This Math Does Not Add Up

David Ermer

I am an attorney who practices law in Washington DC. My practice has involved the Federal Employees Health Benefits Program since 1983.

This Math Does Not Add Up

David Ermer–Uncategorized–
The Hartford Courant reports today that “Consumers nationwide are expected to save millions of dollars on medical care under an industry-changing settlement announced Tuesday
aimed at forcing insurers to pay fairer reimbursement to doctors and hospitals outside their networks.” Under this settlement discussed in yesterday’s Tuesday Tidbits, Ingenix is jettisoning its UCR schedule in favor of an independent database to be developed by a university designated New York’s attorney general, Andrew Cuomo.

The Courant article accurately, in my opinion, presumes that the university database will produce higher reimbursement rates for out-of-network providers than the Ingenix databases. However, all this means is more money in the doctors’ pockets. The consumers who use out of network providers will pay less out of pocket, but the vast majority of consumers who use in-network providers necessarily will pay more. What’s more the consumers who use out of network providers will not benefit dollar for dollar because insurers likely will be forced to raise premiums for everyone as a result of this change.

Remember that it was the American Medical Association that sued Ingenix over this database in 2000 and stood firmly behind Mr. Cuomo. The AMA is in the process of killing the golden goose.

Interesting Developments

David Ermer–Uncategorized–
The Walgreens pharmacy chain, in conjunction with its Take Care clinics, announced the launch of an “employer centric” pharmacy and health care service called Complete Care and Well Being. Walgreens describes the new service as “a new and unique approach to health care that brings together pharmacy, health and wellness services under a single program, with all prices transparent to the employer.”

HHS has unveiled a new version of its personal health record tool called My Family Health Portrait. The HHS press release explains that

Key features of the new version of the Surgeon General’s My Family Health Portrait include:

  • Convenience – Consumers can access the tool easily on the Web. Completing the family health history profile typically takes 15-20 minutes. Consumers should not have to keep filling out different health history forms for different practitioners. Information is easily updated or amended.
  • Consumer control and privacy – The family health history tool gives consumers access to software that builds a family health tree. But the personal information entered during the use of the tool is not kept by a government or other site. Consumers download their information to their own computer. From there, they have control over how the information is used.
  • Sharing – Because the information is in electronic form, it can be easily shared with relatives or with practitioners. Relatives can add to the information, and a special re-indexing feature helps relatives easily start their own history based on data in a history they received. Practitioners can help consumers understand and use their information.
  • EHR-ready, Decision support-ready – Because the new tool is based on commonly used standards, the information it generates is ready for use in electronic health records and personal health records. It can be used in developing clinical decision software, which helps the practitioner understand and make the most use of family health information.
  • Personalization of care – Family history information can help alert practitioners and patients to patient-specific susceptibilities.
  • Downloadable, customizable – The code for the new tool is openly available for others to adopt. Health organizations are invited to download and customize, using the tool under their own brand and adding features that serve their needs. Developers may also use the code to create new risk assessment software tools.

Finally, the AP reports that software glitches in the Veterans Affairs Department’s electronic medical records systems caused numerous treatment errors over the past four to five months. The VA has stated no patients were harmed. According to the AP report

“It’s very serious potentially,” said Dr. Jeffrey A. Linder, an assistant professor of medicine at Harvard Medical School who has studied electronic health systems. “There’s a lot of hype out there about electronic health records, that there is some unfettered good. It’s a big piece of the puzzle, but they’re not magic. There is also a potential for unintended consequences.”

Hey it’s my job as a lawyer to belabor the obvious!

