Serious Cost Containment Without Cost Shifting to Employees Webinar
The Cost ProblemEveryone Who Sponsors A Plan Has A Cost Problem
The Cost Problem Average Costs Average Annual Health Care Cost Increases, 2000 - 2010 (with sample projection) $247,665 $229,320 $179,212 $195,700 $211,160 $265,249 $138,884 $159,300 Plan Cost $120,559 in 2010 15.2%$100,000 $109,400 14.7%Plan Cost 12.3%in 2000 10.2% 9.4% 9.2% 8.6% 7.9% 8.0% 8.0% 7.1% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Medical Benefits: Hewitt Associates, October 9, 2006 and Hewitt 2010 Survey
The Cost ProblemEveryone Has Taken Actions To Try To Bring Costs Under Control
What Can I Do About Costs Right Now?• Plan Document stating Plan rules, conditions & benefits• Wellness Programs• Pre-Certification• In-Patient• Out-Patient Surgery Reduce• Scans, Scopes, Expensive Tests Eligible• Care Management Bills• Discharge Planning• Large Case Management• Chronic Care Management• Claims Edit System• Claims Process Based on Plan Design
What Can I Do About Costs Right Now?• General Medical Network• Centers of Excellence for Transplants• Dialysis Programs Discounts• Specialty Pharmacy• Out-of-Network Fee Negotiation
The Environment Health Care Reform Lack of Perceived SuccessDue to Continued Cost Increases & Inability to Afford Costs.
The EnvironmentPoliticians Are UpsetPerceived As Ineffective Looking for The Bad Guys…
The EnvironmentAttack on Bad Guys So Far: 1. Big Pharma 2. Insurance Companies 3. Networks & Cost of Service
Provider ReimbursementWhat Are Providers Charging?
Comparison of Hospital Charges Hospital % of Cost Barberton 489% Akron City 427%Cleveland Clinic 391%Akron General 346% Hospital Affinity 233% Average 316% Mercy 231% Lowest to Highest 313% Aultman 215% Average to Highest 176% Alliance 185% Lowest to Average 137% Wooster 176% 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 ChargesCPT Code: Office Visit, Established Patient, 15 minute99214 1325% Lowest Average Highest Charge Amount Charge Amount Charge Amount $36.00 $86.70 $477.00 127% Medicare 550% Allowable $68.18 Difference of Difference of 52.80% 700%
Comparison of Hospital ChargesCPT Code: Sense nerve conduction test MRI joint lower95904 3657% Lowest Average Highest Charge Amount Charge Amount Charge Amount $70.00 $466.89 $2,560.00 932% Medicare 548% Allowable Difference of $50.08 Difference of 139.78% 5112%
The Environment Government SponsoredAttack on Health Care Cost
The KeyHerzlinger’s Iron Triangle Congress Insurers / Hospitals Networks Who Killed Health Care?, Regina Herzlinger
Attack On Health Care Costs1. 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 Costs2. Federal Trade Commission & Michigan Attorney General Investigating Favored Nation Agreements Between Blue Cross Network and Hospitals
Attack On Health Care Costs3. 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.
Attack On Health Care CostsThe Relationship Of These Cases: All 3 Look At Inflated Hospital Pricing and The Network
Attack On Health Care CostsMassachusetts 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 Costs4. State of California versus Sutter Hospitals and MultiPlan/PHCS Allegation: Fraudulent Billing Practices and Enabling & Profiting From Fraudulent Billing Practices
What Does the Attack Mean?What Does This Mean?
What Does the Attack Mean? Why Is This Important?These Practices Are Rampant and Involve Most Types of Services.
Obligations Of Plan Employer Plan of Benefits• Agrees to Advise Patient on EOB that Unpaid Portion Is •No Balance Bill To Patient •Discount Off Billed Charge• Agrees to Pay Assigned Patient’s Responsibility• Gives Up Audit Rights Patient Repriced Claim Within 30 Days •Remove Possibility of Audit •Delivers To Patients PPO Network Provider •Discount Off Billed Charge •No Impact on Provider-Patient Relationship
Obligations To PatientEmployer Plan of Benefits • Billed Charge Not To Exceed Amounts Patient Agreed To In Exchange For Assignment • Deductible, Co-Pay, Co-Ins • Reasonable Value of Services For Covered Services PPO Network Provider
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 decisionsare between the patient and a provider.” - TPA/Network Contract
The Key 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. “[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
The Key• 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.
Provider Reimbursement What Are Providers Actually Getting Paid? According to theAmerican Hospital Association…
Provider ReimbursementAggregate 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 DesignPlan Design Fee Schedule Based on 130% of MedicareMaximum OR Benefit = 1XX% of Hospital’s Cost (as determined by cost to charge ratio) And 1XX% of Medicare Fee Schedule For Professional Services
The Communication EffortWhat 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
Succeeding: Approach for Participants What Plan Sponsors Need to Have in Placeto 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 Success$2 Million of Billed Unbundled Charges 50% Discount = $1,000,000 of Allowable Expense 150% of Medicare < $600, 000 of Allowable Expenses Savings = 40% +
QuestionsCall J.P. Farley for more detailsat 800.634.0173 if you haveadditional questions on this concept.Jim Farley 440.250.4349 Jim.Farley@jpfarley.comor visit our website at jpfarley.com
THANK YOU for attending today Please visit JPFarley.comor more learning opportunities.