• The President submitted to Congress a Medicare reform bill as required by the Medicare Modernization Act of 2003. The President’s proposal calls for means tested Medicare Part D premiums, medical malpractice liability caps, and increased use of health information technology. It was not well received on Capitol Hill.
• The Senate Budget Committee held a hearing on health information technology on February 14. The testimony can be found here.
• The Senate Budget Committee also released an interesting Congressional Budget Office chart on Medicare spending in 2005 by geography. It’s worth a click.
• CVS Caremark agreed to settle a lawsuit by a group of States Attorneys General alleging that the prescription benefits manager engaged in deceptive brand name drug switching practices. Under the settlement, Caremark will pay the states $38.5 million and follow certain rules on drug switching programs. In its press release, CVS Caremark explains that the liability stems from its predecessor companies’s legacy Caremark and legacy AdvancePCS “and will not result in significant changes to current business practices.:

For time immemorial, health insurers have capped their reimbursement to physicians at a usual, customary, and reasonable (UCR) limit that the insurer set using a database. When I began working in the health insurance field in the early 1980s, the health insurance trade association, HIAA, maintained a UCR database based on claims information contributed by members and broken down by three digit zip code. In the 1990’s as I recall HIAA sold the database to Ingenix, which is now a United Healthcare (UHC) subsidiary.

The UCR limit does not apply to doctors who belong to the insurer’s provider network. Thus the lower UCR reimbursement incents consumers to use network providers thereby controlling medical costs.

Today, Andrew Cuomo, New York State’s attorney general, sent a letter to United Healthcare advising the company that the State plans to sue UHC and certain subsidiaries because the UCR database is flawed and works a fraud on consumers. Cuomo in his press release explained that his “investigation found a clear example of the scheme: United insurers knew most simple doctor visits cost $200, but claimed to their members the typical rate was only $77. The insurers then applied the contractual reimbursement rate of 80%, covering only $62 for a $200 bill, and leaving the patient to cover the $138 balance.: As usual, Consumers Union and the American Medical Association loudly applauded the action.

UHC which now has five days to convince Cuomo to not file suit, issued the following press release:

We are in the midst of on-going discussions with the Attorney General’s office and we will continue to cooperate fully. UnitedHealth Group recognizes the excellent health care delivered to patients by the physicians of New York and is committed to fair and appropriate payment for physicians, the state’s other health care providers and consumers. The company also believes in delivering high quality and dependable database tools.

The reference data is rigorously developed, geographically specific, comprehensive and organized using a transparent methodology that is very common in the health care industry. We believe these reference tools add substantial value to the health care system by providing all participants – providers, payers and consumers – with a long-standing transparent, consistent, and neutral line of sight into the health care market, its costs and performance.

Health plans and other health care payers use these reference tools to independently negotiate their own reimbursement schedules, establish fees for out-of-network care, negotiate provider service contracts and review claims for their members and consumers.

Cuomo also announced that his office was serving subpoenas on sixteen major health insurers/managed care companies that use the Ingenix UCR database, including Aetna, CIGNA, and Empire Blue Cross. Shares of publicly traded managed care companies fell on the news.

Karen Ignani, the President of the managed care trade association AHIP offered the following observations:

“Today’s announcement presents an opportunity to shed light on one of the root causes of rising health care costs in America. “At a time when the costs of medical services soar above inflation every year, health insurance plans’ tools and techniques are mitigating the damage done to consumers and employers. Last year, health insurance premiums grew at the lowest rate in a decade due to health plans’ cost-containment and quality-improvement strategies. “It’s unfortunate that today’s media event ignored these facts and failed to address the appropriateness of charging out-of-network patients $200 for ‘simple doctor visits’ lasting ‘15 minutes’ — which equates to a billing rate of at least $800 an hour. As medical costs continue to soar, this is the discussion that public policy leaders need to have.”

This case will be worth watching.

America’s greatest President Abraham Lincoln was born today in 1809. Next year will be the 200th anniversary of his birth but a winter storm in Hodgenville, Kentucky, caused the cancellation of the birthday party. I traveled north by car today to visit a client, and it was likely the same storm that doubled the time it took me to travel home. But at least I made it.

