Health Business Blog

Medicare is the leading cause of the federal government’s poor budget prognosis. More seniors, higher utilization, new products and services, longer lives and a decline in the number of working age people paying into the system all add up to big trouble. But two article I saw in today’s Wall Street Journal made me realize the prognosis is even serious:

• Numbers That May Make You Sick explores the amount of money –typically in the hundreds of thousands– that people approaching retirement need to have set aside to pay for health care costs such as co-pays, deductibles and uncovered services such as remote patient monitoring for diabetes. To compound the challenge, these costs are likely to rise faster than general inflation, which means that CPI assumptions need to be broken out for this component. It’s something few people do.
• The same article discusses long term care insurance, which is apparently a hard sell for most people. The exception is those people who’ve experienced the trauma of long term care costs with their parents.
• A Nip and a Tuck discusses the phenomenon of older people getting cosmetic surgery, whether because they feel they need it to stay in the workforce or for social reasons. These procedures aren’t covered, which most people realize, but neither are operative-related complications. Although the article points out some of the dangers of cosmetic surgery for older people, the examples it gives are of people who had a lot of success and would recommend such procedures to others. (Reads a bit too much like an infomercial considering its in the WSJ)

It’s Halloween, and if you’re not as scared about long term health care costs as you are of your local ghosts and goblins, their might be something wrong with you.

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The SuperHero edition of the Health Wonk Review is up at the always informative Managed Care Matters.

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The Wall Street Journal (Pain for Europe’s Smaller Drug Firms) notes that Spain, Greece, and Italy are putting the squeeze on drugmakers as part of national austerity programs designed to ease the debt crisis. Companies like Almirall and Alapis that depend heavily on those markets are suffering mightily as national health systems cut reimbursements. There’s less appetite for cuts to hospitals and physicians, and none for taking away coverage.

The US fiscal situation isn’t as pressing as Southern Europe’s. Still if present trends continue, we’ll get there. In fact, uncontrolled health care spending –mainly Medicare– is the culprit. So what can we expect in a 10 year time frame, assuming the US’s finances aren’t straightened out by then?

• Hospitals and physicians are likely to get hit harder in the US than Europe. That’s partly because physicians get paid more here than Europe and also because Medicare sets rates and pays providers directly
• Pharmaceutical companies won’t escape the axe, but they’re a bit less vulnerable politically in the US because they are a major source of R&D spending, are seen as innovative and a more attuned to the political system
• The Affordable Care Act is intended to bring more people into coverage, but the effects may be partially offset by states tightening Medicaid eligibility and Medicare restricting entry by raising the eligibility age or increasing patient financial responsibility
• Although it sometimes seems spending can’t go any higher, there still may be cost shifting from public programs to the private market, where premiums may grow even more rapidly than they would otherwise

I’m hoping the Super Committee or subsequent efforts place us on a more sustainable policy footing and that PPACA, state-level and private initiatives succeed in decelerating health care spending. Otherwise things are going to get ugly.

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Politico argues that Mitt Romney may be haunted by Massachusetts health care costs. I disagree for a couple reasons:

• As the article mentioned, the Massachusetts health reform law Romney signed was about getting people into coverage, not reducing costs
• Although Massachusetts health insurance costs are high relative to other states, that’s not due to the health reform law and doesn’t take into account affordability compared to income

One reason health reform wasn’t passed until 2006 was that opponents argued we had to get costs under control first, and only then take on universal coverage. After a couple decades of that thinking the state decided to try to do things the other way around, an approach I think is more likely to succeed. Universal coverage improved the environment for long-term cost control by getting everyone into the system and making it clear that cost containment would be needed to sustain the gains of reform. Although it would be great to have achieved cost containment in the five years since the law went into effect, it takes longer than that to change health care. Efforts by private health plans to control costs with innovative approaches such as Blue Cross’s Alternative Quality Contract are showing promise. Meanwhile the state is moving forward –albeit slowly– on payment reform and cost control.