Tuesday Tidbits (plus)

David Ermer–Uncategorized–
On Friday January 9, 2009, the Office of Management and Budget cleared the final HHS 5010 transaction
standards and ICD-10 code set rules for publication in the Federal Register. I expect that the rules will be published on Thursday or Friday of this week (in other words before Inauguration Day as HHS has projected.) We won’t know whether the implementation deadlines have been extended until the rules are published. I’ll be keeping an eye out here

While the first point was a tidbit the next one is not. Today, Ingenix and United Healthcare announced a UCR rate settlement with New York attorney general Andrew Cuomo. (Health plans generally pay out of network providers based on usual reasonable and customary (UCR) rates.) Under this agreement, Ingenix and UHC will pay $50 million to a qualified university selected by Mr. Cuomo. According to Mr. Cuomo, the selected university will create a new database.”to help determine fair and accurate reimbursement rates. The university will also develop a website where for the first time consumers will be able to learn in advance how much they are likely to be reimbursed if they go out of network.” Replacement of the current widely used Ingenix databases with this “independent” database is bound to reduce the incentive for plan members to use in-network providers.Finally, Govexec.com confirms a Washington Post report that the chief Washington, D.C., zookeeper, John Berry, is expected to become the OPM Director in the Obama administration. (I couldn’t resist that sentence. Mr. Berry is a skilled executive who is strongly endorsed by the federal employee unions.)

Weekend update / Miscellany

David Ermer–Uncategorized–

Interesting NFL games were played this weekend. I was in South Carolina when Arizona beat the Carolina Panthers to much local consternation. It would be astonishing if the Cardinals reached the Superbowl. Having watched the Eagles lose to the Redskins on December 21, I was surprised that the Eagles have reached the NFC championship game. Next week’s Steelers – Ravens game will be fun to watch. But onto the business at hand.

There were several FEHBP developments this past week.

The OPM Inspector General’s office posted on the web its semi-annual report to Congress for the period ending September 30, 2008.

OPM released the results of its 2009 Federal Human Capital Survey:

Satisfaction with health insurance and the flexible spending account programs show improvement since 2004. Employee satisfaction with health insurance (Q.65) continues to increase, up 6 percentage points since 2004. While satisfaction with flexible spending accounts (Q.68) was up 5 percentage points since 2004.

The Office of Management and Budget released an FY 2008 report on performance of the federal government. According to that report, Federal Employees Health Benefit Plan (FEHBP) overall enrollee satisfaction was 78% vs. health care industry standard of 60% (percent).

OMB also released agency performance and accountability scorecards. OPM received a green light on both its progress in eliminating improper payments and its health care quality and transparency initiative. According to OPM’s Improper Payments Improvement Act report for FY 2008, the improper payment rate for the FEHB Program as reported by OMB is 0.2%. In contrast, Medicare’s rate is 3.6%.

Events also transpired outside the FEHBP world. AHIC Successor, Inc. renamed itself the National eHealth Collaborative (is that really more catchy?). The collaborative also refreshed its website. Government Health IT News reports that

With a new administration coming to Washington, D.C., and a massive federal stimulus plan under consideration, some policy experts believe the environment for overhauling the country’s health care system is favorable. The Health Information and Management Systems Society has called on the new administration to spend a minimum of $25 billion on the adoption of electronic medical records by nongovernmental hospitals.

“Twenty-five billion [dollars] moving into this area could be a game-changer,” said John Loonsk, director of interoperability and standards at the Office of the National Coordinator of Health IT, at the board meeting.

Some critics have suggested that allocation of those funds should be deferred until interoperability standards are in place. But Loonsk, remarking on recent progress made in that area, told the board that a lack of technical standards is “no longer the major obstacle to advancing interoperability.”

He nonetheless conceded that implementing those standards “is very challenging.”

Business Insurance reported on another stimulus development. Congress is planning to provide a government contribution of the 50-60% of the COBRA continuation coverage premiums for workers who lose their jobs (perhaps subject to other eligibility criteria such as an earnings ceiling). The FEHBP analog is COBRA continuation coverage is TCC. The article does not explain whether the expected subsidy would be extend to TCC.

Finally, last week the Centers for Medicare and Medicaid Services (CMS) announced that the agency has

notified more than 3,000 of the nation’s hospitals that they will receive the full payment update for calendar year (CY) 2009 as part of the new Hospital Outpatient Quality Data Reporting Program.

The successful hospitals represent 99.3 percent of all hospitals that participated in the program that began in 2008 as an effort to strengthen the tie between the quality of care furnished to people with Medicare in hospital outpatient departments and the payments hospitals receive for those services.

