If there were not a single additional appeal filed and no changes were made to the system, it would take 11 years to eliminate the current backlog, the chief law judge of the Office of Medicare Hearings and Appeals estimates.
This article first appeared June 29, 2016 on the Kaiser Health News website.
The Department of Health and Human Services Tuesday proposed key changes in the Medicare appeals process to help reduce the backlog of more than 700,000 cases.
The measures "will help us get a leg up on this problem," said Nancy Griswold, chief law judge of the Office of Medicare Hearings and Appeals.
If there was not a single additional appeal filed and no changes in the system, it would take 11 years to eliminate the backlog, Griswold said in an interview.
Her office has faced increased criticism from health care providers and beneficiary advocates lately for its inability to speed up appeals and reduce the backlog. The latest critique came earlier this month in an investigation from the Government Accountability Office.
This latest effort still falls short of what is needed, said Tom Nickels, executive vice president at the American Hospital Association. "We are deeply disappointed that HHS has not made more progress in addressing the delays despite the more than two years since the delays began," he said.
The new proposals, as well as increased funding requests, are expected to eliminate the backlog by 2021 by streamlining the decision-making process and reducing the number of cases that go to the third level of appeals, where many cases linger waiting for a hearing and then a decision from an administrative law judge. From the day of the hearing, it currently takes an average of slightly more than two years for a decision in appeals from hospitals, nursing homes, medical device suppliers and other health care providers.
Among the proposed changes:
Designate some decisions from the Medicare Appeals Council, the last of four stages of appeals, as precedents that decision-makers at lower levels would have to follow. That could eliminate redundant appeals and resolve inconsistencies in interpretation of Medicare policies.
Allow senior attorneys to handle some of the procedural matters that come before the administrative law judges, such as dismissing a request for a hearing after the appellant has withdrawn the request, Griswold said.
Revise how the minimum amount necessary to lodge an appeal is determined. Under current rules, an appeal must involve payment of at least $150, based on the amount the provider charged. HHS is proposing to use Medicare's allowed amount instead, which tends to be lower, and that could reduce the number of claims that could be appealed.
Eliminate some steps in the appeals process to simplify the system.
Although advocates have sought changes to speed up the appeal process, Alice Bers, an attorney at the Center for Medicare Advocacy, was skeptical about some of the proposals. The effort to set up a system of precedents, she said, "could restrict coverage for needed items and benefits for seniors that they are entitled to by law."
And the change in calculating the minimal amounts "could make it harder for beneficiaries to reach that threshold," said Bers. It might not sound like a lot of money, Bers said, "but for an elderly woman living on Social Security that's several meals or co-pays for medicine."
The proposals do not address what hospital representatives say is a key cause of increasing appeals, independent audit contractors who can reject payments to hospitals. The American Hospital Association contends that those contractors unnecessarily cut off many payments and that hospitals frequently win the appeals.
According to the GAO study, audit-related appeals decided at the administrative law judge stage — the third level of appeals — increased 37-fold from 2010 through 2014, compared to only 1.5 times for appeals of other kinds of claims.
But Griswold said that currently only about a third of the pending cases at this stage involved recovery audit contractors, after settlements were reached with appellants who agreed to accept partial payment. As a result of these agreements, 4,245 cases from just 16 appellants were withdrawn from the system as of May 12, according to government statistics.
Griswold also said Medicare will continue to process beneficiary appeals before those from hospitals, doctors and other health care providers. The practice began in 2014.
The Blues reported a loss of $265 million on insurance operations from individual market plans in 2015. The insurer said claims for medical care far exceeded premium revenue for those plans.
This article first appeared June 27, 2016 on the Kaiser Health News website.
Blue Cross and Blue Shield of Minnesota will retreat from the sale of health plans to individuals and families in the state starting next year. The insurer, Minnesota's largest, said extraordinary financial losses drove the decision.
"Based on current medical claim trends, Blue Cross is projecting a total loss of more than $500 million in the individual [health plan] segment over three years," the insurer said in an emailed statement.
The Blues reported a loss of $265 million on insurance operations from individual market plans in 2015. The insurer said claims for medical care far exceeded premium revenue for those plans.
"The individual market remains in transition and we look forward to working toward a more stable path with policy leaders here in Minnesota and at the national level," the company stated. "Shifts and changes in health plan participation and market segments have contributed to a volatile individual market, where costs and prices have been escalating at unprecedented levels."
The decision will have far-reaching implications.
Blue Cross Blue Shield says the change will affect about "103,000 Minnesotans [who] have purchased Blue Cross coverage on their own, through an agent or broker, or on MNsure," the state's insurance exchange.
"We understand and regret the difficulty we know this causes for some of our members," the insurer wrote. "We will be notifying all of our members individually and work with them to assess and transition to alternative coverage options in 2017."
Cynthia Cox of the Kaiser Family Foundation, who analyzes individual health insurance markets around the country, says what the Blues are doing in Minnesota is similar to a walk back by UnitedHealth Group, the nation's largest health insurance company. (KHN is an editorially independent program of the Kaiser Family Foundation.)
"Right now what it seems like is that insurance companies are really trying to reset their strategy," Cox said. "So they may be pulling out selectively in certain markets to reevaluate their strategy and participation in the exchanges."
