of growth formula can wreak havoc on FEHBP carriers who typically have a large contingent of Medicare eligible enrollees.

Speaking of Medicare, the AMA News frets about the ongoing consolidation of Medicare administrative contracts from 15 numbered regions to 10 lettered regions. Medicare contractor changes in 2008 wreaked havoc on providers, and CMS is reassuring providers that the current transition will be much smoother.  The Medicare law requires CMS to recompete the contracts every five years. The FEHBlog noted in the article that

The newest Medicare contractor reforms are ending partnerships that have
been in place since the inception of the Medicare program. The
contractor Wisconsin Physicians Service, for example, had been the payer
in Wisconsin since 1966. On Sept. 27, National Government Services,
with corporate headquarters in Indianapolis, won the bid to administer
the Medicare program in Illinois, Minnesota and Wisconsin.

The FEHBlog made his first trip to Madison Wisconsin for a meeting at WPS in the late 1980s. Over the last decade, the FEHBlog has made several trips to Madison as his two daughters matriculated there.

Modern Healthcare reports an interesting healthcare business development — “Retail pharmacy giant Walgreens said it will deliver prescriptions to
hospitalized patients and manage their medications for the first 30 days
after they leave the hospital under new contracts with a dozen
hospitals and health systems.” It’s interesting that hospitals would turn over presumably lucrative pharmacy business to Walgreens. The article explains that the objective of the arrangement is to reduce readmissions within 30 days of discharge — now a Medicare penalized event. “Participating hospitals include Sarasota (Fla.) Memorial Health Care
System, Washington Adventist Hospital in Takoma Park, Md., and Marion
(Ind.) General Hospital.”

The Wall Street Journal reported this week that another new Medicare penalty is incenting hospitals to improve the food and hospitality services to patients. “Nearly $1 billion in payments to hospitals over the next year will be based in part on patient satisfaction, determined by a 27-question government survey administered to patients. Hospitals with high scores will get a bonus payment. Those with low ones will lose money.”

Congress remains on the campaign trail until November 12. The FEHBlog has been reading that further major ACA and related  regulations such as the omnibus HITECH Act rule will not be issued until sometime after the November 6 election which is not that far away.

The FEHBlog in an effort to illustrate that he has a life outside the law waxed rhapsodic about the National’s win on Thursday. The FEHBlog was in the ball park on Friday but that Nationals loss is best described as the ecstasy and the agony. Suffice it to say that the FEHBlog has faith in the National’s management and the team and there will be another season. (Also with respect to the Redskins which are still playing, RG3 is the real deal).

The FEHBlog ran across a useful website — statereforum.org —  in the course of reading an AMA News article kvetching that most of the 24 states (including DC) have selected an essential health benefits benchmark using a popular, cost effective small employer plan. The article notes that “various medical organizations, such as the American Academy of Pediatrics and the American Medical Association, have voiced concerns that too many of the private benchmark plan options available to states would fall short on needed children’s benefits.” The article concludes that if the state benchmark does not include all of the statutorily required benefit categories including pediatric oral and vision care then federal officials can fill that gap.


The AMA News also reports on the uptick in office visits to primary care physicians in particular crediting the ACA’s preventive care mandate in part. The article illustrates the continuing importance of the fee for service payment model to doctors.  The FEHBlog has been reading about the problems created by that model for at least 20 years, but it continues to hang on. Two experts opine in the Wall Street Journal this morning that “The ultimate success of these Medicare innovations [mandated by the ACA to move away from the fee for service system] is unlikely unless the care-delivery system is controlled by salaried, primary-care physicians groups held accountable for staying within a budget,” similar to Kaiser Permanente. 

The FEHBlog is lucky to have been able to purchase post-season Nationals tickets due to his partial season ticketholder status and some moolah. He went to this afternoon’s crucial game against the St. Louis Cardinals with his son John. The game was tied one – one in the bottom of the ninth inning and Jayson Werth, the National’s lead off hitter, came up to bat. On the thirteenth pitch of the at bat, Werth hit a home run into the National’s bullpen. It was an electrifying moment. I don’t think that I have ever heard such a roar from a crowd. The crowd didn’t want to leave. The FEHBlog is looking forward to tomorrow night’s game which will decide whether the Nationals or the Cardinals will face the San Francisco Giants for the National League championship.