Massachusetts insurance costs were high before reform and remain high. Key drivers are our overuse of academic medical centers for primary care, extensive benefits mandates, and guaranteed issue/community rating requirements, which mean that people with pre-existing conditions can purchase insurance –even though it drives up costs for everyone. Overall Massachusetts is a high cost state and health insurance is no exception. But incomes are high, too. Only Connecticut had a higher per capita personal income in 2010.

Statewide health care reform isn’t sufficient, since states can’t control Medicare policies and have only partial control of Medicaid. That’s why federal reform is necessary for Massachusetts and other states to succeed in cost containment, quality improvement and universal coverage.

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I’ll be hosting the next edition of Grand Rounds at the Health Business Blog. Please submit your posts by Sunday, October 30.

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A few weeks ago I parsed an Explanation of Benefits (EOB) I received from Blue Cross Blue Shield of Massachusetts after a visit to Sports & Physical Therapy Associates, an excellent physical therapy center with 14 locations in Greater Boston. The post (What does an Explanation of Benefits (EOB) actually explain?) generated a number of comments and questions on the Health Business Blog itself and when it was cross-posted at KevinMD. In particular:

• What would a cash paying patient be asked to pay?
• How is the $225 in “charges” derived? Is it determined by Medicare?
• Does the provider lose money on the Blue Cross contracted rate?

I’m not a billing expert so I sent an email to Sports & PT to ask them to respond directly. I was impressed with their informative and thorough response, which I am posting here with their permission.

Mr. Williams,

We would be happy to provide you with some insight into how insurance claims are processed.  Please find your questions with the corresponding answers below.

When a patient first comes to our clinics, we provide them our Policy Disclosure document.  I think you will find it valuable in understanding the relationship between patient and provider, patient and insurance carrier, and lastly, provider and insurance carrier.  Here is the first paragraph:

“Sports and Physical Therapy Associates (SPTA) is pleased to participate in your health care and we look forward to establishing a lasting relationship as your physical therapy provider. As part of this relationship, we wish to establish our expectations of your financial responsibility as outlined in our Financial Policy. Letting you know in advance of our Financial Policy allows for a good flow of communication and enables us to better satisfy you. Your medical insurance is a contract between you and your insurance company; we are not a party to that contract. We can often help with providing information about your benefits, but you are primarily responsible for knowing what type of coverage you have and for any charges that you have incurred as a patient with us. Please review and sign the following Financial Policy prior to your first visit.”

Questions:

1. What I would have been charged if I didn’t have insurance? Do you offer discounts to cash paying customers? If so, what do they have to do to get a discount? How much are the discounts?

For patients with no health insurance we offer a “Self-pay” rate. Our self-pay rate is $100 for evaluations and $75 per visit for follow-up appointments. The rate is based on the average reimbursement we receive from our insurance carriers.

For the most part patients utilize their insurance to cover their episode of therapy but may “run out” or exhaust their benefit prior to the doctor, patient, or therapist’s desired end result. We offer this self-pay rate to all patients who must pay out-of-pocket for their services. In addition, if a patient’s insurance reimburses at a lower-than-average rate we charge them the lower amount. For example, BCBS reimburses around $75-80 per visit but Tufts pays us $68 per visit. A Tufts patient whose insurance cuts him or her off could pay out-of-pocket for continued services and would not be charged more than his or her insurance was paying us ($68/visit). For those patients that are having financial challenges, we will set up a payment plan.

2. How do you come up with the $225 in charges? Is that your price or is it do to with Medicare rules?

Medicare sets the standard when it comes to reimbursement rates as well as billing/documentation guidelines; however, Medicare does not have anything to do with how much we charge for each procedure. The charged amounts are comparable to what other outpatient physical therapy practices are billing (for each procedure) in our region.