The Department of Health and Human Services issued a proposed regulation today that would allow for the creation of patient safety organizations as authorized by the Patient Safety and Quality Improvement Act of 2005. Modern Healthcare.com explains that “Under the rule, public and private for-profit and not-for-profit organizations could become certified through the Agency for Healthcare Research and Quality as PSOs. The organizations will consult providers on patient-safety events and quality-improvement initiatives in confidential and privileged settings. “

Speaking of regulations, the U.S. Office of Personnel Management finalized last week a regulation concerning allotments from federal employee salaries. OPM’s press release explains that

“These final regulations involve the use of OPM’s allotment authority to allow for pretax salary reductions as part of OPM’s flexible benefits plan. Using an allotment from an employee’s pay to the employing agency allows certain payments (e.g., employee health insurance premiums, contributions to a flexible spending arrangement, and contributions to a health savings account) to be paid with pretax dollars, as provided under section 125 of the Internal Revenue Code.”

For example, this regulation will help those employees who have enrolled in high deductible FEHB plans with health savings accounts because effective March 10, 2008, they can contribute to their HSAs with pre-tax dollars. An employee making those contributions with after tax dollars receives the same tax savings via an income tax refund after filing his form 1040. So it’s a cash management thing.

The Senate Budget Committee will be holding a hearing on February 14, 2008 at 10:00 AM: Health Care and the Budget: Information Technology and Health Care Reform with the following witnesses (and a third to be name later)

Valerie C. Melvin — Director, Human Capital and Management Information Systems Issues, U.S. Government Accountability Office

Laura Adams — President and CEO, Rhode Island Quality Institute

• The President released his Fiscal Year 2009 budget on Monday. Govexec.com offers a series of special reports on the budget. The budget contains no new FEHB Program proposals. It drops last year’s proposal to weight an annuitant’s FEHBP government contribution on his or her years of government service.
• The agenda for the March 19-20 FEHBP carrier conference has been posted online.
• URAC is seeking public comment on its new Specialty Pharmacy, Mail Service Pharmacy and Pharmacy Benefit Management (PBM) for Workers Compensation and Property and Casualty accreditation programs.
• Merck agreed to pay the government $650 million to settle False Claims Act charges based on its marketing practices for the arthritis drug Vioxx and the cholesterol drug Zocor. The settlement derives from alleged Medicaid best pricing law violations and therefore will not benefit the FEHB Program.
• In other pharma litigation developments, four health insurers were awarded a $69 million antitrust judgment against Mylan Laboratories for using its market domination over two anti-anxiety drugs, lorazepam and clorazepate, to inflate the prices charged for those drugs. Interestingly, the health insurers had opted out of a class action against Mylan Labs for the same practice. Mylan Labs has announced that it will appeal to the U.S. Court of Appeals for the D.C. Circuit.

I was pleased to read in the 1/30 BNA Health Plan and Provider Newsletter, that on January 22, Judge Patti Saris of the U.S. District Court for the District of Massachusetts rejected the First Databank class action settlement that if approved would have caused First Databank to prospectively reduce its markup factor used to calculate the Average Wholesale Price for prescription drugs and set the wheels in motion to replace the AWP with another standard. In my opinion, the settlement would have disrupted the PBM market.

The judge allowed the parties two weeks to present an alternate settlement proposal. According to the report, the Judge refocused the parties on a settlement that provided monetary relief to consumers who had been overcharged by the erroneous markup. According to the National Community Pharmacists Association’s general counsel who attended the 1/22 hearing, the judge took the phase out of AWP off the negotiating table.