She said the individual markets just aren't turning out as expected. "The hope was that these markets would encourage exchange competition and [get] more insurers to come in. … I don't know if we're at a point where it's completely worrisome, but I think it does raise some red flags in pointing out that insurance companies need to be able to make a profit or at least cover their costs."
In response to the development in Minnesota, Gov. Mark Dayton, a Democrat, highlighted gains in enrolling more Minnesotans in health insurance plans since the implementation of the Affordable Care Act. But he also acknowledged the insurer's departure reflects the instability in the market for individual and family coverage.
"This creates a serious and unintended challenge for the individual market: the Minnesotans who seek coverage there tend to have greater, more expensive health care needs than the general population," said Dayton. "Blue Cross Blue Shield's decision to leave the individual market is symptomatic of conditions in the national health insurance marketplace.
University of Minnesota health economist Roger Feldman called the Blues' departure a major blow to Minnesota's already troubled individual market. "What this says about the individual market is that it is very unstable and it has been disrupted by a number of events, and we still don't know whether it will recover or not from those disruptions," he said.
Feldman said lawmakers would be wise to pay attention to the unstable individual markets and to shore them up with a carrot and stick approach.
"To get people to sign up in the exchange we need one or both of those," he said. "The stick could be to raise the penalties on people who don't buy insurance, and the carrot could be to increase the subsidies for people that do. I think that's the only way that we're going to get a decent mix of risks to buy into that exchange."
Although the main Blue Cross Blue Shield unit is leaving Minnesota's individual market, its much smaller subsidiary, Blue Plus, will continue to offer plans on the individual market, according to the company statement. Blue Plus, has only about 13,000 members according to his message.
Kaiser's Cox says that's typical and leaves insurers a re-entrance option.
MNsure spokesman Shane Delaney said about 20,000 Minnesotans purchased Blue Cross and Blue Shield of Minnesota plans through MNsure. He said the vast majority of them qualified for tax credits to help pay premiums. Delaney said all of the Blue Cross and Blue Shield customers losing their coverage next year should look for other options on MNsure, the only place eligible applicants can secure federal tax credits.
As health care costs continue to rise, attention has turned to a tiny number of super-utilizers. A program that started in California has taken a different approach to treating these high-cost patients: Over the past two years, it has tracked them, healed them and saved a ton of money.
This story first appeared June 23, 2016 on the Kaiser Health News website.
Don Meade doesn't like hospitals, but he uses them. In just one year, he made 62 trips to the emergency room. He rattles off the names of local hospitals in Orange and Los Angeles counties like they're a handful of pills.
"St. Joseph's in Orange, [Saddleback Memorial in] Laguna Hills," he says. "The best one for me around here is PIH in Whittier."
At 52, Meade has chronic heart disease and other serious ailments, and he is recovering from a longtime addiction to crack cocaine. Today, he lives with his dog Scrappy in a small apartment in Fullerton.
Beyond making a trip to the ER pretty much every week of the year, Meade has had innumerable X-rays, scans, tests and hospital admissions — all of it on the taxpayers' and hospitals' dime, since he is a beneficiary of Medi-Cal, the state and federal program for the poor.
"The doctors and a few nurses knew me [by name], and I told them I should get some stock in the hospital because I was there so much," he muses.
As health care costs continue to rise, attention has turned to a tiny number of expensive patients like Meade, called super-utilizers. A program that started in Orange County has taken a different approach to treating Meade and other high-cost patients: Over the past two years, it has tracked them, healed them and saved a ton of money along the way.
Meade received more than a million dollars worth of care in each of the two years before he entered the program, according to Paul Leon, CEO of the Illumination Foundation, a homeless health services group based in Irvine. Leon's foundation runs the program, known as Chronic Care Plus, which has stabilized Meade and found him housing.
"It's crazy," said Maria Raven, an associate professor at the University of California, San Francisco who specializes in frequent-user policy. "This small group of people makes quite an impact on the health care system, and on the finances of the health care system."
In Medi-Cal, the state's health insurance program for the poor, frequent health care users representing just 1 percent of the patient population account for about one-fourth of health care spending, according to Kenneth Kizer, MD at the Institute for Population Health Improvement at UC Davis.
That's why health professionals across California have started targeting this problem group.
In a small, busy room at a recuperative care center in Santa Fe Springs, just up Highway 5 from Disneyland, the Chronic Care Plus program's lead nurse, John Simmons, directs treatment for a select group of homeless frequent users.
Simmons says the big secret about these health care frequent fliers is that they're not necessarily the sickest patients — they're often just homeless, with substance abuse or mental health issues, and they routinely end up in the emergency room.
"It was them relying on the ER for everything," Simmons said. "They got a common cold, they'd want to run to the ER."
To break the cycle, Simmons conducts what is known as intensive care coordination. He helps the 37 participants, including Don Meade, find housing, get off drugs, get access to services, and make appointments with primary care doctors.
Meade, an Army veteran, was living outside the Santa Ana Civic Center for years before he found housing through the Illumination Foundation's Chronic Care Plus program. The program identifies homeless patients being discharged from hospitals and helps place them in apartments. (Heidi de Marco/KHN)
The Illumination Foundation launched the program with the goal of breaking the vicious cycle into which these patients had fallen, then following them over a two-year period. Getting consistent care and support for that length of time, Simmons says, can change their lives for good.