Though we may bill $225 we do not receive $225 from our patients or their insurance carriers.  Each insurance has a different allowed amount. We never receive more than your allowed amount. Who we receive the allowed amount from is dependent on the patient’s benefit (if you have a deductible you would be responsible for paying us what your insurance allows for the visit, if you don’t have a deductible your insurance would pay, if you have a copayment they would pay everything except for the co-pay).

Example from your EOB – Note: the actual procedure codes/descriptions are missing from your EOB causing you some confusion (I agree, this is frustrating).

They allowed $81.31 (you pay $25 they pay $56.31 = $81.31), and we adjust off the remaining amount according to our contract with BCBS. For more information on the procedures and descriptions you’ll have to consult with your therapist.

3. Do you lose money on the Blue Cross reimbursement? Do you consider your contract with them a loss leader?

We don’t lose money because we never expected to receive more than the contracted allowed amount. However, if we didn’t contract with BCBS (the largest health insurance carrier in the state) we would lose a lot of money. Why then charge more than we expect to receive? We bill over 200 insurance carriers and they all reimburse at different rates so it’s easier to have a set charged amount for each procedure then make the contractual adjustment at the end.

Please let me know if you have further questions.

All the best,

[Billing Manager]

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Eli Lilly is withdrawing Xigris from markets worldwide after a major study showed the drug doesn’t work for sepsis.

I thought it would be a good time to rerun my post from earlier this year about conflict of interest problems with Xigris:

An Archives of Internal Medicine article (Conflicts of Interest in Cardiovascular Clinical Practice Guidelines) is getting a lot of notice today. In essence, many of the physicians who develop guidelines that influence practice patterns and payment decisions have conflicts. The authors recommend only allowing those without conflicts to write the guidelines.

This isn’t a new issue. In 2006 I wrote a piece (Another dirty little secret is out in the open) and am reposting it below because it’s timely:

A year ago in Time to deal with medicine’s dirty little secrets?, I wrote about a variety of practices that are relatively well-known in the health care field but would be shocking to outsiders. Industry often takes the blame for “aggressive marketing tactics,” and no doubt some of that is deserved. But physicians are also culpable.

The open secrets include the ghostwriting of journal articles by industry sponsors, physicians and academic medical centers holding ownership stakes in companies whose products they are researching, the clinical role sometimes played by orthopedic sales reps, and perhaps the most egregious example: physicians who set guidelines having financial relationships with the companies that benefit from how those guidelines are set.

Now we have a new example, which is even more serious than usual. A recent New England Journal of Medicine article blames Eli Lilly for overzealous promotion of Xigris. According to the Boston Globe:

Eli Lilly and Co. funded medical guidelines created for the treatment of [sepsis] in an effort to boost sales of a drug with questionable benefits. The allegation was made by senior scientists at the National Institutes of Health. [They] said Lilly tried to shape the guidelines for use of the drug Xigris by sponsoring a three-pronged marketing campaign

The first two phases are by now almost standard practice in the industry:

1. Lilly paid a task force to spread the word that hospitals were rationing Xigris because of its cost, which forced docs “to decide who would live and who would die”
2. Lilly “orchestrated” the development of practice guidelines to treat sepsis that called for early use of Xigris (an example of the phenomenon I have described before)

But then Lilly allegedly took a third step, which was a little shocking even to me:

Now, Lilly is sponsoring lobbying efforts to turn the guidelines into quality standards. Hospitals that follow such quality measures receive higher payment from insurers.

What’s happening here? Basically, an influential group of doctors is being lazy and greedy, and Lilly is enabling their behavior. The doctors put their fingers in the cookie jar and Lilly keeps restocking it. The public is paying for the cookies –in the form of higher product sales and sub-optimal health care– and should get fed up!

I have no problem with companies using legal means to promote their products, even if their tactics are “aggressive.” They owe it to their shareholders to maximize return on investment. But it isn’t in their long-term interest to push things as far as the medical profession often lets them.