Here’s the link to the National Association of Chain Drug Store’s press release —

Here’s the blurb from the National Community Pharmacists Association’s web site

AWP Rollback BlockedA federal judge has rejected key elements of a proposed settlement of
the First DataBank/Medi-Span antitrust case that would have required a 4%
rollback of published Average Wholesale Price (AWP) figures, a move that would
have cost the average independent community pharmacy about $105,000. NCPA
vigorously opposed the proposed settlement. U.S. District Court Judge Patti B.
Saris told lawyers in the case to “go back to the drawing table.”The lawsuit was
brought by union health plans that alleged the two publishers conspired with
McKesson to increase AWPs, resulting in higher copayments for patients under the
plans’ AWP-based system. McKesson was not involved in the proposed
settlement.The parties involved are supposed to come back with a new proposed
settlement in early February. NCPA was not a party, but intervened when it
became apparent that independent community pharmacies would suffer greatly under the proposed settlement. NCPA filed a vigorous, detailed response lead by a
report from Ed Heckman, RPh, president PAAS National, and affidavits from nearly
two dozen independent community pharmacies.The judge mentioned the Heckman
report and NCPA favorably several times during the two-hour fairness hearing
Jan. 22 in Boston. “I heard very little that wasn’t positive to our interests,”
reported John Rector, Esq., NCPA general counsel. NCPA also was represented by
David Balto, Esq., an expert antitrust counsel.“We will continue to be active
and to keep you posted with further developments in this case,” Bruce Roberts,
RPh, NCPA executive vice president and CEO, told community pharmacists.

• What an exciting Super Bowl! President Bush releases his FY 2009 budget tomorrow. The Washington Post reports that the budget will seek to freeze domestic discretionary spending and cut billions from federal healthcare programs in order to achieve a balanced budget by 2012. The budget likely will not be well received on Capitol Hill.
• Speaking of Capitol Hill, Rep. Tom Davis (R Va) who chaired the House committee with FEHB Program oversight authority until the 2006 elections announced last week that he will not run for re-election this year. Rep. Davis remains the ranking Republican on the House Oversight and Government Reform Committee.
• The Bridges to Excellence Coalition announced a medical home incentive program. According to Modern Healthcare.com,
  

  A definitive picture of a medical home has yet to develop, but its principles—as formulated by the ACP, American Academy of Family Physicians, American Academy of Pediatrics and American Osteopathic Association—involve patients having a personal physician who leads an integrated team of healthcare professionals providing coordinated acute, chronic, preventive and end-of-life care facilitated by information technology tools and based on a foundation of safety and quality improvement. Also, patients would have “enhanced” access—meaning extended hours and a secure electronic communication options—and primary-care physicians would be recognized and adequately reimbursed for the care management and coordination services they provide.

  Bridges for Excellence explains in its press release that

  Through participation in the BTE Medical Home recognition, doctors can receive an annual bonus payment of $125 for each patient covered by a participating employer, with a suggested maximum yearly incentive of $100,000. “Our research shows that patients who are well taken care of cost less,” said Francois de Brantes, BTE CEO. “The average potential savings per covered life would be approximately $250 a year.”

• The hospitals located in State of Washington has joined the hospitals in the States of Massachusetts, Vermont, and Minnesota by agreeing not to bill patients or health plans for the cost of caring for the consequences of their own errors, so-called never events. Modern Healthcare.com reports that
  

  The agreement applies to 28 of the most egregious adverse events such as operating on the wrong part of the body, or the serious injury or death of a patient from a fall. Out of a total of 600,000 hospital admissions in the state from June 2006 to July 2007, only about 180 such adverse events were reported to the state. The CMS and most major insurers have announced they will no longer pay for many of these so-called “never events.”

• OPM has posted its management response to its Inspector General’s latest semi-annual report to Congress.

• The AMA News hit the roof over a web site hosted by a Blue Cross Blue Shield of Minnesota affiliate that allows people to post their reports about their personal health care experiences.

• The major consulting firm Towers Perrin has released its 2008 health care cost survey which is available for download.

