The history of president Obama’s health reform bears an uncanny and disturbing similarity to the life cycle of a hurricane. With Sandy fresh in our memory, the similarity is not comforting.
Hurricanes have three phases. The front wall of the storm brings high winds, lightening, and rain. Next, at the hurricane’s center, or eye, the wind drops and the air warms. If one is at sea, the water may turn calm and warm, bringing the illusion that the storm has ended. As the storm moves on, wind and rain return, often with increased force. Those fooled by the calm who leave safe havens may be destroyed by what follows.
The life cycle of a hurricane will bear an eerie similarity to that of health reform. Nearly four years elapsed between president Obama’s initial call for national health reform until the bill became law and the Supreme Court ruled on its constitutionality. The political and legal turmoil was intense and continuous. The process was rancorous and the outcome in doubt from start to finish. It took a bitterly fought presidential election to put an end to this phase of the struggle.
Now, we are in a period of relative calm. The 2012 election settled the immediate fate of the Affordable Care Act (ACA). The candidate who swore to repeal it lost. The ACA was the major domestic legislative achievement of the victorious incumbent president who won reelection. Now, eighteen states are in process of designing rules for health insurance exchanges — the administrative entities that will manage implementation of the new law, the most important provisions of which will take effect one year hence. The other states will either leave implementation entirely to the federal government or share administrative responsibilities with federal agencies.
A huge amount of work remains to be done by October 1, 2013 when people can begin enrolling for insurance coverage in the new exchanges.
Continue reading “Health Reform: The Political Storms Are Far from Over”
Filed Under: Commentology, THCB
Tagged: 2012 Election, Affordable Care Act, Health Insurance Exchanges, Health Reform, Henry J. Aaron, Obamacare
Dec 29, 2012
What will health insurance cost in 2014?
Will the new health insurance exchanges be ready on time or will the law have to be delayed?
There Will Be Sticker Shock!
First, get ready for some startling rate increases in the individual and small group health insurance marketplace due to the changes the law dictates.In a November 2009 report, the CBO estimated that premiums in the individual market would increase 10% to 13% on account of the health insurance requirements in the ACA. In the under 50 employee small group market, the CBO estimated that premiums would increase by 1% to a decrease of just 2% compared to what they would have been without the ACA. All of these differences in premium would be before income based federal subsidies are applied to anyone’s premiums.
In recent weeks, the Obama administration issued a series of proposed regulations for the health insurance market. Since then, I conducted an informal survey of a number of insurers with substantial individual and small group business. None of the people I talked to are academics or work for a think tank. None of them are in the spin business inside the Beltway. Every one of them has the responsibility for coming up with the correct rates their companies will have to charge.
Hold onto your hat.
On average, expect a 30% to 40% increase in the baseline cost of individual health insurance to account for the new premium taxes, reinsurance costs, benefit mandate increases, and underwriting reforms. Those increases can come in the form of outright price increases or bigger deductibles and co-pays.
Filed Under: Commentology, Health Plans, THCB, The Business of Health Care
Tagged: CBO, Health Insurance Exchanges, individual market, Premium, Robert Laszewski, Small Group
Dec 5, 2012
Costs and revenue: This is the oxygen of any business, any organization. What are your revenue streams? How much does it cost you to produce them? Life is not just about breathing, but, if you don’t get that in-out equation right, there is nothing else life can be about.
Right now this enormous sector is turning itself inside out. It has turned the “transmogrification” setting to “warp.” Why? It’s all about the in-out. It’s all about increasingly desperate attempts to get that right — and the clear fact that we cannot know if we are getting it right.
Let’s do some school on the two sides of this equation. Let’s just go over the new weirdness, and the implications for you and your organization. Revenue first.
Hunting for True Revenue
In traditional health care (the way we did business until about five minutes ago) the revenue side was complicated in detail, but simple in concept: You do various procedures and tests and services, and you bill for them. You bill each item according to a code. You bill different payers; each has its own schedule of payments that you negotiate (or just get handed) every year. There are complications, such as people on Medicare with supplemental insurance, dual eligibles on Medicare and Medicaid, and self-pay patients who may or may not pay.
That’s the basic job: aggregating enough services that reimburse more than their real cost so that you can cover the costs of services that don’t reimburse well. This is cost-shifted, fee-for-service management. Cut back on those low-reimbursement services; pump up the high-reimbursement ones. Corral the docs you need to provide the services, provide the infrastructure and allocate costs across the system.