Industry leans on the reputations of individual physicians (aka “key opinion leaders”), medical societies (aka guideline writers), and journals to legitimize their marketing messages. It’s up to the medical profession to scrutinize industry claims and issue independent guidelines and quality standards. Sometimes these claims hold up and deserve to be propagated. Sometimes they don’t. If the docs and journals don’t do their jobs they deserve to lose credibility.

It’s hard to know the extent to which medical guidelines are already corrupted. The situation is a bit like the incident when the Chinese President’s plane was refitted. In the process of fixing up the plane someone inserted a bunch of listening devices (presumably at no extra charge). When the Chinese checked out the plane and realized it was bugged they had to rip the whole thing up. That’s something like what is going on within the major payers. They’ve stopped treating journal articles and guidelines as objective and have started doing their own analyses. But do we really want to leave health care decisions just to them?

Here’s some free advice to the different players in health care:

• Industry: Feel free to market your products and services aggressively, but don’t take things too far. If you do you’ll end up killing the goose that lays the golden eggs. No one will trust doctors, guidelines or journals anymore
• Physicians: Remember that pharma and device companies are not stupid. If they spend money supporting your research or sending you to conferences or sponsoring continuing medical education it’s because they expect to get a return on their investment. It’s awfully hard to remain objective in such instances. Your job is to adopt the best medical practices and put the patient first –sometimes that requires expensive new treatments and sometimes old, cheap standbys are better
• Payers: Go ahead and challenge the objectivity of journal articles and guidelines. On the other hand, don’t pretend that low cost is always synonymous with best treatment. Expect physicians to keep you in line on that.
• Patients: You need to look out for yourself. Find a good, honest physician. Take a look at who’s sponsoring the educational materials you receive. Ask your physician about alternative treatments and do some research yourself

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Reunions are one of the nice perks of being a Harvard Business School alumnus. Lectures, parties, sporting events –what’s not to like? A couple years ago I attended a fascinating session at a reunion, jointly taught by a business school professor and a neuroscientist. The subject was early childhood development, and one of their objectives was to persuade their (generally) wealthy and influential audience to support funding of early childhood programs. They presented research demonstrating the importance of the early years in brain development and showed how kids who had good nutrition, parents speaking to them and holding them, reading books to them, etc. did much better. Basically,  the kids from a deprived environment were never going to catch up to the kids from an enriched environment. The professors made the point that the return on investment from early childhood programs –which tend to have low and declining funding– was so much greater than more popular and expensive measures deployed in later life, including prison.

The part I remember the best was their observation that the research was making an impact. But that impact was that well educated, wealthy people (such as their Harvard Business School alumni audience) were applying the findings to their own kids, and actually widening the gap between themselves and everyone else!

A couple things I saw today reminded me of this:

• A letter to the editor of the Boston Globe by former Stride Rite CEO/chairman Arnold Hiatt making the return on investment argument and noting that state funding of early education and care has been dropping in Massachusetts
• A policy statement from the American Academy of Pediatrics about limiting or eliminating “screen time”for kids under 2, which also notes that kids from lower socioeconomic strata watch more TV from an earlier age

I think it would be productive if the presidential campaign included a serious discussion about shifting funding away from old people –e.g., Medicare and Social Security– and towards the youngest in society. I know what side of the debate I’d be on.

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Joseph Kim, MD, MPH is President of Medical Communications Media and founder and editor of MedicalSmartphones.com. He’s a digital entrepreneur with a wide array of interests. I caught up with Dr. Kim at the Center for Connected Health Symposium in Boston where we discussed:

• Mobile continuing medical education (CME)
• Evolution of CME in light of changes in regulation, technology, funding, and user preferences
• The dominance of Apple and its implications for app development and distribution
• His favorite moments from the Connected Health Symposium
• Highlights from the Facebooking Health panel he participated in here

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David Williams interviews Dr. Joseph Kim Play Now | Play in Popup | Download

This is the transcript of my recent podcast interview with Health eVillages co-founder Donato Tramuto.

