Serious Cost Containment Without Cost Shifting to Employees Webinar
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Transcript of Serious Cost Containment Without Cost Shifting to Employees Webinar
Everyone Who Sponsors A Plan Has A Cost Problem
The Cost Problem
Average CostsAverage Annual Health Care Cost Increases, 2000 - 2010 (with sample projection)
Medical Benefits:
Hewitt Associates, October 9, 2006 and
Hewitt 2010 Survey
9.4%10.2%
15.2%14.7%
12.3%
9.2%
7.9%8.6%
8.0%7.1%
8.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
$265,249Plan Cost in 2010
$109,400
$120,559$138,884
$159,300$179,212
$195,700
$100,000Plan Cost in 2000
$211,160$229,320
$247,665
The Cost Problem
Everyone Has Taken Actions To Try To Bring
Costs Under Control
The Cost Problem
What Can I Do About Costs Right Now?
• Plan Document stating Plan rules, conditions & benefits
• Wellness Programs
• Pre-Certification
• In-Patient
• Out-Patient Surgery
• Scans, Scopes, Expensive Tests
• Care Management
• Discharge Planning
• Large Case Management
• Chronic Care Management
• Claims Edit System
• Claims Process Based on Plan Design
Reduce
Eligible
Bills
What Can I Do About Costs Right Now?
• General Medical Network
• Centers of Excellence for Transplants
• Dialysis Programs
• Specialty Pharmacy
• Out-of-Network Fee Negotiation
Discounts
Health Care ReformLack of Perceived Success
Due to Continued Cost Increases& Inability to Afford Costs.
The Environment
Politicians Are UpsetPerceived As Ineffective
Looking for The Bad Guys…
The Environment
Attack on Bad Guys So Far:
The Environment
1. Big Pharma
2. Insurance Companies
3. Networks & Cost of Service
What Are Providers Charging?
Provider Reimbursement
Comparison of Hospital Charges
Hospital % of Cost
Barberton 489%
Akron City 427%
Cleveland Clinic 391%
Akron General Hospital
346%
Affinity 233%
Mercy 231%
Aultman 215%
Alliance 185%
Wooster 176%
Average 316%Lowest to Highest 313%
Average to Highest 176%
Lowest to Average 137%
All hospitals listed are within 25 miles of Hospital #1.
All hospitals listed (except #16) are mid-sized community or general hospitals.
Comparisons based on identical services only.
Comparison of Professional Charges
Office Visit, Established Patient, 15 minute
Lowest Charge Amount
$36.00
Highest Charge Amount
$477.00
CPT Code:
992141325%
550%127%
Difference of
700%
Difference of
52.80%
Medicare Allowable
$68.18
Average Charge Amount
$86.70
Comparison of Hospital Charges
Sense nerve conduction test MRI joint lower
Lowest Charge Amount
$70.00
Highest Charge Amount
$2,560.00
CPT Code:
959043657%
548%932%
Difference of
5112%
Difference of
139.78%
Medicare Allowable
$50.08
Average Charge Amount
$466.89
Government Sponsored Attack on Health Care Cost
The Environment
The Key
Herzlinger’s Iron Triangle
Who Killed Health Care?, Regina Herzlinger
Congress
HospitalsInsurers / Networks
Attack On Health Care Costs
1. Federal Trade Commission & Massachusetts Attorney General Investigating Massachusetts General Hospital and Brigham & Woman’s Hospital
Subject: Network Inability to Effectively Negotiate Pricing Due to Provider Market Leverage After Mergers.
Attack On Health Care Costs
2. Federal Trade Commission & Michigan Attorney General Investigating Favored Nation Agreements Between Blue Cross Network and Hospitals
Attack On Health Care Costs
3. Federal Trade Commission & Texas Attorney General Settles With United Regional Health Care System (Wichita Falls, Texas)
Settlement: Prohibits Pricing And Discounts Based On Whether Networks Contract With Other Area Providers; Also Prohibits Retaliatory Actions Against Network.