"The beauty of the program was, we took those people and got them self-sufficient," Simmons said, "and you notice their health [go] on an upward trend."
The program saved $14 million in health care spending for just those 37 people over two years, compared with the two years prior to the launch of the program.
That doesn't count the savings attained by using fewer police and emergency transportation services, Simmons said.
Saving so much money with so few participants is an open invitation to expand the program, said Pat Brydges, an administrator at St. Joseph's Hospital, which helped fund the program.
"There are homeless people in every city in every state," Brydges said. "There's no reason why this wouldn't work across the nation."
The program is consistent with St. Joseph's mission to help all people, and the cost savings is an extra perk, she said.
She pauses briefly to contemplate how much money would be saved if this tiny pilot program went national.
"Wow, I don't even know if I could count that much," Brydges said. "But if we can do $14 million in this one area alone, it's amazing what we could do across the nation."
Back in his Fullerton apartment, Meade said he now sees a primary care doctor instead of going to the emergency room. He still has ongoing heart and health problems.
Donald Meade plays with his puppy Scrappy in his apartment patio. "If I lost this apartment, I would give Scrappy to my neighbors … I wouldn't want him to be stressed out living in the streets." (Heidi de Marco/KHN)
Being followed by program coordinators over such a long time has really made a difference in his life, Meade said.
"A lot of the stress leaves after you're in your own home, but if you're out in the street you're worried so much all the time," he said.
Getting off the street is one thing, Meade said, but the staying off it is another. It's not just that he has his own doctor now, and better health. He has a new life, he said.
The Illumination Foundation plans to release data at the end of June on its first two years.
MemorialCare Health System said Chicago-based Boeing selected it from a group of bidders for the five-year contract in Southern California, where the company has roughly 37,000 employees and dependents. Financial terms weren’t disclosed.
This article first appeared June 21, 2016 on the Kaiser Health News website.
In another sign of growing frustration with rising health costs, aerospace giant Boeing Co. has agreed to contract directly for employee benefits with a major health system in Southern California, bypassing the conventional insurance model.
The move, announced Tuesday, marks the expansion of Boeing's direct-contracting approach, which it has already implemented in recent years in Seattle, St. Louis and Charleston, S.C.
Other large employers are also pursuing this idea in regions where they have big concentrations of workers. In some cases, they refer employees to nationally top-performing hospitals for select surgeries.
MemorialCare Health System said Chicago-based Boeing selected it from a group of bidders for the five-year contract in Southern California, where the company has roughly 37,000 employees and dependents. Financial terms weren't disclosed.
"More employers are interested in moving in this direction," said Barry Arbuckle, chief executive of the MemorialCare Health System, based in Fountain Valley, California. "It reflects the desire of these employers to participate in bending the cost curve for health care, and it allows the provider to have a more unfettered relationship with the employer and employees."
The new health plan will be offered to Boeing workers in Southern California during open enrollment this fall alongside some existing options, including a Kaiser Permanente HMO. Coverage starts Jan. 1.
MemorialCare, a large integrated health system spanning Los Angeles and Orange counties, partnered with other hospital systems and physician groups to create a broader network.
The partners include UC Irvine Health, Torrance Memorial Health System and PIH Health.
This MemorialCare Health Alliance will include nine hospitals, about 2,400 physicians and other providers, as well as 71 surgery centers, urgent-care facilities and other freestanding clinics.
"MemorialCare and its partners have a long track record of health care leadership and innovation in Southern California, as well as a strong market presence," Jeff White, Boeing's director of health care strategy, said in a statement. "Creating these partnerships is one of the innovative ways we are managing our health care programs to improve quality and efficiency."
Boeing and other self-insured employers have typically hired health insurance companies to contract with hospitals and doctors and design their employee benefits. As medical costs kept escalating, employers and health insurers often narrowed their networks to negotiate lower rates and shifted more of the costs onto workers through higher deductibles.
Direct contracting is seen as another way to potentially save money while improving care and patient satisfaction.
In these contracts, health systems usually take on the financial risk of managing the health of a large population. The provider groups are often organized as accountable care organizations, in which physicians and hospitals share the financial responsibility for coordinating care and avoiding unnecessary spending.
This MemorialCare ACO designed for Boeing must meet numerous performance measures of quality, access and savings, Arbuckle said.
The Boeing contract "allows us to earn certain incentives or, if we don't meet certain criteria, incur a loss on that particular aspect," Arbuckle said. "There is no incentive to keep people in the hospital and go to multiple specialists. For us, this is where health care needs to go."
Steve Valentine, vice president and West Coast consulting leader at health-care firm Premier Inc., said MemorialCare was a logical fit for Boeing, but plenty of health systems will be competing for these types of contracts.
"Most health systems have been building up their infrastructure to do exactly this kind of relationship," Valentine said.
MemorialCare won't have to handle all of the administrative chores of an insurer. Boeing uses its national insurance administrator, Blue Cross and Blue Shield of Illinois, to process claims for its direct contracts.
Boeing will offer workers several incentives to choose this new provider-backed health plan in California.