Modern Healthcare reports that

The federal government’s 4-year-old nonpayment policy for
hospital-acquired conditions has had no measurable effect on rates of
several types of healthcare-associated infections specifically targeted
by the program, according to a study published in the New England Journal of Medicine.

In
October 2008, the CMS stopped reimbursing hospitals for 12
hospital-acquired conditions, including patient falls, late-stage
pressure ulcers, air embolisms and certain healthcare-associated
infections.

Either the sanctions are not strong enough as one blogger commented or the hospitals don’t have as much ability to avoid these infections as policymakers expected. The FEHBlog’s gut reaction is that the latter conclusion is more likely the correct conclusion than the former.

In more good news, Business Insurance reports that changes sparked by the Affordable Care Act is causing medical malpractice insurance premiums to increase.

Medical malpractice coverage costs are expected to experience
modest increases in the short term, driven upward in reaction to the
ongoing consolidation of hospital physicians’ offices and other
providers in the U.S., due in large part to dramatic changes to health
care delivery and reimbursement models. 

Of course, medical malpractice premium increases cause providers to ask for more money from the health insurers.

And because this is the FEHBlog, it should be noted that Kaiser Health News is giving advice on whether to drop FEHBP coverage for a Medigap plan.

Congress of course remains on the campaign trail until next month. Congress now has one more issue to add to its lame duck session’s agenda — federal regulation of compounding pharmacies. The recent deadly outbreak of fungal meningitis has been traced to a large scale compounding pharmacy in Framingham, Massachusetts called the New England Compounding Center. The FEHBlog was bowled over yesterday when he read a New York Times article explaining that

some doctors and clinics have turned away from major drug manufacturers and have taken their business to so-called compounding pharmacies, like New England Compounding, which mix up batches of drugs on their own, often for much lower prices than major manufacturers charge — and with little of the federal oversight of drug safety and quality that is routine for the big companies. “The Food and Drug Administration has more regulatory authority over a drug factory in China than over a compounding pharmacy in Massachusetts,” said Kevin Outterson, an associate professor of law at Boston University.

The federal Food and Drug Act contemplates that state regulated pharmacies may occasionally combine ingredients into compounds. However, some companies like the New England Compounding Center have engaged in large scale compounding which should but doesn’t currently fall under FDA oversight. Regrettably, the New England Contaminating Center allegedly distributed impure injectable steroids across the country. The company now has recalled all of its compounds, and according to the Hill, Sen. Richard Blumenthal (D Conn.) is asking the FDA for its legislative recommendations.

The Affordable Care Act created accountable care organizations (“ACOs”) within the Medicare Program. Healthcare.gov defines an ACO as “a group of health care providers who give coordinated care, chronic disease management, and thereby improve the quality of care patients get. The organization’s payment is tied to achieving health care quality goals and outcomes that result in cost savings.”  Medpage Today is reporting on a Health Affairs reported simulation of an ACA that successfully treats Medicare eligible patients with diabetes 2.  The simulation found that a 10% clinical improvement would create just 1.22% in savings for Medicare Parts A and B — well below the level needed to trigger savings sharing. That’s bad news for those hoping to reap some revenues from ACO’s.” On the bright side, insurers also are developing ACOs which will offer providers much more flexible contractual rather than legally mandated compensation structures.

In other cheery news, the AMA News is reporting on a silent exodus of doctors from the medical profession. That’s not good news as we are only 15 months away from the great influs of new patients that the ACA subsidized health insurance exchanges are expected to produce.

Govexec.com notes that OPM required FEHB plans to pay the U.S. Treasury for any 2011 rebate for failure to meet the 85% medical loss ratio under the Affordable Care Act to the U.S. Treasury. OPM uses the funds to moderate changes in plan premiums. This is a perfectly legal approach which Govexec.com acknowledges. This really is not a big deal because the majority of FEHB plans are enrolled in fee for service plans like Blue Cross FEP and GEHA. These retrospectively experienced rated contracts routine produce a medical loss ratio over 90%, OPM also now has a medical loss ratio based pricing methodology for HMOs participating in the FEHB Program which incents compliance with the ACA’s requirements.

The Defense Department announced yesterday that effective January 1, 2013, the U.S. Postal Service must stop delivery to FPO and APO addresses of imported pharmaceuticals and other prohibited items into Germany and the European Union. This puts the ki-bosh on the use of U.S. based mail order pharmacies filling prescriptions for U.S. expatriates in Germany and there is a significant contingent of FEHBP enrollees in Germany. The FEHBlog is aware that FEHB plans serving those enrollees are on top of this issue.