The incentives all point in the same direction. The revenue streams are all additive. The more you do of the moneymaking items on the list, the more money you make.
Continue reading “Why Health Care Is Reshaping Itself”
Filed Under: Commentology, THCB, The Business of Health Care
Tagged: Capitation, Fee-for-service, health care cost, health care revenue, internal costs, Joe Flower, M&A, Medicare, reimbursements, the Next Health Care
Nov 30, 2012
I’ve been getting emails about the NY Times piece and my quotation that the penalties for readmissions are “crazy”. Its worth thinking about why the ACA gets hospital penalties on readmissions wrong, what we might do to fix it – and where our priorities should be.
A year ago, on a Saturday morning, I saw Mr. “Johnson” who was in the hospital with a pneumonia. He was still breathing hard but tried to convince me that he was “better” and ready to go home. I looked at his oxygenation level, which was borderline, and suggested he needed another couple of days in the hospital. He looked crestfallen. After a little prodding, he told me why he was anxious to go home: his son, who had been serving in the Army in Afghanistan, was visiting for the weekend. He hadn’t seen his son in a year and probably wouldn’t again for another year. Mr. Johnson wanted to spend the weekend with his kid.
I remember sitting at his bedside, worrying that if we sent him home, there was a good chance he would need to come back. Despite my worries, I knew I needed to do what was right by him. I made clear that although he was not ready to go home, I was willing to send him home if we could make a deal. He would have to call me multiple times over the weekend and be seen by someone on Monday. Because it was Saturday, it was hard to arrange all the services he needed, but I got him a tank of oxygen to go home with, changed his antibiotics so he could be on an oral regimen (as opposed to IV) and arranged a Monday morning follow-up. I also gave him my cell number and told him to call me regularly.
Continue reading “Is the Readmissions Penalty Off Base?”
Filed Under: Commentology, THCB
Tagged: Affordable Care Act, Ashish Jha, hospital readmissions, Medical errors, Patient Safety, readmission penalties, Readmissions
Nov 27, 2012
No one would deny that we’ve reached a point in public healthcare finance where tough choices have to be made about what gets covered and what doesn’t. There is, however, one fairly easy choice, and that is to reconfigure the $3 copay for Medicaid members using the emergency room.
I would propose a replacement benefit of $0 for the first visit and $20 for each subsequent one, in a given calendar year. Not every state, but any state that reaches certain thresholds for physician access or urgent care availability may switch to this policy.
Here are the arguments in favor. First, each $3 visit costs the state and federal government about $500. There are few discretionary or semi-discretionary patient decisions that cost so little to trigger so much taxpayer spending. (Hospitalizations have that kind of ratio, but a patient can’t check himself into a hospital the way he can visit an ER.)
Second, one must consider the historical context. The $3 copay (“$3″ is a shorthand for $0 to $10 — I don’t think it is over $10 anywhere) is a vestige of the bad old days when it was very difficult to find physicians who accepted Medicaid patients. That is still the case in some locales; they would not be eligible for this waiver. The world has changed, but the copay hasn’t.
Third, ER utilization rates in the TANF population, which because of its average age is generally pretty healthy, far exceed that of the commercially insured population. This is despite the fact that TANF members in general cost much less than commercially insured people, a gap that widens still further once birth events are removed from the calculation. Clearly there is much excess utilization.
Continue reading “Is It Time To Charge Medicaid Members for ER Usage?”
Filed Under: Commentology, THCB
Tagged: Al Lewis, copays, ER, Medicaid, North Carolina Medicaid, TANF
Nov 24, 2012
Hey there Accountable Care Organization executive.
You’re probably willing to continue to commit millions of dollars toward an electronic health record (EHR) coupled to an online patient portal. That’s because you’ve been told by your leadership team that electronic consumer empowerment, patient-provider communication and the substitution of efficient two-way messaging for costly face-to-face visits will increase quality, reduce expenses, generate shared savings and guarantee that your life-sized portrait will be prominently displayed in your flagship hospital’s lobby.
Well, after you’ve read a just-published JAMA research study by Ted Palen, Colleen Ross, David Powers and Stanley Xu, you may want to tell your administrative assistant to cancel that appointment with the portrait artist.
The article’s title is Association of Online Patient Access to Clinicians and Medical Records With Use of Clinical Services.