Enrollees will have no copays for primary-care visits. They will get full coverage for generic drugs and the freedom to choose specialists within the network without a referral. Emergency care will be covered as in-network even if it's received outside MemorialCare. Boeing will also offer increased contributions to workers' health savings accounts.
In other examples, Intel Corp. contracted directly with a major health system in New Mexico, where it has several thousand employees.
Retailers Wal-Mart and Lowe's took a different approach, striking deals with select hospitals across the country for bundled prices on specific surgeries. The companies steer workers to those hospitals.
California Insurance Commissioner Dave Jones urged federal officials to block the merger of health insurance giants Anthem Inc. and Cigna Corp., declaring the $54-billion deal anti-competitive and harmful to consumers.
This article first appeared June 17, 2016 on the Kaiser Health News website.
California Insurance Commissioner Dave Jones urged federal officials to block the merger of health insurance giants Anthem Inc. and Cigna Corp., declaring the $54-billion deal anti-competitive and harmful to consumers.
The state insurance department doesn't have the authority to thwart the merger on its own, but Jones' recommendation Thursday could carry considerable weight in Washington and hinder the companies' efforts to win federal antitrust approval.
Jones said the Anthem-Cigna merger would likely result in higher costs for consumers and businesses, fewer choices for coverage and a lower quality of medical care. He said the California health insurance market was already highly concentrated among four large companies, and this deal would only make matters worse.
"Bigger is not better for California consumers," Jones said at a press conference in Sacramento. "I urge the Department of Justice to use its authority to block the Anthem and Cigna merger because of its anti-competitive effects."
Anthem criticized Jones' decision and expressed confidence it would obtain the necessary government approval for the merger.
"We do not believe that the California Department of Insurance's opinion is based on the true merits of this transaction," Anthem said in a statement. "We are confident that the highly complementary nature and limited overlap of our organizations that will benefit the complex and competitive health insurance markets will be reviewed on the facts by the Department of Justice and appropriate state authorities."
The U.S. Department of Justice is investigating the merger, and federal officials could seek divestitures to reduce market power or try to block it entirely on antitrust grounds.
Anthem said it has received approval from 12 states thus far, but other reviews are pending. Jones said he was the first state insurance regulator to formally oppose the Anthem deal.
California's other insurance regulator, the Department of Managed Health Care, is still examining the merger as is Connecticut, which plays a critical role since Cigna is based there.
The decision in California was being watched closely across the country by consumer groups, medical providers and Wall Street investors.
In addition to Anthem's proposed acquisition, another merger proposal between Aetna Inc. and Humana Inc. would consolidate the U.S. health insurance market from five major players down to three. Jones hasn't issued a decision yet on the Aetna-Humana tie-up.
The insurers contend that their mergers will enable them to eliminate unnecessary costs and deliver more affordable benefits to employers and consumers.
But Jones soundly rejected that argument from Anthem, saying its claims of $2 billion in savings were "vague" and "not credible."
"There is simply no guarantee that these savings would benefit policyholders," he said.
Jones expressed concern about Anthem and Cigna gaining a significant share of the market for administering benefits of self-insured employers. He said the combined companies would have 61 percent of that employer market in California.
"This suggests Anthem would gain a monopoly share of the market," Jones said.
Some big employers nationwide have raised similar worries about having fewer competitors to choose from.
Jones also cited Anthem's history of big rate hikes and said increased market power could trigger even more.
Consumer advocates applauded Jones' move and urged California's managed-care regulator to voice similar opposition to federal officials.
"The U.S. Department of Justice should reject this $54 billion merger that is about padding health insurers' profits, not improving consumers' health care," said Carmen Balber, executive director of Consumer Watchdog, a Santa Monica-based advocacy group. "Anthem cannot provide proof of savings, or any benefits to consumers from this merger because there will be none."
Since 2013, Balber said, Anthem Blue Cross has imposed $145 million in rate hikes that California regulators have deemed unreasonable but don't have the power to stop under state law.
Anthem has defended its rate increases, saying they reflect the rising cost of medical care industrywide.
If the Anthem-Cigna deal is completed, the combined company would have more than 54 million members, making it the largest U.S. health insurer. It would generate an estimated $117 billion in annual revenue. Anthem would also become California's largest health insurer, topping HMO giant Kaiser Permanente.
In 2014, Anthem, Kaiser, Blue Shield of California and Health Net controlled 85 percent of the state's health insurance market for employers and individuals, according to Jones. By adding Cigna, Anthem's market share alone would exceed 50 percent in 28 of California's 58 counties, the insurance department estimated.
The Anthem-Cigna merger has been rocky from the start. The two sides bickered publicly during negotiations last summer before finally reaching a deal.
Industry analysts have been growing more pessimistic about the chances that the deal will actually be consummated.
Ana Gupte, a health care analyst at Leerink Partners, said even without direct jurisdiction over the deal, the California insurance department's opposition spells further trouble for it.
"California is an important state for this merger, and we expect it to be material to the broader antitrust scrutiny," Gupte said.
Jones, a Democrat and an elected insurance commissioner, is running to be California Attorney General in 2018. He has supported other insurance acquisitions.
