Blue Shield of CA Seeks Damages from Physician Group: Last week Blue Shield of California filed for $10.5 million in damages from Monarch HealthCare, since last fall a division of UnitedHealthcare’s Optum. The tension between Blue Shield and Monarch is likely to be a sign of things to come as the healthcare market continues to restructure and the line between payers and providers blur. Blue Shield alleges that Monarch, a 2300-physician association serving nearly 200,000 patients, is in violation of its contract with the payer. Among Monarch’s alleged missteps: misinforming patients that its contract with Blue Shield would terminate January 1, 2012 and advising members to switch to competing health plans to remain with in-network doctors. As a result, Blue Shield claims it lost a majority of its 2,400 Medicare Advantage patients and believes it became less attractive to commercial customers during the fall enrollment season. According to the Los Angeles Times, Blue Shield has notified Monarch that it will terminate its contract with the doctor group on May 1, 2013. Blue Shield of California isn’t the first payer to have troubles with Monarch: after the Optum acquisition, Anthem Blue Cross pulled out of a pilot for an accountable care organization. For its part, Monarch calls Blue Shield’s allegations “mischaracterizations”.
- See the WSJ and LA Times for stories on the Monarch/Blue Shield dust-up.
- Here’s a link to an early December press release by Blue Shield of California outlining the perceived problem.
- Anthem is DOA with Monarch-Optum Union.
Opacity of the White Paper: The Value of Healthcare Is More Than A Price Tag: A recent analysis by the Health Care Incentives Improvement Institute (see below) calculates private insurers spend $3200 more per procedure than Medicare on knee replacements, primarily because of higher in-patient stay fees tied to complications. It’s yet another reminder of the fact that dramatic variations in the cost of common medical procedures continue to drive overspending in the US healthcare marketplace. Nor is the pricing disconnect only seen between Medicare and the private pay market; indeed, there can be significant variation –as much as 100%–in the costs billed for procedures like colonoscopies or heart catheterizations in the private pay sector depending on which physician or hospital provides a patient’s care. Thomson Reuters recently published a white paper suggesting price transparency, especially cost data designed to “engage” consumers to exercise “choice” in their healthcare treatment, could save as much as $36 billion a year to reduce such inefficiencies. Using data from MarketScan, Thomson Reuters analyzed the price variation for 300 “shoppable” procedures (defined as high volume procedures like knee replacements or lower back MRIs that are scheduled in advance) and calculated that overall spending could be reduced 3.5% by reducing costs to the median price in a geographic market. They theorize that by giving patients the right tools to comparison shop for routine procedures, it will be possible to reduce the wasteful healthcare spend caused by pricing disparities. It sounds intuitive, but providing such information isn’t that easy. Aetna, Cigna, and UnitedHealth are all attempting to offer their members price comparison tools but have run into problems because contracts with providers can constrain their ability to publish full cost information. Furthermore, price is just one component patients must take into account when making a medical decision. As New America Foundation’s Shannon Brownlee argues in this week’s TIME, patients also need information that reflects the medical cost/benefit, including safety and outcomes data, as well as information on potential alternatives. Indeed quality rankings, such as the kind privately-held Castlight Health is beginning to offer its employer clients, are another critical tool required to enable patient decision-making.
- Thomson Reuters’ analysis of the potential impact of pricing transparency on healthcare spending.
- See this piece in TIME for more on why it’s not so easy to be a savvy medical consumer.
- For more on Castlight Health, see this write-up by Huffington Post from last fall.
Bundled Payments Offer Savings, Efficiency and Better Care: Once again there’s evidence that “bundling” payments can significantly reduce medical costs. In a research report published last week, the Health Care Incentives Improvement Institute estimated the comparative benefits of a bundled payment program for total knee replacement – a routine but often multi-practioner treatment from surgery to rehabilitation—for Medicare and commercially insured patients. As noted above, the study, which retrospectively analyzed claims data for over 51,000 patients undergoing total knee replacement between 2008 and 2010, showed the average procedure costs for commercial patients were $3261 dollars more than for Medicare recipients. Using HCI3’s proprietary PROMETHEUS analytics software, the researchers also discovered that bundling payment to reimburse for total care –from 30 days before surgery to 180 days post-hospital discharge—could cut Medicare and commercial payers’ costs by as much as 10% and 5% respectively. According to HCI3’s analysis, the bulk of those cost-savings come from including potentially avoidable complications –for instance readmission due to wound infection—in the bundled payment. (Such costs are currently reimbursed as fee-for-service.) In an accompanying introduction to the paper, James Robinsin, a professor of health economics at Berkeley called the estimated savings “remarkable” noting total knee replacements are one of the largest expenditures in the Medicare budget. Over the past few months, there’s been a ground swell of support for using bundled payments to drive more efficient healthcare and reduce associated costs. In mid-January the Congressional Budget Office released a report analyzing the cost-savings associated with four Medicare demonstrations of value-based payments. The only one to provide Medicare with significant savings bundled payments to hospitals and physicians to cover all services connected with heart bypass surgeries.
- Kaiser Health News’ take on the findings is here.
- Click this link to read the HCI3 report.
- The CBO’s report on four Medicare demonstrations of value-based payments can be found here.
BIO and PhRMA Weigh In On PCORI’s Priorities: In last week’s Round-up we highlighted ongoing efforts by the Patient-Centered Outcomes Research Institute to obtain outside comment on its draft national research priorities. Two major industry lobbies, the Pharmaceutical Research and Manufacturers of America and the Biotechnology Industry Organization, promptly weighed in during a day long meeting on February 27. Both groups recommended PCORI prioritize its efforts—and its funding dollars—in the arena of healthcare delivery, including bolstering efforts around medication adherence. Given their close ties to drug companies, it’s hardly surprising that the two groups’ recommendations steer toward generalities. After all, focusing on individual studies that measure the comparative effectiveness of drug A versus drug B or newer robotic-assisted prostate surgery versus traditional laproscopic measures could pit paying members of the organizations against one another. In all honesty, BIO and PhRMA’s recommendations seem in line with PCORI’s own thinking about its mandate. In earlier public forums PCORI representatives have explicitly mentioned the need to invest in “enabling technologies” of comparative effectiveness rather than funding such studies themselves. That’s a wise political move; with a presidential election and PDUFA renewal upcoming, PCORI doesn’t want to become a controversial lightning rod because its national priorities smack of cost-effectiveness. That would doom PCORI before it even got off the ground.
- A story from “The Pink Sheet” spells out the responses of BIO and PhRMA. (Sub. Required [$$])
Written by Halleh Balch; edited by Ellen Licking