Executives with the National Association of Insurance Commissioners say they're pleased that the healthcare reform package President Obama is expected to sign into law today retains states' oversight for their own insurance markets.
"We believe state insurance regulators are best equipped to educate consumers, field complaints, and regulate insurers," NAIC President Jane L. Cline, who is West Virginia insurance commissioner, told reporters at a media availability Monday afternoon. "So, we are pleased that the federal legislation preserves that role and does not create a federal commissioner shifting oversight to Washington, D.C."
Kansas Insurance Commissioner Sandy Praeger, chair of the NAIC Health Insurance and Managed Care Committee, said the provision to create multistate compacts by 2016 that would allow consumers to purchase insurance across state lines is workable "as long as states come together and agree on what the rules will be for those interstate sales via a compact."
"Consumers are still protected and the markets in those states would still be protected because they would be playing by the same rules. Selling across state lines absent a compact could destabilize the market," Praeger says.
Even though the compacts would be well-regulated, Oklahoma Insurance Commissioner Kim Holland, the NAIC secretary-treasurer, said she's not sure how many states would be willing to compromise on their health insurance benefits structures.
"It is likely that there won't be many of these compacts formed because you are going to have to harmonize the benefits structure and the products," Holland said.
"What we are talking about are mandates for coverage. Those are developed through the legislative process within a jurisdiction that is driven by consumer interest and a response by legislatures and it is difficult to pass them," Holland said. "The idea that a state would just give up the legislation that has been passed based on consumer need and interest and legislature response seems remote to me."
Cline said states share about 200 interstate compacts on a wide range of issues, but that health insurance creates a new set of challenges. "The difference here is you are dealing with an insurance product that is about providing healthcare, and healthcare delivery systems are generally local. It makes it a little more tricky," Cline says.
Under reform, Holland said the federal government would establish a "floor" for benefits within a compact, and that states could fashion there own benefit levels.
"Conceivably you could have states that have over time added numerous mandates to the scope of their benefits that might be interested in offering an alternative to consumers in their state that were lower cost, and agree that some other options with fewer of those mandates be available, and that could be done through the compact," she said.
As far as regulating medical loss ratio within the compact, the commissioners said that would almost assuredly remain within the purview of each individual state. "Otherwise, you could game that system easily," Praeger said.
The commissioners also expressed concerns that the three-to-one rating bands in the bill for the "young invincibles" might be too restrictive, and drive those young healthy adults out of coverage. The commissioners say the penalties for ignoring the insurance mandate of up to 2.5% of annual income would still be cheaper than the cost of health insurance coverage.
"That has been one of our principal concerns, that there is an inadequate penalty to enforce the mandate in a meaningful way," Holland said, adding without a proper penalty "motivated buyers," such as those with an illness, would buy coverage, while the "young invincibles" would rather pay a small penalty.
With the passage of the bill in Congress, Republican opponents have vowed to take their fight to the state level. Attorneys general in three states have already vowed to challenge the constitutionality of the individual insurance mandate. The commissioners said they are aware of the turmoil surrounding the bill, but that they will plan for implementation.
"The timeframes in some cases are narrow enough that we can't afford to let any time lapse. We will move ahead assuming this will become the law and that it won't meet any constitutional challenges that will be effective," Praeger said. "We have more to lose by not being ready than by waiting and seeing. We will move ahead."
Bureau of Labor Statistics data show that there were 152 mass layoffs—defined as 50 job losses or more—at nongovernmental hospitals in 2009, resulting in more than 13,000 job cuts, up from 112 mass layoffs with more than 12,800 job cuts in 2008, which was the first full year of the recession that started in December 2007.
By comparison, 67 hospital mass layoffs occurred in 2007, with about 8,200 job cuts, and 57 mass layoffs with 3,300 job cuts in 2006. The number of mass layoffs could actually be higher because BLS doesn’t track layoffs affecting fewer than 50 jobs or layoffs at government-owned hospitals.