How the study was done:
Kaiser Permanente Colorado added “MyHealthManager” (MHM) to their EHR in May 2006. MHM allows patients to view tests, records, problem lists as well as care plans, schedule appointments, request refills and message their doctors. By June of 2009, over 375,000 Kaiser patients had signed up for MHM. Of those, about 45% had used the system at least once. Of this number, Kaiser researchers pulled the records of 44,321 persons who had been continuously enrolled in the Kaiser system for at least two years.
Continue reading “Study Says, Something Other Than What We Were Expecting. EHR Portals Increase Hospitalization Rates”
Filed Under: Commentology, THCB
Tagged: ACOs, EHR, Jaan Sidorov, Kaiser Permanente Colorado, MyHealthManager, patient portal
Nov 21, 2012
Henry David Thoreau said, “There are a thousand hacking at the branches of evil to one who is striking at the root.”
We have hacked at healthcare costs for what seems like thousands of times, with very limited success. It is time to strike at the root. Rather than focus on reducing costs after preventable diseases have taken hold, it is time to focus attention on eliminating the disease.
Let us look at two specific examples.
1. The CDC (Center for Disease Control and Prevention) has estimated that the cost of smoking(estimated cost of smoking-related medical expenses and loss of productivity) exceeds $167 billion annually. The CDC has also estimated that 326 billion cigarettes (combustible tobacco, to be more precise) went up in smoke in 2011. In other words, every cigarette consumed costs the nation about 50 cents; every pack, $10.
Put another way, while the smoker paid approximately $5 a pack up front, there was also an additional $10 secret surcharge — the cost of which is born by all of us (such as taxpayers, anyone who buys health insurance, even private companies who suffer from lower productivity as a result). It is as if we are telling the smoker, “I know you can’t afford to pay $15 for a pack. So we will give you $10 so you can afford to smoke.” We are not this generous even with people who don’t have one square meal a day. We spent $78 billion on food stamps, with constant pressure to bring that down further even if some people will be left without food as a result.
Continue reading “Cigarettes Should Cost $25 a Pack”
Filed Under: Commentology, OP-ED, THCB
Tagged: Cancer, Diabetes, Earl C. Daum, Health care spending, President Obama, preventable diseases, smoking, smoking cessation, sugar consumption, Vijay Govindarajan
Nov 21, 2012
It seems both ironic and inevitable: I won’t be getting any more “meaningful use” checks. It’s not that I didn’t qualify for the money; I saw plenty of patients on Medicare and met all of the requirements. I was paid for my first year money without much hassle. The problem I am facing is this: I am probably going to be “opting out” of Medicare, and once I do that I will cease to exist as far as HHS is concerned, and they are the ones who write the “meaningful use” checks. No existence equals no money.
This is ironic because I have gotten famous for how well I’ve used electronic medical records, have written advice for physicians trying to qualify for “meaningful use,” and am esteemed enough to be often asked for my opinion on the subject (culminating in a presentation last year for CDC public health Grand Rounds). I have spent much of the past 16 years disproving the myths that small practices couldn’t afford EMR, that EMR decreases profitability, or that they reduce quality of care. We not only could afford EMR, we flourished, using it as a tool to increase both productivity and profitability. Not to overstate the issue, but my practice (and others like it) paved the way for the existence of “meaningful use.” I don’t know if that’s a good or a bad thing.
But, as fate would have it, I am leaving the practice in which I did all of this work and am starting a new practice with a different payment system. Instead of charging for office visits or tests done in my office, I am charging a monthly “subscription” fee for access to my care and to the other resources I offer. But there isn’t a Medicare code for a monthly subscription fee, and the rules of Medicare are such that, as far as I can tell, I cannot have the practice I intend to build and be listed as a Medicare provider. This is the case even if I never charge Medicare for any of my services.
Regarding my status as a Medicare provider, there are three options:
- Accept Medicare as a “participating” provider – This means that I see Medicare patients and accept what they say I will be paid. I bill CMS for my services, which are based on my “procedure codes.” My main procedure is the office visit, but I can also bill for things like immunizations, lab tests, and office procedures. The more procedures I bill for, the more I get paid, but I must justify this billing in my documentation or run the risk of being accused of fraud.
