Friday, July 20, 2018
Blog Page 1031

POLICY: Medicare drug coverage issue hurts Bush

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Today’s New York Times reports with data what most of us following along at home have suspected for a while–seniors don’t like what they are hearing about the Medicare drug bill, and the blame is shifting towards the President.

    A poll conducted this month by The New York Times and CBS News showed that Mr. Bush had a 41 percent approval rating among the 65-and-older voters, his lowest among any age group. That was down from 44 percent in July and 63 percent in May.

The main issue is that middle income retirees are finding out not only that they’ll have to pay premiums for drug coverage, but also that there’s a hole in the middle of the benefit package–it runs out somewhere after the first $4,000 of spending.  There may also be some nasty compromises required for upper income seniors, in particular means testing for those earning more than $60,000 a year. Furthermore, without any bill there’s a big increase in the amount Medicare recipients will have to pay in Part B premiums next year, up $7.90 to $66.60 per month.

Liberal Democrats in the Senate, led by Edward Kennedy, have vowed not to accept means testing, as they believe it will be the start of a slippery slope to a two-tiered system. And in poll after poll seniors have consistently trusted the Democrats over the Republicans in their assessment of which party is better for Medicare. It may be hard for the average taxpayer to feel much sympathy for the small percentage of seniors who earn almost double the average American household being asked to contribute more towards their Medicare coverage.  However, it was those seniors who caused the repeal of Medicare Catastrophic Act back in 1989.  And all politicians know that the average senior not only votes at much higher rates than younger voters but also that seniors are concentrated in states like Pennsylvania and Florida.  You may remember that one of those states in particular was quite important in the outcome of the last Presidential election, and you can be very sure that, bill or no bill this year, this issue will be at the forefront of the Democratic campaign in those states.

INDUSTRY: Slow progress on HBOC indictments

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If you think back to late 1998 you may remember that stodgy drug distributor McKesson bought hospital software company HBOC. HBOC had grown into being the biggest HIT software supplier, mostly through a series of acquisitions through the 1990s. At that point most observers believed that McKesson was mistakenly buying a  company that had run out of growth potential and was selling out at the top. If you remember 1999 (and if you owned McKesson stock you probably do!), it became apparent to McKesson that the news was much worse. They discovered that HBOC’s profits were fictional and found that Charles McCall, its new CEO acquired with HBOC, was behind the fraud. In one day McKesson lost half its value

Fast forward to last Friday, a mere 4 years and 6 odd months later, and one of the guilty parties, former Exec VP Albert Bergonzi admitted it. Meanwhile the biggest fish, McCall, was indicted only in June 2003. Evidence given by some of the others, notably ex-CFO Jay Gilbertson, shows that the fraud was started in early 1997 basically to dress the company up for sale.

So apart from the awful luck McKesson had by failing to do its due diligence properly, and the consequent suffering of the shareholders (Mckesson’s stock is still where it was immediately after the fraud was announced), the real question is why does it take the better part of 5 years for this fraud to be prosecuted? And does that delay help to encourage other white collar criminals to cheat the books and the rest of us?

INDUSTRY: The ever-growing power of Wal-Mart

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There’s been plenty written elsewhere about the influence of Wal-Mart in America’s economy. For instance, this about Wal-Mart and the recording industry and this critical view of its influence on local communities. Somewhat under the radar Wal-Mart has been growing in scale as grocery store and a pharmacy chain. It’s now the number 3 pharmacy chain in the US, behind Walgreens and CVS. Jane Sarasohn Kahn has written an excellent article about Wal-Mart’s influence on the health care business.

One of the best known aspects of Wal-Mart’s presence is what it does to suppliers.  It forces them to cut costs and pays them later than they’d like, so Wal-Mart makes more of the "float" than other retailers.  In fact I was once told that Sam’s Club (its discount "club" store) actually makes zero margin on goods sold but turns over its inventory every 7 days and pays its suppliers in 90, giving it nearly 3 months to collect interest. Donald Johnson at The Business Word has written a fairly complimentary article about Wal-Mart’s employee health benefit program, particularly the emphasis on cost control and catastrophic care insurance, but he neglects to point out that it takes 6 months for an employee to be eligible for health benefits and that Wal-mart has 40% employee turnover a year. So great swathes of Wal-Mart employees are uninsured. (It could be worse–they could offer no health insurance).

One example of Walmart’s power over suppliers happened this morning.  It pulled out of a flu vaccination program is was going to offer with the FluMist product from MedImmune.  MedImmune’s stock price is off over 5%.

