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HOSPITALS: Fraud–Hospital CEO Goes to Jail, by MATT QUINN

After the – alleged – Medicare fraud at HealthSouth, Tenet, Medco, et. al… the government has held the CEO of an organization that defrauded Medicare personally responsible:

According to AIS Health, Guy Roland Seaton, the CEO of a California subacute hospital and nursing home was sentenced to 78 months in prison for bilking Medicare by overstating nursing salaries at his facility by almost $3 million.

It seems that the nursing home used fabricated time cards and phony payroll reports to inflate Medicare charges for nursing salaries:

    “A St. Luke’s employee created false time cards and payroll reports from 1996 to 1999. For example, Seaton allegedly told an employee to create phony nursing logs and nursing schedules for April 1996 and February 1997. When the Medicare fiscal intermediary, Mutual of Omaha, got a whiff that something was amiss in nursing salary reimbursement, it planned an audit. In anticipation of the 1999 audit, a St. Luke’s employee assembled a binder full of false nursing schedules and then gave it to FI auditors, the indictment says.”

While it is clear that the CEO of St. Luke’s had a direct role in the fraud, it is heartening to see that prosecutors didn’t accept the “I’m the CEO and didn’t know about the actions of a few rogue employees” so commonly used in this day and age.

While the dollar amount in this case pales in comparison to the – alleged – amounts that the other companies have been accused of defrauding the government, one can only hope that prosecutors hold corporate heads responsible for the behavior of their low-level employees (versus the other way around). But I wouldn’t hold my breath.

TECHNOLOGY: Healthcare IT–Staying the Course (or Not) by MATT QUINN

With rosy prognostications , encouragement from Leapfrog , the support of our Fearless Leader, and leading healthcare organizations pledging billions for Healthcare IT, the universal adoption of electronic medical records and CPOE seems like a done deal.

But debt and pressures on reimbursement margins could derail even the best-intentioned efforts. Baptist Health System Inc. is pulling the plug on its multimillion-dollar effort to install Siemens Medical Solutions Health Services Corp.’s Soarian software throughout its hospitals in favor of maintaining its 1989-era systems (). Hailed by then-CIO Charles Jones as a tool to” provide our clinicians with the best tools…to enhance care delivery and patient safety,” Baptist has since changed direction.

“Given the substantial investment, resource and time commitment required to participate as a Soarian early adopter, BHS … has decided to halt implementation of Soarian.”

As Sutter announces ambitious plans to spend over $1 billion on IT systems, one wonders if it will be willing to make cuts elsewhere to maintain its plans in the face of reduced reimbursement from CalPers to maintain its decade-long IT vision.

The ever-reasonable Dr. Donald Berwick, president and CEO of the not-for-profit Institute for Healthcare Improvement, calls for the government to provide web-based, downloadable (and inexpensive) IT systems to overcome the high initial capital costs of the technology and cultural change barriers to the adoption of complex integrated systems:

    “Berwick called for information standards for coding systems and interoperability among these systems. As a separate effort, the government should sponsor an electronic medical record…that anyone could download online… The record could act as a foundation if users wanted to build more expensive proprietary systems. He likened the free EMR model to the creation of the Internet, which was developed by the government and “essentially given to the public.”

With the present healthcare IT funding proposal not expected to have much of an impact on adoption, perhaps $100 m toward Berwick’s proposal would be better spent!

TECHNOLOGY: WebMD as victim of AMA activism? by MATT QUINN

There’s a long article from CNET about the problems that WebMD is facing:

While the true scope of WebMD’s “lost” or HIPAA non-compliant claims is hard to ascertain from this article, it appears that payers, providers and the AMA are taking the opportunity to shake down the company for more “hand” in negotiating rates on clearinghouse services:

According to Eric G. Brown, vice president and health care analyst at Forrester Research, “WebMD’s problems with customers seem to stem more from attitude–the arrogance of a dominant player–than from technology failures. “They’re perceived as the Microsoft of the health care sector.”

Kimberly Grose, vice president of network services and operations for Harvard Pilgrim, based in Wellesley, Mass. adds that “Thirty-five cents may not seem like much, but it adds up quickly for Harvard Pilgrim because it handles 19 million transactions annually.”

All of this portends bad news for WebMD’s Envoy business:

Forty-eight percent of the plans already exchange claims directly with at least some providers.

“While large providers and payers can bypass middlemen, Envoy is becoming a clearinghouse ‘for leftover claims’ from small providers that don’t want to be bothered by the effort of setting up direct connectivity with hundreds of payers, said Sean Wieland, a research analyst with W.R. Hambrecht.”