- Become a “non-Participating” Medicare provider - In this scenario, I am paid by the patient for the encounter and then they are reimbursed for what they paid me. The choice of what I bill happens the same way, and I still must set fees based on what CMS tells me (although I can bill a little bit more than I would if I was a participating provider). Billing is, once again, based on the documentation of the visit.
- “Opt out” of Medicare altogether - Opting out means that I am no longer in the Medicare database as a provider and won’t get paid by them at all. Patients are free to come to me, but they must pay what I charge, and I set my fees based on what I think is best. Continue reading “Tough Hard Decision: What To Do About Medicare”
Filed Under: Commentology, THCB
Tagged: Coding, Medicare, Opt out, private practice, Rob Lamberts, Subscription model
Nov 19, 2012
Last year I graduated from nursing school and began working in a specialized intensive care unit in a large academic hospital. During an orientation class a nurse who has worked on the unit for six years gave a presentation on the various kinds of strokes. Noting the difference between supratentorial and infratentorial strokes—the former being more survivable and the latter having a more severe effect on the body’s basic functions such as breathing—she said that if she were going to have a stroke, she knew which type she would prefer: “I would want to have an infratentorial stroke. Because I don’t even want to make it to the hospital.”
She wasn’t kidding, and after a couple months of work, I understood why. I also understood the nurses who voice their advocacy of natural death—and their fear of ending up like some of our patients—in regular discussions of plans for DNRtattoos. For example: “I am going to tattoo DO NOT RESUSCITATE across my chest. No, across my face, because they won’t take my gown off. I am going to tattoo DO NOT INTUBATE above my lip.”
Another nurse says that instead of DNR, she’s going to be DNA, Do Not Admit.
We know that such plainly stated wishes would never be honored. Medical personnel are bound by legal documents and orders, and the DNR tattoo is mostly a very dark joke. But the oldest nurse on my unit has instructed her children never to call 911 for her, and readily discusses her suicide pact with her husband.
You will not find a group less in favor of automatically aggressive, invasive medical care than intensive care nurses, because we see the pointless suffering it often causes in patients and families. Intensive care is at best a temporary detour during which a patient’s instability is monitored, analyzed, and corrected, but it is at worst a high tech torture chamber, a taste of hell during a person’s last days on earth.
Continue reading “End of the Line in the ICU”
Filed Under: Commentology, THCB, The Insider's Guide To Health Care
Tagged: Cancer, DNR, DNR tattoos, end of life wishes, futile care, ICU, Kristen McConnell, Nursing, Palliative Care
Nov 16, 2012
Practice Fusion, Castlight or ZocDoc will be the next digital health IPO. That’s according to a survey of over 100 innovative digital health entrepreneurs, conducted by my firm, InterWest Partners.
Nearly one third of respondents said Practice Fusion was most likely to be the next digital health IPO with approximately 20% of entrepreneurs voting for Castlight and ZocDoc, respectively. Among the trio, all three have been impressive generating media coverage and raising money (collectively raising over $320m in the last 2 years alone with valuations ranging from $450m to upwards of three quarters of a billion dollars), in addition to having some of the most visionary leaders in the space.
Contrary to popular belief that digital health is primarily about the next iPhone app for weight loss, sleep or exercise, it was interesting to note that all of the leading “IPO” candidates in our survey have B2B models. This is consistent with an insightful RockHealth report ( which found that nearly 80% of digital health companies have B2B models. Future growth in this category is likely to continue as the leading healthcare accelerators such as RockHealth, BluePrint Health and Healthbox are all seeing more applications from B2B companies.
The responses to the IPO question reflect an interesting industry trend. Though often classified as “B2B”, many of the leading digital health companies are really B2B2C – meaning that without the C there is no B2B. Pricing transparency tools (Castlight), scheduling platforms (ZocDoc), employer based wellness programs, medication adherence solutions – they all must find a way to engage the end user or they won’t be purchased by the employer, physician, healthplan, hospital, or pharma company. And though it’s impossible these days to sit through a day of pitches without hearing the phrase “consumer engagement” twenty times, I’m excited that people are starting to ask more of the right questions. Why will someone want to use this? Does it really solve a true need? Is the product easy to use, intuitive, and fun? Continue reading “The Next Digital Health IPO?”
Filed Under: Commentology, THCB
Tagged: Blueprint Health, Castlight, Healthbox, InterWest, Michelle Snyder, Practice Fusion, RockHealth, Startups, Zocdoc
Nov 12, 2012