In March, the commissioner approved a smaller merger in hopes it would boost competition in the state against heavyweights like Anthem. He gave the green light to Centene Corp.'s $6 billion acquisition of Health Net Inc., which is the state's fourth-largest health insurer.
The NOTICE Act requires that starting Aug. 6, Medicare patients receive a form written in “plain language” after 24 hours of observation care but no later than 36 hours. Medicare is soliciting feedback on the draft notice through Friday.
This article first appeared June 16, 2016 on the Kaiser Health News website.
In just two months, a federal law kicks in requiring hospitals to tell their Medicare patients if they have not been formally admitted and why. But some physician, hospital and consumer representatives say a notice drafted by Medicare for hospitals to use may not do the job.
The law was a response to complaints from Medicare patients who were surprised to learn that although they had spent a few days in the hospital, they were there for observation and were not admitted. Observation patients are considered too sick to go home yet not sick enough to be admitted. They may pay higher charges than admitted patients and do not qualify for Medicare's nursing home coverage.
The NOTICE Act requires that starting Aug. 6, Medicare patients receive a form written in "plain language" after 24 hours of observation care but no later than 36 hours. Under the law, it must explain the reason they have not been admitted and how that decision will affect Medicare's payment for services and patients' share of the costs. The information must also be provided verbally, and a doctor or hospital staff member must be available to answer questions.
And patients could have questions, said Brenda Cude, a National Association of Insurance Commissioners consumer representative and professor of consumer economics at the University of Georgia. She said the notice is written for a 12th-grade reading level, even though most consumer materials aim for no more than an eighth-grade level. It "assumes some health insurance knowledge that we are fairly certain most people don't have."
Medicare is soliciting feedback on the draft notice through Friday.
Medicare officials declined to comment while the draft form is under review. But they have expressed support for efforts to explain observation care.
"We are in complete agreement with the notion that the patient should certainly know their status and know it as early as possible," Sean Cavanaugh, Medicare's deputy administrator, told a Senate committee last year when asked about the notice legislation. "And we've been pushing very hard through educational channels, even providing sample materials that hospitals could use to educate their beneficiaries on what status they have."
Many hospitals also support the effort. "It's important for patients to understand their status in the hospital," said Katie Tenoever, senior vice president and general counsel for the Federation of American Hospitals.
But the form does not meet the expectations of Rep. Lloyd Doggett, D-Texas, who co-sponsored the law.
"I am concerned that the proposed notice fulfills neither the spirit nor the letter of the law," Doggett said in an interview.
It doesn't require the hospital to explain exactly why the patient is getting observation care instead of being admitted, he said, and doesn't clearly explain the difference between Medicare's Part A hospitalization and nursing home benefit and Part B, which covers outpatient services, including doctor's visits, lab tests and hospital observation care.
The notice, he said, also does not sufficiently explain why observation patients are ineligible for Medicare's nursing home coverage, which under law requires at least three consecutive days as an admitted patient.
The draft notice also has raised some concerns among doctors. It says that observation care is provided in order to help the doctor decide whether the patient is sick enough to be admitted. But Dr. Jay Kaplan, vice chairman for emergency services at Ochsner Health System in New Orleans and president of the American College of Emergency Physicians, said it should explain that the doctor's decision is not always final. Hospital officials also can decide that patients don't meet the admission criteria and should get observation care. If Medicare auditors find that hospitals erred by admitting patients who should have been in observation, Medicare pays nothing for their care.
The number of Medicare observation patients rose to almost 2 million in 2014, 5 percent more than 2013, according to government statistics.
The notice's information on drug coverage has also raised concerns. It reads, "Generally, prescription and over-the-counter drugs, including 'self-administered drugs,' given to you by the hospital in an outpatient setting (like an emergency department) aren't covered by Part B."
Those "self-administered drugs," usually taken at home for chronic health conditions like high cholesterol, are generally covered by the patient's separate Medicare Part D drug plan but the coverage often doesn't apply inside the hospital. Most hospital pharmacies do not participate as in-network pharmacies with Part D plans, said Marina Renneke, a Humana spokeswoman.
However, that section "was really quite confusing," said Kaplan. Medications given to treat the illness that brought patients to the hospitals are covered under Part B, he said.
Joanna Hiatt Kim, the American Hospital Association's vice president for payment policy, said, "A number of hospitals already voluntarily distribute their own notices."
Still, her association has raised some questions about how to carry out the federal requirement in a letter to Medicare.
For example, although the federal law requires notice to observation patients after 24 hours and before 36 hours, several states tell hospitals to provide a notice when observation care begins and it may include different details. Should patients get two notices?
Then there's the matter of timing. The final notice is expected shortly before hospitals must start giving it to patients. AHA is asking for an additional six months to get ready.
As health care consolidation accelerates nationwide, a new study shows that hospital prices in two of California’s largest health systems were 25 percent higher than at other hospitals around the state.
This story first appeared June 13, 2016 on the Kaiser Health News website.
Researchers said this gap of nearly $4,000 per patient admission was not due to regional wage differences or hospitals treating sicker patients. Rather, they said California's two biggest hospital chains, Dignity Health and Sutter Health, had used their market power to win higher rates.
"California experienced its wave of consolidation much earlier than the rest of the country and our findings may provide some insight into what may happen across the U.S. from hospital consolidation," said the study's lead author, Glenn Melnick, a health care economist at the University of Southern California.