Tuesday Tidbits

David Ermer–Uncategorized–

The Centers for Medicare and Medicaid Services (CMS) actuaries issued their report on 2007 healthcare spending, which continued to outpace the CPI-U.  CMS explained in a press release that 

“Retail prescription drug spending grew 4.9 percent in 2007, slower than the 8.6 percent growth in 2006.  The deceleration in 2007 was the result of several factors, including sustained growth in the generic dispensing rate, slower growth in prescription drug prices, and growing consumer concerns for drug safety. “The generic dispensing rate continued to climb in 2007 as several major blockbuster drugs lost patent-protection; this continued growth in the use of generics contributed to both a deceleration in total expenditures as well as prices. “Prescription drug prices, as reflected in the National Health Expenditure Accounts, grew 1.4 percent in 2007, much slower than the 3.5 percent growth in 2006.  This lower price growth was not only driven by the increased use of generics, but also by the introduction and continuation of generic drug discount programs by large retail chain stores. “Increased safety concerns for certain prescription drugs in 2007 also likely influenced the drug spending trend, as the Food and Drug  Administration issued sixty-eight “black-box” warnings (indication that the drug carries a significant risk of serious or even life-threatening effects), compared to fifty-eight in 2006 and twenty-one in 2003. “With the exception of prescription drugs, spending for most other health care services grew at about the same rate or faster than in 2006.”

Speaking of prescription drug spending, CMS announced today that it will be putting the squeeze on Medicare Part D plans next year.  The CMS press release explains that

CMS currently allows Part D sponsors that contract with a PBM to report to the CMS the amount paid to the PBM (the lock-in price) or the amount the PBM paid to the pharmacy (the pass-through price).  Under the lock-in approach, a Part D plan agrees to pay a PBM a set rate for a particular drug. The PBM then negotiates with pharmacies to obtain the lowest possible price for the drug, which often is lower than the amount the PBM receives from the plan. Under the new rule, plans may continue to use the lock-in model with their PBMs, but they must report to CMS the price actually paid to the pharmacy as the negotiated price.  Any difference between the price paid by the plan to the PBM and the price paid by the PBM to the pharmacy must be reported as an administrative cost.  This requirement helps ensure that sponsors’ administrative costs are not included in the drug costs used to determine how much the beneficiary will pay, as well as reinsurance and risk corridor payments made by CMS.  This will also create a uniform definition of drug costs for all Part D sponsors. “For patients whose plan used the lock-in model, this regulation will reduce what they pay at the pharmacy counter because their copayment will no longer be based on a higher negotiated price,” said CMS Acting Administrator Kerry Weems. “The current lock-in approach also moves beneficiaries through the Part D benefit more quickly, bringing them to the ‘coverage gap’ sooner than under the pass-through pricing model.

Finally, Healthcare IT News reports that “Four healthcare industry organizations — The Council for Affordable Quality Healthcare (CAQH), the Healthcare Information and Management Systems Society (HIMSS), the Integrating the Healthcare Enterprise (IHE) Initiative and the Blue Cross and Blue Shield Association (BCBSA)– are collaborating with the Centers for Medicare and Medicaid Services on a 5010 testing project of the new X12 HIPAA 5010 transactions.” HHS is expected to promulgate in the near future the final rule requiring health plans, providers, and clearinghouses to begin using those standards for their HIPAA regulated transactions by a deadline that will be set in the rule.

Weekend update / Miscellany

David Ermer–Uncategorized–

The 111th Congress convenes on Tuesday, January 6, at noon. I expect that the most pressing health care items on its agenda will be reauthorizing the State Children’s Health Insurance Program, which otherwise expires on March 31, 2009, and providing up to $25 billion in funding for interoperable electronic medical records in the anticipated economic stimulus bill.

Speaking of Congress, Modern Healthcare.com reports that “Democratic leaders on Capitol Hill have named Douglas Elmendorf, a former Clinton administration economist, to head the Congressional Budget Office. He will replace Peter Orszag, who resigned in November to head incoming President Barack Obama’s White House budget office.”