INDUSTRY: Major healthcare M&A deals this year

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This Reuters report shows major healthcare M&A deals this year.  I found this after looking at GE’s further incursions into the health care business.  Most recently GE last week bought Amersham. Amersham makes reagents and fits in with GE’s MRI and other scanner business.  Meanwhile GE has also decided to to get further into medical IT, with its purhcase of the old Medicalogic EMR system from Medscape. Add to that Siemens purchase of SMS a couple of years back, and its apparent that the world’s biggest companies are starting to scrutinize the US’ biggest industry, and also see if there are opportunities on the information and medical technology side, as well as on the pharmaceutical side.

Note: Amersham’s interesting historical footnote is that it was the first company privatized by the Thatcher government in the 1980s, and possibly the first privatized company ever

TECHNOLOGY: Physician IT use–New Zealand leads the way

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I mentioned anecdotally a while back that GPs in New Zealand and the UK are very advanced in their in-office IT use. A GP I stayed with there last March was using a computer to type his patient notes while the patient was in the office.  He was no fresh young doc, in fact he’s much closer to retirement than to hanging his shingle. So what caused this transformation? A national system, national planning, the creation of a single health identifier for everyone in the country, and funding for the technology.  The result is shown in this piece by the New Zealand Health IT Cluster:

80% of GPs use an EMR
95% of GPs, 100% of laboratories and 100% of radiology clinics are connected to the Health Data Network.

More from iHealthbeat

QUALITY QUICKIE: Design in HC–IDEO’s take

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Famed Palo Alto industrial design firm IDEO is taking on the challenge of designing a more-patient friendly hospital process. Many of the ideas they are talking about are similar to the quality circles that the Japanese used to successfully destroy threaten the US auto industry. Don Berwick has been promoting these ideas in health care for many years, as I posted about here.

The most interesting idea the IDEO team comes up with is rapid prototyping.  They changed many things about the process, did it very quickly, and then observed the results immediately.

    Ordinarily the hospital spends a year or two in committee, create what they think is the perfect team process, and then goes out and tries it and fails. At IDEO we say, "fail early to succeed sooner." So after a half hour bringing into the field, we see how colleagues use it. Then we come back and revise it. So we get rapid prototyping in place. Previously it was death by committee.

On a side note, IDEO made its name in part on its design of the Palm V PDA (on the left in the picture).  What’s not so widely known is that IDEO stole assumed its role in the design process from a smaller design firm (for reasons that were totally unrelated to the design work). The smaller firm had already come up with this design, which IDEO if anything made less attractive in the final product. So it just shows that even the best and brightest amongst us have skeletons in our closets.

INDUSTRY: Employer health costs moderating slightly

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Hewitt Associates report on their annual survey on health costs for employers. They found that the 2004 premiums will be up an average of 12.6% next year as opposed to 14.7% in 2003. They also note that HMO costs continue to rise a little more than PPO and POS plans (13.5% vs 12%) which is one reason that HMO enrollment has been declining (although HMOs and POS are pretty similar these days). Don’t forget that these costs are for employers and are not really the same as overall health costs which are also paid by government and consumers. Employers are continuing to respond by imposing more costs onto their employees, which is leading to contentious labor relations in many industries, such as retail and public services (via The Bloviator). Hewitt expects some of the following tactics:

    Higher payroll contributions (from employees), lower subsidies for dependents, and increased office, hospital inpatient and emergency room copayments. (For drugs), implementing higher copayments, coinsurance models, mandated low-cost substitution provisions for certain therapeutic classes and generic incentives. (For chronic care)
    contracting with organizations that offer specialized or disease management programs. Offering new consumer-driven health plans.

In other words pay more and probably get less.

There are a couple of implications here for health plans serving the commercial market. One is the slow but steady emergence of the "consumer-directed health plan".  While this doesn’t appear to be any more than another fancy benefit-set such as the HMO, PPO or POS were in their day, it is making an appearance as this news from Siemens suggests. Expect consumer directed plans to mean employees choosing between a diminishing set of benefit options.

The other implication is that the slight reduction in cost increase may translate into lower revenue increases and therefore lower margins for health plans. Health plans (and insurance companies) ride out something called the underwriting cycle. Simplisticly put they charge more in some years to make up for losses in past years and they make big profits in those years–so big premium increases as we’ve seen in the past few years equal big profits for insurers.

Two of the biggest insurers, United and Wellpoint, have seen their stocks rise over 50% in the past 2 years, and beat the S&P500 by way more than that. This may not continue for much longer if costs are coming slightly more under control, which may have consequences for the vast amount of money with which United’s senior management have been rewarded, mostly with the approval of an exceedingly compliant board led by ex-New Jersey governor, Thomas Kean .