"I would definitely say levels have been high in the recent past but it is hard to tell what is going to happen this year, and I don’t know what the common denominator is. We only have a couple of data points to look at," says BLS economist Patrick Carey.
David Cherner, a principal at Health Workforce Solutions LLC, in San Francisco, says the layoffs are the result of the continued severe financial pressures facing acute care hospitals. "Medicare and Medicaid reimbursements are being reduced, in some cases there are reductions in patient volumes, economic unease, and this is just continuing the trend from the last 18 months or so," Cherner says. "That coupled with the uncertainty around healthcare reform has made folks continue to focus on cost cutting."
The Seton Family of Hospitals, a safety net health system for Central Texas, announced last week that it was eliminating about 150 positions, approximately half of which were staffed, even as the health system sees increasing demand for services.
"Like the rest of the industry, there are a lot of different forces at play in Central Texas," Seton Family spokeswoman Adrienne Lallo says. "The economy is in the doldrums. The number of patients who have employer-based healthcare has been ratcheting down. There are fewer people who come in fully covered. The numbers of people who come into the hospital who are either underinsured or have no insurance at all are going up, and the number of people who have no ability to pay are going up."
Even with the financial pressures at Seton Family, Lallo says many of the affected employees can be shifted to other jobs within the health system, leaving only the employees with nontransferable skills out of the relocation. The layoffs, she says, are more about "reorganizing to gain efficiencies."
These layoffs should be put in their proper context. While certainly painful for the people who lose their jobs, the healthcare sector remains one of the most vibrant job growth areas of the economy. Hospitals created 33,400 new jobs in 2009, and skilled clinicians are still in high demand in most areas of the nation.
The overall healthcare sector—which includes everything from hospitals to outpatient surgery centers to podiatrists' offices—has created 631,000 jobs since the recession began in December 2007. In that same time frame, the number of jobless people in the nation has risen from 7.7 million to 15.3 million, BLS figures showed.
Cherner says he is "still bullish" that hospital hiring in 2010 will be a lot stronger than it was in 2009. "Certainly, once we get some clarity around healthcare reform and people start to make sense of it, that we will see a bit more stability," he says.
Judging by the BLS data, this recession has changed the way that hospitals regard staffing. Because labor costs are the biggest driver in hospital costs, hospitals will contain these costs by continuously examining their staffing needs. Even after the recession, we will continue to see these staffing adjustments–some big, most small—in the months and years ahead. Employees with adaptable skills will transition into new roles within their hospitals. Employees without those skills will be left behind.
Note: You can sign up to receiveHealthLeaders Media HR, a free weekly e-newsletter that provides up-to-date information on effective HR strategies, recruitment and compensation, physician staffing, and ongoing organizational development.
Robert Wood Johnson University Hospital Hamilton will pay $6.35 million to settle two whistleblower lawsuits alleging that the New Jersey hospital inflated outlier billings to Medicare, the Department of Justice announced today.
The two lawsuits filed against RWJUHH alleged that the hospital inflated charges to obtain supplemental outlier payments for cases that were not extraordinarily costly and for which outlier payments should not have been paid. DOJ intervened in both suits in January 2008.
"Taxpayer dollars should go toward quality healthcare, not wasted on fraud and abuse," said Tony West, assistant attorney general for the civil division of the Department of Justice, in a media release. "As the settlement announced today demonstrates, the Justice Department is committed to pursuing those who defraud Medicare and drive up the costs of healthcare."
When asked to comment about the case, RWJUHH President and CEO Skip Cimino said, "Robert Wood Johnson University Hospital Hamilton has resolved the outstanding Medicare Reimbursement issue with the government and looks forward to continuing its service to the community. The settlement resolves the entire case brought by the government. In the Settlement Agreement, the hospital expressly denies any wrongdoing or admission of the government's claims."
The whistleblowers in the two suits will split more than $1.1 million of the total recovery.