Dignity and Sutter disputed the idea that they can dictate rates, saying they face ample competition.
Hospital chains that buy up other facilities, clinics and physician offices often tout savings and improved services from coordinating patient care and eliminating inefficiencies. The researchers found no evidence that any potential savings were being passed along to the employers, insurers
The study, published in the Journal of Health Care Organization, Provision and Financing, comes as Sutter faces a lawsuit and an investigation by state Attorney General Kamala Harris for potential harm to consumers. Dignity and other big medical groups are also subjects of the attorney general's inquiry.
One limitation of the study is that it draws only on claims data from Blue Shield of California, the state's third-largest health insurer. However, experts say that what Blue Shields pays is a good proxy for the industry as a whole.
The prices in the study reflect the actual amounts paid by Blue Shield, not billed charges or list prices.
The research showed that from 2004 to 2013, the amount paid by Blue Shield to nearly 60 hospitals owned by Dignity and Sutter jumped 113 percent compared to a 70 percent increase at about 175 other California hospitals.
At the beginning of that ten-year period, prices were similar at all the hospitals studied. However, by 2013, the average payment per patient admission was $19,606 at Dignity and Sutter hospitals and $15,642 at the other hospitals.
James Robinson, a University of California, Berkeley professor of health economics, said the study's findings show how dominant health systems use revenue from higher prices to get even bigger.
"It allows them to further expand by acquiring medical groups which gives them even more bargaining power," Robinson said.
Sutter spokesman Bill Gleeson said the health system's recent price increases to insurers have been extremely low and its charges are in line with competitors. He also cast doubt on the study's validity because of its reliance on data from Blue Shield, which has clashed publicly with Sutter over prices and contracts.
"This a self-serving play by Blue Shield to use stale and potentially misleading data to further its contract negotiations with Sutter Health and an attempt to advance its position in pending litigation," Gleeson said.
Melnick said Blue Shield shared its claims data but wasn't involved in the analysis or the conclusions of the study. The San Francisco-based insurer declined to comment on the study until it could review the findings.
Dignity said a number of factors affect its prices for commercially insured patients. It cited high labor costs, the need to pay for state-mandated seismic upgrades and the expense of treating a rapidly growing Medicaid population in California.
Dignity, a nonprofit based in San Francisco, is California's largest hospital chain, with 32 facilities in the state and seven more in Arizona and Nevada. It posted an operating profit of $423 million on annual revenue of $12.4 billion in the year ending June 30, 2015.
Sutter's nonprofit system, based in Sacramento, includes 24 hospitals and 34 surgery centers. It reported $11 billion in revenue last year and an operating profit of $287 million.
Hospitals run by Kaiser Permanente, both an insurer and health system, weren't in the claims data analyzed.
The study's authors said lawmakers should consider limiting the use of "all-or-none" negotiating tactics that force health plans and employers to accept all of a health system's hospitals, clinics and physician groups or risk losing access to them all.
Gleeson, the Sutter spokesman, said his health system does not use all-or-none contract provisions.
"There are many health plan products that include pieces and parts of Sutter Health," he said.
UC Berkeley's Robinson said he was "dubious about the state getting in there and regulating different forms of private contracting."
Beyond Sutter and Dignity, prices grew substantially across all hospitals from 2004 to 2013. The average payment per admission increased 76 percent from $10,113 to $17,818.
The increase occurred at a time when other economic indicators rose more modestly. California household income, for example, increased 23 percent during that period.
Sutter faces a class-action lawsuit, filed by a Blue Shield-run grocery workers' health plan and supported by other employer and business groups, that accuses the health system of imposing anticompetitive terms and illegally inflated prices. Sutter disputes the allegations.
Doctors will now file an application for FDA approval that contains just 11 questions, 15 fewer than the old form. They should be able to complete this new version in 45 minutes, the FDA said.
This article first appeared June 8, 2016 on the Kaiser Health News website.
Doctors will now file an application for FDA approval that contains just 11 questions, 15 fewer than the old form. They should be able to complete this new version in 45 minutes, the FDA said. The new form is simpler because it was designed for individual patients, replacing an all-purpose format that had been used by doctors acting on behalf of individuals or small or large groups of patients.
There had been concerns that doctors unfamiliar with how to submit the old form might have been deterred from applying for compassionate access, which is also known as expanded access, said FDA spokeswoman Sandy Walsh.
The policy is intended to help patients with incurable diseases who have tried all standard therapies and hope to extend their lives by taking experimental drugs not yet approved by the FDA, said Dr. Edward Kim, chair of the Department of Solid Tumor Oncology at the Carolinas HealthCare System's Levine Cancer Institute.
The FDA's old form was a "pretty laborious process," Kim said. When doctors are serving patients whose time is precious, every minute saved on paperwork can help, he said.
In streamlining its path to approval, the FDA has bolstered a larger movement in the U.S. to make experimental drugs more accessible to certain patients. Currently, 20 states have "right to try" laws aimed at improving terminally ill patients' access to experimental treatments, according to the Regulatory Affairs Professionals Society.
Despite benefits for time-pressed physicians, the FDA's slimmed-down application form might not speed those drugs faster to patients whose time is running out.