The German action strikes the FEHBlog as overkill but there’s no question about the importance of keeping a safe drug supply. Reuters reports that the Food and Drug Administration “working with international regulatory and law enforcement agencies from about 100 countries, said on Thursday that it took action against more than 4,100 Internet pharmacies, bringing civil and criminal charges, removing offending websites and seizing drugs worldwide.”

On Monday with the beginning of the new federal fiscal year, Medicare’s readmission penalty took effect. Kaiser Health News explains that

Nearly one in five Medicare patients return to the hospital within a
month of discharge, costing the government an extra $17.5 billion in
2010. Experts say many of these readmissions are unavoidable given the
infirmity of the population, but others are due to surgical mistakes or
lapses in patient care after people leave the hospital. A total of 2,217
hospitals are being punished in the first year of the program, which
began Oct. 1. Of those, 307 will be docked the maximum amount: 1 percent
of their regular Medicare reimbursements.

Overall, Medicare has estimated it will recoup about $280 million
from hospitals where it determined too many heart attack, heart failure
or pneumonia patients returned within 30 days.

The AMA News explains that the penalty ramps up to 2% in the next fiscal year and 3% in the following fiscal year. HHS is considering adding over health events, such as joint replacements to the mix.

The Washington Post has a chart showing the penalties imposed on hospitals in the Washington D.C. area. Maryland hospitals are exempt from the readmission penalty because as the FEHBlog noted in the summer the federal government permits Maryland to use its own hospital rate setting methodology.

Medicare (except in the FEHBlog’s home state of Maryland) reimburses hospitals on a prospective payment system. The hospital except in outlier cases receives a fixed diagnosis related group payment based on the patient’s admitting diagnosis. The hospital gains financially if the cost of care is less than the DRG amount. Consequently, the system incents patient discharge. The new policy will change this calculus. When hospitals lose money on Medicare, they seek to recover those losses from private sector payors, including the FEHBP.  

Of course, hospitals don’t make discharge decisions; doctors do. Consequently, as Kaiser Health News points out the new policy will incent further integration between hospitals and doctors.

Congress is on the campaign trail until November 13, the beginning of the lame duck session. Monday is the beginning of a new federal fiscal year and the FEHBlog has learned from Kaiser Health News that today is the deadline for states to submit their minimum essential benefit packages to HHS. “15 states and the District of Columbia have made their choices and 17
more states are expected to do so in the next few weeks, according to
consulting firm Avalere Health.”  While FEHB plans and large group plans do not have to offer the minimum essential health benefits package, those plans cannot impose lifetime or annual dollar caps on those benefits to the extent that they are offered. OPM for the FEHBP and the Labor Department for ERISA government plans will have to help employer sponsored plans sort out any confusion created by HHS’s state by state approach (which was not dictated by the statute).

The AMA News reports on growing insurer use of the patient centered medical home strategy or primary care on steroids.

Programs supported by commercial and government insurers now exist in
nearly every state, according to a report issued Sept. 7 by the
Washington-based Patient-Centered Primary Care Collaborative, an
organization supportive of the medical home model.
For example:

• Programs run by member organizations of the national BlueCross
  BlueShield Assn. supply care to 4 million patients in 39 states, the
  District of Columbia and Puerto Rico.

• Humana offers medical home services in 10 states for 70,000 Medicare Advantage members and 35,000 commercial members.

• The Centers for Medicare & Medicaid Services announced Aug. 22
  that 500 practices with more than 2,000 physicians across the country
  will participate in the comprehensive primary care initiative.

• WellPoint, Aetna and UnitedHealthcare have announced in recent months that their medical home programs are expanding.

The momentum is growing, the report said, because insurers see evidence that medical homes save money and improve care.