The Justice Department said its total recoveries in False Claims Act cases since January 2009 have topped $3 billion. Since 2006, DOJ has recovered more than $1.1 billion from hospitals that it alleged engaged in outlier fraud, it added.
Detroit Medical Center, Michigan's largest charity care provider, signed a letter of intent to negotiate the eight-hospital system's sale to private Vanguard Health Systems, Inc., according to a joint media release today.
The purchase price will include approximately $417 million to retire all outstanding DMC bonds and other long-term indebtedness, and also requires Nashville, TN-based Vanguard to assume all DMC liabilities. Vanguard has also pledged to invest $850 million in capital improvements over the next five years at every DMC hospitals, which DMC Board Chair Steve D'Arcy called "the single largest private investment in the city's history. It represents great confidence in the future of the city of Detroit."
"For years, DMC has had significantly less cash-on-hand than any of our competitors," D'Arcy said. "Now, we have found the solution to allow us to continue our mission to provide quality care for all, despite state and national economic conditions."
DMC CEO Mike Duggan said the nonprofit health system has been in the black for seven consecutive years, "but each year it has been a struggle."
"We've had to sit by and watch while West Bloomfield and Novi and Ann Arbor make huge investments in new modern hospitals and we've been frustrated we can't do the same in the city of Detroit," Duggan said. "Now we can. Detroit will no longer take a back seat to anyone in the quality of our hospital facilities."
DMC hospitals will keep their historic names, but will be owned and operated by a Vanguard subsidiary known as VHS Michigan, which will establish a regional advisory board consisting of four members appointed by Vanguard and three appointed by the DMC board.
Though DMC is obviously pleased with the move, stakeholders in Michigan expressed concern about the sale of Michigan's largest charity care provider to a private, for-profit company from out-of-state.
"The Detroit Medical Center has been a cornerstone in the healthcare safety net for several years. We are hopeful that Vanguard will work with physicians to continue to provide patients in Detroit with the care they need," said Richard E. Smith, MD, president of the Michigan State Medical Society.
Blue Cross Blue Shield of Michigan President/CEO Daniel J. Loepp welcomed the investment in Detroit and the opportunity to improve DMC facilities with the capital investments, but he wants assurances that "the health system's nonprofit mission to provide charitable access to medical services for the poor is not compromised as a result of this deal."
"Michigan has a strong foundation of 144 nonprofit hospitals that serve the interests of local communities and local people—particularly access to healthcare for the underinsured," Loepp said. "Ownership of the state's largest charitable care provider by a for-profit health system has the potential to permanently alter this safety net. We encourage careful consideration and review of this transaction by stakeholders and regulators."
Vanguard said it has agreed to a 10-year commitment to keep all eight DMC hospitals open and to maintain the health system's charity care policy.
"Vanguard has consistently demonstrated our commitment to working with community boards and resources to ensure the best possible outcomes for patients," said Trip Pilgrim, Vanguard's chief development officer. "We have the opportunity to continue this tradition in Detroit, and believe that with the access to capital Vanguard brings, the existing management team will grow DMC into one of the pre-eminent hospital systems in America."
The capital improvements list earmarks $500 million for specific projects approved by the DMC board, including a new Children's Hospital of Michigan tower, new patient units at Detroit Receiving Hospital, doubling of the Sinai-Grace Hospital emergency department, a major renovation of OR space at Harper University Hospital, and new physician office buildings at Harper and Sinai Grace. The other $350 million will be for ongoing repairs and capital and equipment needs at DMC.
The existing DMC Board chaired by D'Arcy will remain and administer the existing $140 million in charitable funds given to DMC over the years and will make sure all donor funds are spent as intended. The DMC Board will also have the legal right to enforce Vanguard's commitments under the purchase agreement.
The letter of intent is non-binding and extends through June 1, when both parties are required to have completed a mutually acceptable agreement. If they haven't, the letter of intent terminates unless they agree to extend it. The final agreement must be approved by the DMC and Vanguard boards, and will be reviewed by the Attorney General of Michigan, and other state and local government entities.