• Today’s Baltimore Sun features an interview with Shannon Brownlee, a journalist who last year authored the book “Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer.” Ms. Brownlee suggests that the root of the Nation’s health care problems is the fee for service reimbursement system. She also recommends the creation of an institute for the study of effective treatments and separating drug manufacturers from clinical research. She points to the recent Vytorin study which finds that this combination drug works no better than the generic version of Zocor which is one of its components.
• In a post last week, I mentioned that Wal-mart is planning to get more involved with health care. The Wall Street Journal reports that the big news is that Wal-mart is considering entering the prescription benefit management business. CNNMoney.com reports that the announcement is not raising alarms in the PBM industry yet, but in an interesting twist, NCPA, the retail pharmacy trade association, is hopeful about the announcement.
• According to an HHS press release, HHS Secretary Michael Leavitt announced at a meeting of the American Health Information Community (AHIC) on January 22, 2008, that LMI, teaming with the Brookings Institution, will lead the effort to design and establish the public-private partnership based in the private sector, known as AHIC 2.0. This award will consist of two phases with a full transition expected by late 2008. The Democratic leadership health information technology bills pending in Congress would block this initiative.
• GAO released a government improper payments report for fiscal year 2007 which ended on September 30, 2007. The U.S. Office of Personnel Management estimates that FEHB Program overpayments totalled $169.7 million for an error rate of 0.5%.
• The Centers for Disease Control released the latest National Immunization Survey which finds adult immunization rates unreasonably low. Time Magazine recommends that adults “check out the CDC’s immunization schedule, and the next time you visit your doctor, ask about routine vaccinations.”
• The Blue Cross Blue Shield Association released a proposal for covering the uninsured, titled “The Pathway to Covering America.”
• OPM published a proposed regulation governing the manner in which federal agencies can use employees’ Social Security numbers.

CMS announced today “no later than May 24, 2008, all covered entities are expected to be using the [HIPAA National Provider Identifier] NPI in a compliant manner, and all contingency plans should be lifted.”

In other news, the Institute of Medicine released a report recommending that “Congress direct the U.S. Department of Health and Human Services to establish a program with the authority, expertise and resources necessary to set priorities for evaluating clinical services and to conduct systematic reviews of the evidence. The program would also develop and promote rigorous standards for creating clinical practice guidelines, which could help minimize use of questionable services and target services to the patients most likely to benefit. ” AHIP, the health plan trade association, endorsed the IOM recommendation.

According to Healthcare IT News, Wal-Mart’s CEO announced yesterday that “We will partner with doctors and other providers to increase the number of electronic prescriptions in the U.S. And, we will provide electronic health records to United States associates and their family members – including retirees – by the end of 2010.” Wal-Mart’s Vice Chairman is a member of the American Health Information Community, an HHS advisory body.

• The Centers for Medicare and Medicaid Services (“CMS”) is ending its HIPAA National Provider Identifier (“NPI”) contingency plan effective May 23, 2008. Here are the looming deadlines for providers that submit electronic claims to Medicare. CMS is urging providers to test claims now.

March 3, 2008 – Medicare fee-for-service 837P and CMS-1500 claims must include an NPI in the primary fields on the claim (i.e., the billing, pay-to, and rendering fields). You may continue to submit NPI/legacy pairs in these fields or submit only your NPI on the claim. You may not submit claims containing only a legacy identifier in the primary fields. Failure to submit an NPI in the primary fields will result in your claim being rejected or returned as unprocessable beginning March 1, 2008. Until further notice, you may continue to include legacy identifiers only for the secondary fields. May 23, 2008 –In keeping with the Contingency Guidance issued on April 3, 2007, CMS will lift its NPI contingency plan, meaning that only the NPI will be accepted on all HIPAA electronic transactions (837I, 837P, NCPDP, 276/277, 270/271 and 835), paper claims and SPR remittance advice. This also includes all secondary provider fields on the 837P and 837I. The reporting of legacy identifiers will result in the rejection of the transaction. CMS will also stop sending legacy identifiers on COB crossover claims at this time.

• NCQA in cooperation with various medical associations has created standards that primary care medical practices can use to assess whether or not they function as a “patient centered medical home.” According to NCQA, “[t]he Patient Centered Medical Home is a health care setting that facilitates partnerships between individual patients, and their personal physicians, and when appropriate, the patient’s family. Care is facilitated by registries, information technology, health information exchange and other means to assure that patients get the indicated care when and where they need and want it in a culturally and linguistically appropriate manner.” Heath plans are beginning to recognize medical homes in their provider directories.

• The Leapfrog Group for Patient Safety has updated its compendium of pay for performance programs. Any organization may includes its P4P program in the compendium which is searchable for free.