At least WebMD has its online content business to drive profitability… right?

TCHB NOTICE: Vacation time a-coming

Over the next two weeks I’ll be visiting my folks in the UK, and sunning myself on the beaches of Turkey, with hopefully the opportunity to get in a little ruin visiting and paragliding at Olu Deniz. I’ll be checking in very occasionally but in my absence you should see a lot from regular contributor Matt Quinn, who has very kindly offered to carry the load. Several other of my regular correspondents who you may know and love (or in some cases know and hate!) have also graciously offered to pen a piece now and again. So I’m very hopeful that this mostly solo effort will be very interesting in my absence. If you are interested in contributing a piece please email Angela Kang, who is shouldering the admin load of THCB.

And of course, while I’m gone please continue to check out the great med and health care bloggers whom I recognize in the listing to the right.

Take care and try to behave while I’m not watching! And if you really are bored, my vacation snaps should be appearing over at my personal blog.

QUALITY/MALPRACTICE: Change malpractice system to patient safety system, say Pfizer doc

It’s not that often that I agree with Mike Magee, the doctor who’s Health Politics is funded by Pfizer and tends to reflect big pharma’s viewpoints. But in his latest piece called The Road from Medical Malpractice to Safety: You Can’t Get There from Here, he lays out a convincing argument that the malpractice system directly impedes the goals of the patient safety movement. He states the core of this problem very succintly here:

    The American malpractice system, embedded in personal injury law, fundamentally undermines the patient safety movement. A head-to-head comparison tells the story. The tort system uses litigation as its lever for change. The safety movement uses quality improvement analysis. Tort law focuses on the individual. Safety focuses on the process. The tort system’s punitive and adversarial style drives information down, encouraging secrecy. The safety movement uses a non-punitive and collaborative approach, which encourages openness, transparency, and continuous improvement. With tort law, exposing oneself can end one’s career and harm one’s mental health. In the safety movement, contributing is career-enhancing and therapeutic. It may seem counterintuitive, but for medical malpractice to achieve its stated social purpose it must abandon the emphasis on a tort-based approach and embrace safety.

This has the massive implication that organized medicine’s proposed reforms to the medical malpractice system, particularly their desire for limits on pain and suffering awards, are irrelevant and counter-productive. Instead, the system needs to be replaced with a regulatory structure focused on patient safety. And by no means would that be a difficult transition for just the lawyers. It would be even more of a challenge for doctors, who would have to end what Mike Millenson has called “The Silence” of professional courtesy and expose themselves and their colleagues’ decisions to public review.

The AMA and the rest of organized medicine need to take the lead here, get off their high horse about the malpractice issue, and while they have a very sympathetic (i.e. Republican) Congress, develop some real bipartisan consensus on replacing the current tort system with a legally mandated patient safety system. That system will need real teeth to assure the public that it’s not biased in favor of physicians and providers. And of course we need a neutral public education campaign about why such a system is required; reason number one being that most malpractice currently goes on unimpeded, and this system will stop that.

HEALTH PLANS: As you may have guessed CDHP = Cost shifting

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So when I told TCHB readers about Harris’ forecast for the year a few months back, it sounded like employers were confused by the consumer-directed health plan (CDHP) hype but somehow believed that it gave them a way out of paying for first dollar coverage, and was, following the death of managed care, the next big thing in terms of saving them money. My suspicion was that employers would try to slowly move employees to HRA/HSA based high-deductible health plans, and then gradually over time–particularly if the CHDPs didn’t produce their initially savings– gradually stop funding the HRA/HSA. This would be same thing as essentially only covering catastrophic insurance for their employees. Of course that essentially means reducing their benefits.

Well the latest KFF/Mercer poll, as reported in USA Today (hat tip to Don Mccane) suggests that in forecasting that this might be a gradual phenomenon, I actually gave employers too much credit (or too little depending on your viewpoint). The report says:

    Mercer’s survey of 991 employers found that 61% would set the individual annual deductible for an HSA plan at $1,000. But 17% chose $1,500, 11% said $2,000 and 10% were above $2,000. Don’t expect employers to pay that deductible: The Mercer study also found that 39% would not put any money into the savings accounts for workers, while 24% would put in $500 a year, leaving it up to the workers to fund the rest.