DMC's eight hospitals include Children's, Detroit Receiving, Harper, Sinai-Grace, Huron Valley-Sinai Hospital, Hutzel Women's Hospital, Rehabilitation Institute of Michigan, and DMC Surgery Hospital, with a combined 1,734 licensed beds and 2008 total revenues of approximately $1.9 billion.
Vanguard operates 15 acute-care hospitals in Rhode Island, Texas, Illinois, and Arizona, with 4,135 licensed beds. The company's total revenues in fiscal 2009 were approximately $3.2 billion.
Huge salary disparities and onerous student loans appear to be dampening the enthusiasm of medical school students for primary care. The 2010 National Resident Matching Program shows that the number of U.S. medical students choosing internal medicine residencies grew slightly from 2009, but not enough to impact the shortage of primary care physicians.
The NRMP data show that 2,722 seniors at U.S. medical schools enrolled in an internal medicine residency program, a 3.4% increase from 2,632 in 2009. Those enrollment numbers are similar to 2008 (2,660), 2007 (2,680), and 2006 (2,668). In comparison, 3,884 U.S. medical school graduates chose internal medicine residency programs in 1985, the American College of Physicians reported.
The 2010 match numbers include students who will ultimately enter a subspecialty of internal medicine, such as cardiology or gastroenterology. About 20% to 25% of internal medicine residents eventually choose to specialize in general internal medicine, compared with 54% in 1998, ACP said.
"Because it takes a minimum of three years of residency after four years of medical school to train an internist, it is critical to begin making careers in internal medicine attractive to young physicians," said Steven Weinberger, MD, an executive with ACP. "As America's aging population increases and more people gain access to affordable coverage, the demand for general internists and other primary care doctors will drastically outpace the primary care physician supply."
The 2009 Review of Physicians Recruiting Incentives from physician recruiters Merritt Hawkins shows that huge salary disparities continue to exist between primary care physicians and subspecialties. The average salary offered to family physicians in the Merritt Hawkins study was $173,000, the lowest of any specialty. By comparison, cardiologists were guaranteed average base salaries of $419,000 a year, and orthopedic surgeons were guaranteed $481,000.
Those compensation figures are consistent with other studies, such as the Medical Group Management Association's recently released Physician Placement Starting Salary Survey: 2009 Report Based on 2008 Data. The MGMA study found that median starting salaries for all primary care physicians grew by 7.4% between 2005-2008, to $150,000, while the median starting salaries for all specialists grew by 25% for the same period, to $275,000.
The ACP has called for increasing primary care physicians' Medicaid and Medicare payments, expanding pilot testing and implementation of patient-centered medical homes, and increasing support for primary care training programs as ways to increase the number of primary care physicians.
Weinberger said the rising cost of medical education and the financial burden on physicians is pushing many young doctors toward more lucrative subspecialties.
Health insurance plans that push patients toward physicians who keep medical costs lower are based on unreliable estimates of physician performance and may not save money, according to a study in the March 18 edition of the New England Journal of Medicine.
Described as the first major assessment of physician cost profiling, the RAND Corp. study found that about one-fourth of the 13,788 Massachusetts physicians they reviewed would be misclassified under the system of cost ranking commonly used by insurance plans.
"One of the ideas that is pretty popular for saving costs is to squeeze the doctors. What we are concluding here is that would be great if you really knew which ones were expensive," John L. Adams, the study's lead author and a senior statistician at RAND, tells HealthLeaders Media.
"Our findings raise questions about the utility of cost profiling tools for high-stakes activities, such as tiered health plans, and the likelihood that wide use of these strategies will reduce healthcare spending. Consumers, physicians, and those who pay for healthcare are all at risk of being misled by the results from these tools," Adams says.
The study examined 28 physician specialties and found that only about 40% of physicians had cost profile scores that were at least 70% reliable. Fewer than 10% of physicians had cost profiles that were at least 90% reliable.