Under the Affordable Care Act, States may permit large employers to join their  health insurance exchanges beginning in 2017.  Large employers are defined as an employer who employs at least 101 employees. However, in 2016, States can lower that threshold to 51 employees. (Aside — To ensure that their exchanges have enough enrollees to be viable, the District of Columbia and Vermont might require small employers to participate in their insurance exchanges. Revenue needed to operate state exchanges likely will come from an assessment or tax on participating health plans, which will be based on the number of enrollees.) Business Insurance reports that Aon Hewitt, a  large benefits consulting firm, has created its own version of a health insurance exchange for its large employers clients this year with coverage beginning in 2013. Sears, Aon, and Darden Restaurants (owner of Red Lobster among others) are participating. Of course, the FEHBP is the granddaddy of health insurance exchanges.

The Federal Times reports that “President Obama on Friday signed a six-month temporary spending bill
that will keep the government open — and further freeze federal pay
scales — until March 27 [, 2013].” The new 2013 federal fiscal year begins on Monday October 1.

Last year the FEHBlog discussed Highmark Blue Cross’s investment in the West Penn Allegheny Hospital System in Pittsburgh. Today, the Pittsburgh Post Gazette reports that  Saying that Highmark Inc. wanted it to restructure through bankruptcy, West Penn Allegheny Health System canceled the $475 million deal under which the insurer planned to acquire WPAHS.”

The Affordable Care Act authorizes OPM to contract for at least two multi-state plans to participate in all of the state health insurance exchanges by 2017.  A Health Affairs blog post discussed a draft application to act as multi state plan carrier that OPM posted last week. The draft application is available here. OPM is accepting public comments on the draft application until October 22.

Today’s FEHBlog post focuses (as usual) on rising healthcare costs. Last week, S&P which has unveiled a new website for its indices announced that healthcare costs were up in July “Healthcare costs covered by commercial insurance plans increased by 8.34% over the year ending July 2012, up from the +8.06% reported for June 2012. Annual growth rates in Medicare claim costs rose by 2.79%,
according to the S&P Healthcare Economic Medicare Index, up from the +2.27% recorded in June
2012.”

The Healthcare Cost Institute, which analyzes deidentified claims date provided by Aetna, Humana, and United Healthcare, reported this week that healthcare spending rose 4.6% in 2011 following two years of slower growth.

Prices rose for all major categories of health care—hospital stays,
outpatient care, procedures and prescriptions—outpacing an uptick in the
use of many of these services. Prices rose fastest for outpatient care.

“Prices continue be the main culprit for rising health care costs,”
said HCCI Executive Director David Newman. “If we are really going to
get health care spending under control, we have to better understand why
those prices are rising and the implications those increases have for
the U.S. health care budget.”

AHIP reports that

An article by Bob Kocher and Ezekiel Emanuel in the Journal of the American Medical Association (subscription
required) looks at how hospital consolidation is driving up health care
costs, noting that “prices for hospital services are 13% to 25% higher
in consolidated hospital markets.” [The ACA is driving this consolidation.]

Hospital spending currently accounts for one-third of all health
expenditures. According to the article, “…hospital price increases are
now the largest contributor to increases in insurance premiums.
According to an estimate for 2013, hospital prices will increase
8.2%—more than any other sector of health care spending.”

The FEHBlog’s favorite stories concern hospital and doctor use of their new electronic healthcare technology to recover more dollars from Medicare, Medicaid, and commercal plans. A Forbes columnists explains that “Based on my reporting of the health IT industry, [the increased recoveries likely reflect the fact that] that doctors have been “under coding” medical procedures over the years by using paper charts.” Nevertheless, following a New York Times article on Sunday, the federal government sent a “stern letter” to various hospital associations warning against the use of EHRs to artifically inflate recoveries. Healthcare IT News reports that the associations are placing the blame on complex Medicare reimbursement rules. (There is no doubt that Medicare reimbursement rules are hideously complicated.)

No good deed goes unpunished. The federal government has spent nearly $7.0 billion to purchase the technology for the providers. The Institute of Medicine, according to the AMA News, is hoping that this investment will ultimately reduce waste in the healthcare system. However, according to EHR Intelligence, the investment cannot pay off unless Congress permits the establishment of a uniform patient identifier. The bottom line from the FEHBlog’s perspective is healthcare technology should be delinked from the law and there should be no free lunch.

The FEHBlog remains concerned that hospitals will use the ICD-10 roll-out to renegotiate its provider contracts. The ICD-10 includes multitudes of new diagnosis codes and new hospital procedure codes.  The implementation date is now October 1, 2014, just about two years from now.

In closing, the FEHBlog again expresses his admiration for the FEHBP carriers for generally holding down premium increases for 2013.