The Relationship Of These Cases:
Attack On Health Care Costs
All 3 Look At Inflated Hospital Pricing
and The Network
Attack On Health Care Costs
Massachusetts is Proposing what is basically State Controlled Pricing of All Services Regardless of Network
Objection: Government Control and Lack of Free Market
Attack On Health Care Costs
4. State of California versus Sutter Hospitals and MultiPlan/PHCS
Allegation: Fraudulent Billing Practices and Enabling & Profiting From Fraudulent Billing Practices
What Does This Mean?
What Does the Attack Mean?
Why Is This Important?
What Does the Attack Mean?
These Practices Are Rampant
and Involve Most
Types of Services.
Obligations Of Plan
ProviderPPO Network
Patient
Plan of Benefits
Employer
•A
gre
es t
o P
ay A
ssig
ned
R
epri
ced
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im
Wit
hin
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•A
gre
es t
o A
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se P
atie
nt
on
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OB
th
at U
np
aid
Po
rtio
n Is
P
atie
nt’
s R
esp
on
sib
ility
•G
ives
Up
Au
dit
Rig
hts
•Disco
un
t Off B
illed C
harg
e
•No
Balan
ce Bill To
Patien
t
•Remove Possibility of Audit
•Delivers To Patients
•Discount Off Billed Charge
•No Impact on Provider-Patient Relationship
Obligations To Patient
ProviderPPO Network
Patient
Plan of Benefits
Employer
• Billed Charge Not To Exceed AmountsAgreed To In Exchange For Assignment
• Deductible, Co-Pay, Co-Ins
• Reasonable Value of Services For Covered Services
Obligations To Patient
“(Network), TPA, and/or Payor does not in any manner
interfere with or participate in the provider-patient relationship
and all health care decisions are between the patient and a provider.”
- TPA/Network Contract
Variance of Charges
What do we do?
Billed Amount is an irrelevant number, no provider expects to be paid the billed amount. Reasonable amount is what provider accepts as
payments in full from others.
The Key
“[T]he reality is that the rates hospitals charge for services do not always
accurately reflect the value of the services, especially when the hospital routinely
accepts much less for them.”
- Court Case Definition
• This includes Medicare & Medicaid
• No Mention of Negotiation or Contracts
• Providers say that “insurance companies” determine their payments, that they have no say in amounts paid.
The Key
What Are Providers Actually Getting Paid?
According to the American Hospital Association…
Provider Reimbursement
Provider Reimbursement
Aggregate Hospital Payment-to-Cost Ratios for Private Payers, Medicare and Medicaid, 1988 -2008
Source: Avalere Health analysis of American Hospital Association
Annual Survey data, 2008, for community hospitals
Plan Design
Plan Design
Fee Schedule Based on 130% of Medicare
OR
1XX% of Hospital’s Cost(as determined by cost to charge ratio)
And
1XX% of Medicare Fee Schedule For Professional Services
Maximum Benefit =
The Communication Effort
What Effort Is Involved?
• Establish a fee schedule for payments from the plan based on lower cost providers
• Communicate thoroughly and clearly what the plan is doing and why it is doing it
• Change plan document to reflect intentions
What Plan Sponsors Need to Have in Place
to Make These Approaches Work.
Succeeding: Approach for Participants
• Process to assist patients with balance billing issues
– Fair Debt Collections Practices Act
• Access to Patient Advocate
• Legal Representation when Necessary
– Assure Participants that if a balance needs to be paid, employer will pay it
– Enforce Consumer Rights!
Succeeding: Approach for Participants
• Assure Participant that if a balance needs to be paid, the plan will pay it
– Billing disputes settle for 30 cents per dollar
– Need to settle rarely occurs, you are working from a position of strength
Succeeding: Approach for Participants
$2 Million of Billed Unbundled Charges
50% Discount = $1,000,000 of Allowable Expense
150% of Medicare < $600, 000 of Allowable Expenses
Savings = 40% +
Succeeding
Success
Questions
Call J.P. Farley for more details at 800.634.0173 if you have additional questions on this concept.
Jim Farley [email protected]
or visit our website at jpfarley.com
THANK YOU
for attending today
Please visit JPFarley.com or more learning opportunities.