David Williams: This is David E. Williams, co-founder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Donato Tramuto.  He’s founder, CEO and vice chairman of Physicians Interactive. He’s also co-founder of Health eVillages.  Donato, thanks for being with me today.

Donato Tramuto: It’s a pleasure to be here.

Williams: I’d really like to hear about this Health eVillages program.  What is it?

Tramuto: Let me explain how we got here.  I’m going to start with two very important boards that I serve on; one is Regis College, a college that is focused towards nursing. I have also been appointed to the Robert F. Kennedy Center for Justice and Human Rights leadership board.

I had exposure through Regis to a nursing program and affiliation we had in Haiti, and we learned days after the earthquake that 70 of the nursing students whom we had provided services to had died when the nursing school in Haiti collapsed.

We had all of these resources on the medical information side and I kept scratching my head asking myself what can we do?  Obviously you can send funds and help out that way, but what else can you do?

I was having dinner with Kerry Kennedy, the daughter of Senator Robert F. Kennedy and President of the RFK Center. She was already prepared to head off to Haiti to assess the situation to see what the RFK Center could do.  I said why don’t you take a dozen of our mobile devices, which we will download with medical information, the Rx drug guide and other resources that I think could be critical to nurses or physicians in the village. Tools that could help them to bring a safer and more effective way to treat patients.

Kerry took these twelve devices and throughout her trip I was receiving information from her that people were thrilled.  Historically they were guessing about dosing but now they had an automated drug guide that would help equip them with the proper dosing information for patients.

When she came back, we started talking about taking this idea to other countries and underdeveloped communities here in the United States. The idea was to work with organizations like Physicians for Human Rights and Doctors Without Borders to see, when there is a disaster, if we could be part of the early responders and make these medical devices available.

We came up with the name Health eVillages.  I then recruited some top talent to serve on our advisory board: GlenTullman, chairman of Allscripts, and John Boyer, chairman of MAXIMUS.  We brought in people from the pharmaceutical arena: Steve Andrzejewski, former CEO of Nycomed; Alex Baker, Chief Operating Office of Partners Community Healthcare; Neil Versel, one of the most talented technology innovators and writers. Each one of those folks stepped forward and instantly said yes, I want to serve on this board. They also followed their commitment with a significant donation.

The next challenge we had was to convince the board of the RFK Center to allow this new program to reside within the RFK Center, because I felt strongly that that would give it validation and we would have the exposure to many representatives across the world who are associated with the Center to help us identify where the needs might be.

That brought us to this summer when we started meeting with political leaders in Congress and the Senate. One individual we came across was former Senator Bill Frist.  As you know, the Senator has been a pioneer and beacon in working in underserved communities since he left the Senate. He was impressed.  We were on the phone for about an hour and we talked to him about the various aspects of this program. Within 48 hours I received a message back from Senator Frist alerting me that he had an idea about a village in Kenya that was being served by a single physician associated with Vanderbilt and how they had a gap and a need for textbooks.

One of the things we do with the devices is to repurpose medical textbooks and get them onto the mobile.  He was telling me that the text books out there are 60 or 70 years old. They’re outdated and there’s only a few of them.

So we brought Dr. Mark W. Newton over and signed up his facility to be in a pilot with us.

Then Kerry Kennedy went to Louisiana this summer with the RFK Center delegation to reassess health issues arising out of the Gulf oil spill. We asked Kerry to take a dozen devices with her delegation and put them into the hands of the people who are faced with new diseases as a result of exposure to the toxic waste.  We got reports back that this was an amazing tool because it had the capacity, with our SmartLink application, to bring multiple data sets and information together to help them better identify new diseases that might be progressing as a result of the toxic waste.  So that really brought forth validation.

We had a pilot going on in Haiti as a result of the earthquake.  We had a pilot going on in Louisiana as a result of the Gulf oil spill.  We had a pilot going on with Dr. Newton in Kenya.

Also, our board member Glen Tullman was kind enough to bring us into a situation where he was making available physicians to go to Uganda to help out in communities there.  We asked if we could be a part of that program and now we have a fourth pilot going on in Uganda.