In other words, the CDHP translates into direct cost shifting. When you parse the press release from Mercer (access to the survey itself is coming later), it looks like the employers, who are interested in CHDPs with a high deductible plan, are looking at it as an alternative to asking employees to pay up to 50% of the premium for a normal plan. (There’s also a lot of high-fallooting rhetoric about providing a savings plan vehicle for employees to use for health spending in their retirement years, but I don’t think any employees are really buying the notion that employers will care about them in their retirement).

    Nearly half of large employers (48%) say that a likely motivation for offering an HSA would be to provide a savings vehicle for post-retirement medical coverage. Interestingly, significant portions of both those employers who currently offer retiree medical coverage and those who do not say they are interested in this use of HSAs (53% of retiree plan sponsors and 40% of non-sponsors). More than one-fourth of employers (26%) say they would offer the plan to provide a more affordable medical plan option for employees.

In fact, I think that Mercer (which is after all selling something) is a little too gung-ho about the ability that employers will have to force CDHP and their associated costs easily onto employees. The John Gabel study in Health Affairs a few weeks back suggested that the CDHP would have a modest impact. However, it’s clear that the cost-shifting direction is set, and that health care as an automatic employee benefit is at risk in the future.

The “free-marketers” behind the HSA movement, and their opponents who believe in some kind of community-rated tax-based social insurance system, will both take cheer from the apparent demise of the employer-based health insurance system. Both sides of that argument would like to see greater visibility to the tax-payer and/or the consumer as to what all this health care they are consuming actually costs. Employer-funded third party payment (of which Medicare is an extension, by the way) has been the cause of both healthcare cost inflation, the continued existence of the uninsured and all kinds of ridiculous anomalies and inefficiencies in the market-place. When health care is regarded as a freebie provided as a part of employment, all kind of bad things result. So theoretically the employee should be happy because they have for 50 years been giving up income in lieu of their health benefits–one reason that real wages in the US have been flat for 30 years.

But, and this is a major but, there is one set of actors here who severely disagree. To repeat a poll taken last year which I described here, when offered the choice 71% of employees wanted a combination of “health coverage & lower salary” compared to only 24% wanting a “higher salary & no health coverage”. In other words, health benefits as a part of employment are very popular amongst employees.

So if employers are going to try to cut benefits severely (and let’s face it they are unlikely to be adding increased wages in their stead) you can expect to see some very grumpy employees over the coming years. And even American corporations don’t necessarily want to make their employees that unhappy when it only saves them a modest amount of their payroll costs. So I think that Gabel is right and that the way this trend will play out is by no means automatic.

QUALITY/PHARMA: A response to the obesity question

Leonard Soloniuk, MD had this to say about my recent post on the obesity issue:

    I have seen the assertion that obesity is not a health problem in several different contexts, but Paul Campos appears to be quite flamboyant in his arguments. There seem to be several issues here including the utility of BMI is categorizing people at risk. The whole question of the efficacy of interventions is also subject to question.

    One of the reasons Campos’s arguments are worth considering is the recent history of the abuse of science and epidemiology in the pursuit of political goals. Examples would be the HIV epidemic and the medicalization of handgun restrictions. In these cases, interpretations of data have been distorted to fit predetermined policy goals. Thus,
    when the usual suspects (e.g. the CDC, JAMA, etc.) declare a new health crisis, skepticism is in order.

    There are a number of issues that need clarification in this debate: What is the role of BMI? Is body fat a better predictor and a better secondary outcome to follow? What are the true risks for mildly overweight patients? Which interventions lead to improved outcomes.

    However, it is difficult to take seriously an attack on Americans, ascribing to them the need to discriminate. This seriously lessens his credibility for all of his arguments. And that’s unfortunate, because a reasoned analysis of this issue would be quite welcome

I’m inclined to agree with with Leonard that the generic attack on Americans as “wanting to discriminate” is simply not helpful to serious discsussion of this topic, even if there is 200+ years of history showing way more discrimination in the US than we’d like. However, you can make an argument that handgun wounds showing up in emergency rooms constitute, or at least cause, a health crisis (morbidity and mortality in young inner-city men) even if the initial study of the article was clearly politically motivated. So we should not be ready as Leonard to dismiss the CDC/JAMA “establishment” and their views on obesity just because (for instance) as NRA members we didn’t like their views on gun control. (I’m more confused by Leonard’s critique of the CDC’s actions around HIV, but maybe he’ll enlighten me).

However, Leonard does get to the right set of questions, when he asks whether BMI, body fat percentage or anything else really matters, and what the outcomes for overweight people truly are. These clearly require more study with real data rather than emotion amongst the medical community, and I suspect there is emotion on both sides–as there clearly is in Campos’ views.