On the Medicare front, CMS announced on December 29 the publication of a final regulation requiring certain durable medical equipment suppliers to post a $50,000 surety bond by October 2, 2009 (May 4 for new suppliers). According to CMS, “[t]his requirement was due in part to the large number of improper and potentially fraudulent payments to medical equipment suppliers for furnishing medical equipment and devices to people with Medicare. The 2007 Medicare error rate report found approximately $1 billion in improper payments for medical equipment and supplies.”

The Drug Benefit News featured an interesting article on health insurer funding of clinical drug trials. “[M]ore and more health plans are covering medical expenses of members participating in clinical trials, as well as the experimental drugs. Some insurers urge all plans to develop clear policies around clinical trials as a way to benefit both members and themselves.”

CAQH announced on December 30 the continuing expansion of it CORE initiative. CORE is “an all-payer solution that enables provider access to patient insurance information before or at the time of service using the electronic system of their choice. [CAQH] has brought together more than 100 industry stakeholders to collaborate on a multi-phase set of uniform business rules to achieve that goal.”

Another CAQH initiative is its “Save Antibiotic Strength” campaign. “Through the program, CAQH and our partners – including the U.S. Centers for Disease Control and Prevention (CDC) – are educating Americans about the importance of using antibiotics safely, and providing physicians with information and tools to deliver this message to their patients. Together, we are addressing one of America’s most pressing public health concerns.” Last week, Giant Food, a DC metro area grocery chain, and its sister company Stop & Shop, a New England grocery chain, announced that their pharmacies will supply 14 days of generic antibiotics at no charge with a prescription during the period January 2 through March 21, 2009. I think that the trend of charging $4 generics is good for everyone, but I’m not so sure about free antibiotics.

HIPAA transaction and code set conversion update

David Ermer–Uncategorized–
HHS has been pushing this year to promulgate final rules implementing the new 5010 electronic transaction and ICD-10 code sets on a rapid schedule. Cooler heads, including the American Medical Association, the Blue Cross Blue Shield Association, and other provider groups and health plans, are advocating a three year extension of HHS’s proposed full conversion deadline — October 2013. Even the American Hospital Association which favors rapid conversion called for an extension in its formal comments to HHS albeit shorter than others. Healthcare IT News reports that hospital CIOs are “anxious” about the ICD-10 conversion, which is perfectly understandable.

I discovered on the reginfo.gov website that HHS submitted the final regulations for Office of Management and Budget review on December 12. It’s possible therefore that those final rules may be published before January 20. Stay tuned.

Happy Holidays!

David Ermer–Uncategorized–

I hope that everyone is enjoying the long holiday weekend and is looking forward to the new year.

Many years ago, I recall helping a client respond to an appeal over the medical necessity of a monitoring belt worn by women experiencing difficult pregnancies. I learned from the medical reviewer that the belt was valueless but the expectant mothers were aided by the daily contact with the monitoring nurse. That was a good lesson about the importance of human communication in the medical process. While that remains true, I learned from a report in the Oregonian that home health monitoring devices have improved dramatically over the years. Kaiser Permanente is using them successfully with chronically ill members to reduce the number of outpatient visits.

At the 2006 OPM carrier conference, Medco CEO David Snow spoke about value of personalized medicine. According to a report in the MercuryNews.com

[P]ersonalized medicine broadly represents the promise of delivering more effective, efficient medical care through genomics and other science that probes an individual’s makeup at the molecular level. The trend also includes secure Web portals that empower patients with greater knowledge.Personalized medicine, biotech pros say, is poised for dramatic progress in 2009, both in clinical practice and the lab.

Also on a tap for 2009, according to a Reuters interview with Teva North America Pharmaceutical’s CEO is a new federal law creating a regulatory pathway for biological follow-ons also known as biogenerics or biosimilars. Reuters reports that

Israel-based Teva, the world’s largest generic drug maker, has added to its biogeneric capabilities with its $7.46 billion acquisition of New Jersey-based Barr Pharmaceuticals. The deal closed on Tuesday [December 23].

These developments will lead to significant cost savings over time. FYI, the 2009 OPM AHIP carrier conference has been scheduled for March 16 – 17 at the Capital Hilton here in Washington, DC.