So there you have Health eVillages, in a short period of time, becoming a significant opportunity.  We’re doing small things to help people do big things.

Williams: That’s exciting.  Do you have a plan for how you would continue to scale it up? Are there other organizations you will partner with?

Tramuto: This is where the Kennedy Center really helps.  I’ll start with the second part of your question.  Because of the RFK Center affiliation, we are working with them and their affiliation with Physicians for Human Rights and Doctors Without Borders to tie into their response.  They are certainly rapid responders to disasters so we are tied in with them.

One of the interesting yearly events that the RFK Center conducts is that they identify an individual from a country who has been the Martin Luther King of that country and not only honor that person, but also stay with that person for five years to see through the respective issue that they are addressing.

The Kennedy Center provides funding, but also political support, spiritual support and physical support.  We will work with the Kennedy Center on issues that have a health care bent, making devices and information available.

In terms of scaling, since we made this announcement we’re getting a significant number of requests to provide devices in these countries. We’re also getting a significant number of requests from organizations who want to tailgate with us to add a feature.

For example, when I was speaking at the Health 2.0 conference in San Francisco, we met an organization with the capacity to convert video content into any language. We said it would be great if we could make the information available in any language.  So we’re now discussing with them how to do it, but it needs a program director.  We are interviewing and are near a decision on someone who will be the director of this program. The candidate has a great international background, has been in the political field as an elected official, has an enormous number of contacts and has worked in these underserved communities.  I’m very pleased that the board has stepped forward to say we need to put some significant representation here.

Williams: It sounds like you’re starting with used devices, repurposing them and downloading apps onto them.  I imagine that internet connectivity is not a given, but on the other hand, perhaps it’s coming farther and wider.  Will you go beyond reference tools to make use of internet connectivity when it’s available?

Tramuto: Good question.  First of all, our work does not depend on internet connectivity.  It would be great if they have it because the devices can be updated daily with more information.  We have provided a concept in the Health eVillages organization that if in fact there is a community that has no electricity due to the disaster that occurred, we’ll ship out small generators with the devices and make sure that they can be charged.

The other thing to keep in mind is not just the repurposing of textbooks.  We have incorporated our proprietary Rx drug guide, which now has pictures and automation of dosing calculators. The feedback we’re getting is that they used to guess about the dosing.  Now they put the weight in, they put the drug in and they come back with the right dosages.

Our goal here is that we want not only a more just and peaceful community and world, we also want to make sure that people have access to safe and efficient and effective health care. That’s our ultimate goal.

Williams: Beyond your personal involvement, is Physicians Interactive as a company involvemed with Health eVillages?

Tramuto: Absolutely.  We have been one of the donors of devices. We have been a significant donor in terms of the cash contribution to launch this along with the other board members that I have mentioned to you.  The entire organization and I are very committed to this and true believers.

You have got to commercialize.  Obviously we’re a for-profit company.  We can’t do these things if we’re not commercializing them, but we do balance it with everyone’s responsibility to give back.  We’ve donated the website design.  We’ve donated the creativity that goes into this. There are scores of people in the organization who are working on this as well.

Williams: You mentioned contributions, both cash and in kind from board members.  If regular folk want to be involved by providing a cash donation or through other means, is there a mechanism for them to do that?

Tramuto: Yes there is. If they get on the Physicians Interactive website they’ll go right to Health eVillages.  Or they can get on the RFK Center’s site. We really do encourage folks to get involved.  It’s been very encouraging and uplifting over the last two weeks since we launched this that there has been an enormous response of people wanting to get involved and in fact, that’s how we identified our potential director.  So those two entry points would get folks connected to us and in contact with either myself or other folks.

Williams: I’ve been speaking today with Donato Tramuto, founder, CEO and vice chairman of Physicians Interactive. We’ve been discussing Health eVillages where he is co-founder.  Donato, thanks so much.

Tramuto: Thank you very much.

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