As a non-medical healthcare blogger, I’m though asking a slightly different question which is, “will these opinions become mainstream” and if so “will that change the way healthcare services (including drugs) are used?” And if you don’t think that psycho-social changes in attitudes to health can change service provisions in health care you might want to take a look at this article about how the Atkins low-carb diet fad has revolutionized the restuarant and food business. (Arrgghh. Can”t find the NY Times article I read last night so here’s one about the chain Ruby Tuesday’s profit rise on the back of their low carb menu).

HOPSITALS: Market shrugs off $117m Tenet loss

Well it looks like Sheryl Skolnick, an analyst with Fulcrum Global Partners, who decided that Tenet was worth a break-up value of $9.40 a share was about half-right. That number was the bottom a few months back when various suckers (i.e. me) threw in their hands too early. Yesterday Tenet said that it would lose $117M in the first quarter. Wall Street has decided that with around $9 as a base for the stock price, it’s more likely than not that Tenet will get over its legal problems, have only better quarters from now on, and have enough cash to survive this current crisis. The stock is back up close to $12. Obvioulsy you be the judge and caveat emptor.

There’s much more in this article in AMA News, including this quote blaming Wall Street for expecting too much from hospitals, again from Sheryl Skolnick:

    “The hospitals simply can’t generate the year-after-year earnings that Wall Street wants,” she said. “I think Wall Street has to realize that these are real estate based, highly regulated businesses.”

The quote reminds me of one of the first (and what I immodestly think is one of the best) articles I wrote at TCHB, called Why Wall Street Hates Health Care Services, But Doesn’t Know It.

PBMs: Medco settles state complaints, but pretty cheaply

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Medco today settled its ongoing lawsuit with several state attorneys-general at the relatively modest cost of $30m. The stock rose slightly on the news, although there is an another ongoing Federal lawsuit, that TCHB has covered before. While this looks like a kind of business as usual story of “company gests caught with hand in taxpayer cookie jar, company pays fine, stock goes up as investors are happy fine isn’t bigger”, some of my more jaded readers have been poking into the details. Matt Quinn writes about a different Medco settlement with Massachusetts:

    Maybe I’m missing something, but it appears that Medco only had to pay back part of what it stole from the state of Mass:

    “Medco Health Solutions will pay Massachusetts $5.5 million to settle allegations that the company cheated the state while it managed prescription drug benefits for nearly 200,000 state employees and retirees, according to documents expected to be filed in US District Court today.”

    “Over the course of the contract, Medco passed along about $9 million in rebates, but kept another $10 million, the state alleges.” So, steal $10, pay back $5.5… Not a bad deal.

    And, of course, this plot to make Medco millions of dollars was dreamt up and executed by a few “rogue employees”:
    “Medco officials have acknowledged that the company had isolated problems with “rogue employees” at a mail-order pharmacy in Tampa, but said those problems were quickly corrected and did not affect drug costs.”

Of course this is nothing to the “business opportunities” those PBMs and their rogue employees will be looking at when they get to run the Medicare drug program after 2006.

I suspect the lawyers, state AGs and the DOJ have jobs for life.

HEALTH PLANS: UnitedHealth to buy Oxford for $4.9 Bln

So three days after Wellchoice (the Old Empire BCBS) decides that it won’t buy Oxford Health plans, a bigger fish steps in. UnitedHealth decided to buy it instead for $4.9 Bln, which is roughly the price Wellchoice had agreed to pay. In some ways this make more sense and in some ways it makes less, and it reflects how the game has changed for health plans . Oxford gives United greater presence in the north-east and it gives it greater access to the Medicare HMO market, which was Oxford’s original strength. Now that the PDIMA Act is funneling more money to Medicare plans, it makes sense for United to want to grab its share. However, back in the day (i.e. before 2001) the goal of managed care plans was regional market concetration, so that they could grind local providers down on price by developing what Ian Morrison used to call “virtual single payer” capability in each market. It looked like Wellchoice was still going that route when it decided to buy Oxford , but decided that it was about to adopt a 90s strategy in a Zero’s world, and thought better of it. This encouraged analysts at Bank of America who gave Oxford a sell rating, based on its likely poor profit outlook. They won’t look quite so smart today to any of their clients who took them up on their advice!

As an aside. It’s good to see that the sanctity of Wall Street remains inviolate. Reuters reported at 4.11pm that United was going to buy Oxford, but looking at the day’s chart, you figure that the word got out about 40 minutes earlier! I wonder how that was possible?