Doctors still must first obtain a letter of authorization from that drug's manufacturer. That's voluntary and the FDA can't compel them to grant permission. Manufacturers might reject requests because they're worried about liability if the drug causes harm or they might consider the drug unsuited for a particular patient.
"There has been a tendency to focus on this FDA paperwork as the significant part of gaining access to drugs, but where most requests stop is with the company making the drug," said Mark Fleury, a policy analyst at the American Cancer Society Cancer Action Network.
After doctors get manufacturers' consent, they next submit an application to the FDA. It has approved 99 percent of the applications filed for the past six years, FDA figures show. Only 14 out of 1,430 applications were rejected in fiscal year 2015.
Expanded access is intended for patients unable to get access to drugs that are being tested in clinical trials. Sometimes a patient is unsuited for the trial or there might not be a trial to enter at the time the patient needs the drug.
Investigational drugs aren't without risk. The FDA hasn't vouched for the safety of the drugs and they could cause unknown side effects, such as liver damage.
They may also be ineffective. Just because a drug is working for a patient in a clinical trial, doesn't mean it will work for another patient in different circumstances who doesn't qualify for that trial.
Dr. James Gill walked through the morgue in Farmington, Connecticut, recently, past the dock where the bodies come in, past the tissue donations area, and stopped outside the autopsy room.
This story is part of a partnership that includes WNPR, NPR and Kaiser Health News.
"We kind of have a typical board listing all of the decedents for the day," Gill said, pointing to the list of names on a dry erase board. "Overdose, overdose, overdose, overdose overdose. That's just for today."
Gill is the chief medical examiner for the state of Connecticut, and of the nine bodies in his custody that day, four were the remains of the people who likely died from an accidental drug overdose. A fifth was a probable suicide involving drugs. It was a sad, but typical day, he explained, with a practical consequence for the state's morgue: Gill is running out of room to store bodies.
"We've had to buy some extra racks and things so we can store more," he told me. "But we really probably need more cooler space. We're kind of outgrowing the storage space here."
In the past two years, Gill's office has seen a more than a 50 percent increase in autopsies. That's mostly because of the spike in accidental drug overdoses, he said. Heroin is the big player. Fentanyl deaths have surged, too.
I sat with Gill in the so-called family room just off the lobby of the examiner's office. In explaining why good data on exactly which drugs killed exactly which people is important, Gill recalled a conversation he once had with a mother whose daughter had died of a drug overdose the previous year. The mother called Gill to learn more.
"Can you tell me, did she suffer?" the woman wanted to know. "Was she in pain?"
"And I explained to her," Gill said, "that, with an opioid death, the person just gradually goes to sleep and it's very painless.
"And she started crying," Gill told me, fighting tears of his own. "And it gave her some comfort."
There's another reason to get solid data — so you can craft a public health response to the epidemic. Specificity about a death today could help save a life tomorrow, he said. A death certificate needs to say more than something vague like "opioid intoxication" to help both law enforcement and public health officials curb the distribution — and hopefully abuse — of opioids.
"Well, what are those opioids? Are they heroin or are they Oxycontin?' " he asked rhetorically. The precise answer can make a difference in figuring out what actions to take.
But not all death certificates have as much information as they could. When Gill took the job just a few years ago, only 63 percent of Connecticut's drug deaths had specific drugs listed on the death certificate. Today 99 percent do.
"I found that the doctors here, a lot of them were certifying the deaths as acute or multi-drug intoxication," Gill told me. "And I said, 'No, we need to spell out what the drugs are that are causing the death.' So, it would be 'acute intoxication due to the combined effects of heroin, diazepam and alcohol' — and that's how we certify the deaths now. We're very specific about what we're finding in the toxicology."
In 2014 , the most recent year that data are available, only Rhode Island did better than Connecticut in getting and passing along these sorts of comprehensive details. Conversely, only about half of deaths in some other states — including Pennsylvania, Indiana, Mississippi and Louisiana — have specific information on the death certificates.
There are a lot of contributing factors that could explain the variation from state to state, Gill said.
First, not all people who certify deaths have the same training.
Second, when lots of drugs are involved, some people may not be comfortable singling out one or two as the cause of death. Custom could play a role, too — the "We've always done it this way" factor. So might size. Connecticut is small and centralized in the way it handles these cases.
"All of the deaths are examined here by the same group of medical examiners, the same investigators," Gill said. "So we can kind of establish that common technique and certification ability. Whereas, in a lot of jurisdictions — New York, for example — it varies by county."
Margaret Warner, an injury epidemiologist with the Centers for Disease Control and Prevention, focuses on monitoring trends in mortality, using death certificate data, and she agrees that lots of variables contribute to Connecticut's success in gathering better data. But one of them is pretty basic: clear communication with the people who determine and report the cause of death.
"The thing that's different between 2012 and the current year," Warner told me, "is that Dr. Gill — who knows that we want those specific drugs written down on the death certificate — is now writing them down. So some of it's about reaching out to the certifiers to make sure that they know we want the specific drugs involved."
The CDC is actively working on that, Warner said.
But, in Gill's experience, not everyone wants all that information documented.