HEALTH PLANS–Using OTC as a lever for pushing costs onto members

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Health plans and their PBMs failed in their mission to control drug costs in the 1990s. One option that has proved somewhat successful is to get members to use OTC versions of previously popular prescription drugs.  Wellpoint in particular waged a successful campaign to get Claritin (and other non-sedating anti-allergy drugs) reclassified as OTC by the FDA. They then gave away (initially) free coupons to Claritin users to persuade them to try the OTC variety and at the same time made it very expensive for members to get the prescription anti-allergy drugs, Zyrtec and Allegra, by essentially kicking them off the formulary. Now other plans including Aetna are doing something similar by promoting free use of Prilosec now it’s OTC.  Of course this means that Aetna members will probably have to pay much, much more if they want Prilosec’s replacement, Nexium, instead of OTC Prilosec.

While this is good business for the plans and obviously not so for the pharmas, it’s just one more indicator that costs are being pushed directly onto consumers.

QUALITY QUICKIE: Blue Cross’ Pay for Performance strategy

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California Blue Cross (Wellpoint) is one of the plans participating in the California wide Pay for Performance (P4P) scheme, which rewards physician groups for improving a variety of quality scores.  The scheme is administered by the IHA, a provider/payer talking shop that’s seized on quality as an issue that might help improve the antagonistic relationship between plans and providers. This article from MD Practice Alert describes the way Blue Cross HMO is using pay for performance. The article is a little confusing; despite what it says there is no monolithic P4P standards.  All the health plans involved have slightly different metrics. The key thing is that they are all paying bonuses based on some performance measure and making those measures and bonuses publicly available.  For more information on differences between the plans, see here.

Like the other plans Blue Cross is rewarding the groups on the more preventative HEDIS-type measures that are the core of the current P4P. However, one difference between Blue Cross and some of the others is that it’s rewarding physician groups that have utilization management systems that track care given to the group’s patients outside the group’s walls, and especially that given to long-term inpatients in hospitals, rehab centers and skilled nursing facilities. In addition, Blue Cross is paying out more money ($28m) and a higher percentage of its overall payment budget (10%) via its version of P4P.

TECHNOLOGY: Customer service on health plan web sites–Now I’m mad! (with new UPDATE)

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I tend not to let my personal feelings come out in this blog (as I have a couple of others for that) but I find myself pretty grumpy when I read the following passage in Today in E-HealthNews.

    Health-plan Web sites fail to provide adequate content when compared with the "high-quality" content users find at retail and media sites, finds Forrester Research’s Consumer Technographics Q3 North America Benchmark Study. According to the study, retail and media Web sites get overall satisfaction levels of 92% and 86%, respectively. But HMO Web sites receive an overall satisfaction level of only 47%, says Forrester. Even if health plans provide reasonable-quality content on their sites, according to the survey, members say they can’t find it. The study reports that 61% of health-plan Web site visitors say that the site’s navigation structures fail to meet their needs..

You may not know that I spent 2 years working for i-Beacon a company that sold web CRM software to health plans.  The software personalized and organized the presentation of a health plan site to the members based on their health conditions and their medications, as well as automatically extracting information about those conditions from the health plan’s claims system.  We argued that if the health plan installed the system, the plan would save money by having fewer people use their call centers because those members would find the information personalized to them on the web site. What does the report say about that?

    Forrester also finds that seven out of 10 consumers are so unimpressed by the customer-service capabilities of health-plan Web sites that most of the time they use the phone instead

Now I wouldn’t really mind about that fact that only 2 customers bought our product, if health plans as a whole had been buying and installing similar types of software. (Well, I would have minded but I’d have understood)! Instead, as I wrote in this article last year about my e-health experiences, almost all of them did nothing.  The few that have done something in this arena have not in general tried to integrate or personalize the information that they are presenting to their members, which has led to the poor consumer feedback that Forrester reports.

The problem is that despite all the guff about consumer-directed health care, the average health plan sells its products to HR people at big companies who are much more concerned about keeping costs down than the user experience of their members.  This view is so ingrained that appalling customer service from health plans has been totally accepted for ever.  So if the big accounts don’t care, then there’s no real incentive for health plans to make the effort and spend the money to improve.  Whereas in retail or media, if the individual consumer is unhappy they vote with their feet, their mouse and their dollars. Which is yet another reason why employer-based health insurance is a bad idea.

Meanwhile, if anyone wants to buy an excellent health CRM product going relatively cheap, let me know!

UPDATE: Via Tim Oren’s Due Diligence comes news from Jupiter (Forrester’s big rival) that too much personalization actually discourages web site visitors, and that attempts to figure out someone’s needs and wants from limited information is counterproductive. The report says:

    "Given flexible, usable navigation and search, Web site visitors will be more satisfied with their experiences and will find fewer barriers to the profitable behavior sought by site operators," according to the report published Tuesday. "In fact, good navigation can replace personalization in most cases."

So maybe the two companies disagree on their research findings, but perhaps health care web sites have neither personalization nor usable navigation.