"I remember one call from a family member who was upset that we put heroin on the death certificate," he said. "Their son had died of heroin, and they didn't want it on the death certificate because they were afraid that the public was going to hear about it and know that that person died of heroin. And I said, 'I'm sorry, but this is a public health issue.' "
And, judging from the data, it may be a big public health issue for a long time to come.
Blue Shield of California, for the first time, has listed the compensation for its 10-highest paid executives by name. The company also offered details, such as base salary and incentive awards.
In its first detailed disclosure on executive pay, nonprofit Blue Shield of California said Chief Executive Paul Markovich made $3.5 million last year – a 40 percent increase since he took the top job in 2013.
The San Francisco-based health insurer has faced criticism for years from consumer advocates about its lack of transparency on executive compensation, and the issue attracted even more scrutiny after a state audit raised questions about the insurer's big pay increases and large financial reserves.
Following that audit, in 2014, California revoked Blue Shield's state tax exemption, which it had held since its founding in 1939.
In the report issued Thursday, Blue Shield for the first time listed the compensation for its 10-highest paid executives by name. The company also offered details, such as base salary and incentive awards.
Markovich made $2.5 million in 2013, $3 million in 2014 and $3.5 million last year. That 2015 compensation included a base salary of $1.07 million and incentive plan payouts of $2.45 million.
Blue Shield is California's third-largest health insurer with 4 million members and $14.8 billion in annual revenue. The company's 10-member board is led by Chairman Robert Lee, a retired Pacific Bell executive, and also includes Leon Panetta, who served as defense secretary and as director of the Central Intelligence Agency during the Obama administration.
"While we have been providing reports as required to regulators, it left something to the imagination," said company spokesman Steve Shivinsky. The company wanted to "lift the veil and make sure we are going above and beyond what is required so there is a higher level of transparency."
Shivinsky said Markovich's pay increases reflect the company meeting or exceeding many of its performance goals as well as the overall growth of the company. His reported compensation doesn't include retirement plan payouts that accumulate over time and would be reported when an executive leaves the company, Shivinsky said.
Consumer advocates said Blue Shield waited far too long to share details with their policyholders and the public.
"This is the kind of information that should have been forthcoming from Blue Shield a long time ago," said Anthony Wright, executive director of Health Access, a consumer advocacy group. "We are paying for these salaries through our premiums."
Jamie Court, president of Consumer Watchdog in Santa Monica, said the new report still doesn't address all of the deferred compensation and retirement money that top executives could leave with.
"Blue Shield is a black hole when it comes to where the money is going," Court said. "They are the least transparent health insurance company in America."
The company didn't provide information about executive pay until it was required to do so by a 2010 state law. Even then, the company wouldn't put names with the amounts listed and didn't spell out what was included in terms of salary, bonuses or other compensation.
In the new report, Blue Shield didn't provide any details on payouts prior to 2015, including for former CEO Bruce Bodaken.
Michael Johnson, the former public policy director at Blue Shield who has become a critic of the company, said last year that Bodaken received about $20 million as part of his 2012 retirement package, on top of his annual pay. He was chairman and CEO from 2000 to 2012.
Blue Shield had omitted the pay for Bodaken and other executives who had departed during 2012 from a state filing that required annual compensation data on the company's 10-highest paid employees.
The company said it interpreted the rule to apply only to executives still employed at the time it filed the paperwork, which was March 2013 in that case.
Blue Shield insists it did nothing wrong, and the company called the $20 million figure for Bodaken "speculative."
"We won't go and revisit previous board decisions or payments made to executives," Shivinsky said. "Our board spent a lot of time discussing this, and going back in time didn't seem like a reasonable step to take."
Although pay increases and the former CEO's retirement package have drawn fire, the annual compensation of top executives is comparable to what other health care companies pay. Many of Blue Shield's competitors are publicly traded industry giants that pay their CEOs more.
Anthem Inc., which sells Blue Cross policies in California and 13 other states, paid CEO Joseph Swedish $13.6 million in salary and other compensation last year.
Nonprofit Kaiser Permanente also pays top executives more than Blue Shield. George Halvorson, Kaiser Permanente's former chairman and CEO, made $10.4 million in 2014, the latest figures available.
But Kaiser Permanente and other insurers are more transparent about salaries than Blue Shield. Kaiser lists compensation for dozens of executives in its federal 990 filings as a nonprofit, tax-exempt organization.
Blue Shield doesn't file a form 990 because it falls into a unique category. It has paid federal income taxes for years under a change Congress made in 1986 to treat large Blue Cross Blue Shield health plans the same as for-profit insurers. But it had been exempt from California income taxes before the state revoked that status in 2014.
In the new disclosure, the second- and third-highest paid executives for 2015 are no longer at the company.
Janet Widmann, who was then an executive vice president, received $3.4 million last year. That amount may include one-time payments such as retirement or pension money, according to the company. Next was Robert Geyer, the former senior vice president for customer quality, who made $2.5 million.
In all, the top 10 executives at Blue Shield received $18.8 million.
The questions about transparency have come as the insurer has experienced significant growth. Blue Shield's enrollment last year shot up 17 percent to 4 million members, due in large part to the $1.2 billion acquisition of insurer Care1st. Annual revenue also increased 11 percent to $14.8 billion.
This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.