Among physicians in a hypothetical two-tiered insurance plan, for example, nearly 40% of internists and nearly two-thirds of vascular surgeons labeled as lower cost were not, the study found. Physicians in surgical specialties appear to have low reliability cost profile scores, while dermatologists' cost profile scores were the most reliable.
American Medical Association President J. James Rohack, MD, says the RAND study "verifies the AMA's longstanding contention that there are serious flaws in health insurer programs that attempt to rate physicians based on cost-of-care."
"The RAND study shows that physician ratings conducted by insurers can be wrong up to two-thirds of the time for some groups of physicians," Rohack says. "Inaccurate information can erode patient confidence and trust in caring physicians, and disrupt patients' longstanding relationships with physicians who have cared for them for years."
"Given the potential for irreparable damage to the patient-physician relationship, the AMA calls on the health insurance industry to abandon flawed physician evaluation and ranking programs, and join with the AMA to create constructive programs that produce meaningful data for increasing the quality and efficiency of healthcare," Rohack says.
Calls by HealthLeaders Media seeking comment from several health insurance industry trade groups were not immediately returned Wednesday.
Adams says he doesn't think revising the evaluation process has to start from square one. "There are a lot of pieces here that could be useful," Adams said. "There has been a failure on a number of levels. The people that use these tools should have done more physician engagement for two reasons: One, the physicians could have made the tool better; and two, why pick a gratuitous fight?"
The Massachusetts Medical Society (MMS) is involved in litigation against the Massachusetts Group Insurance Commission (GIC), which purchases health insurance for state employees and other public sector employees, because of its requirement that health plans tier physicians. That litigation involves GIC and two participating health plans, according to MMS.
Mario E. Motta, MD, president of MMS, said his organization is not against public reporting as long as it is accurate and fair. "It's critically important that patients and physicians get clear, accurate information about the cost and quality of healthcare. But this report, produced by an independent, renowned research firm, clearly demonstrates that these profiling programs fail to accomplish those goals."
Ranking systems not reliable
The RAND researchers analyzed information from insurance claims for 2004 and 2005 from four health plans in Massachusetts that provide coverage to about 80% of non-elderly adults with private insurance. The study examined the costs of treating common illnesses, such as diabetes and heart attack, assigning each care episode to a physician, and creating a cost profile for each physician based on all similar episodes of care.
The researchers evaluated the reliability of physician cost scores by considering factors, such as the number and types of patients physicians treated. The results show that the reliability of cost-profiling scores was unacceptably low for physicians in most of the specialty groups.
Researchers also examined how reliability scores might change under different scenarios, such as requiring at least 30 episodes of treatment to create a profile and different methods for assigning episodes to physicians. While some scenarios modestly increased reliability, the results still fell short.
"These ranking systems may be useful for some purposes, but they are not reliable enough at this point to make decisions about encouraging patients to see certain providers or excluding some doctors from insurance networks," Adams said. "Much work remains to be done to improve these systems before they are used for high-stakes activities."
He adds that the current systems may be useful for warning physicians that their treatment methods may cost more than those of their peers and urging them to reexamine their practice styles.
Adams says cost profiling "can be made better," but it can't be successful until better tools are developed to use claims data and other information to create reliable cost profiles for physicians.
"One of the things you need to do is get a handle on how difficult the provider's patient mix is. It's an illusion that you have it now," he says. "I have hopes that some of the noise can be taken out of this with better data and particularly the stuff we are going to get out of improved information systems. Even the simplest EHR is going to give us blood pressures and whether or not the person is overweight. That is going to be a big help."
"It will be an evolutionary process. I can see these things on the multiyear scale getting up to an adequate standard," Adams says.
Older women aged 55 and older will become 30% of the nation's direct-care workforce by 2018—up from 22% in 2008, according to a new study by PHI, the long-term care workforce development consultants.
This is not surprising because the nation's workforce is aging and PHI expects that 1.2 million direct-care workers will be women aged 55 and over by 2018.
"Older women are increasingly providing frontline services and supports for frail elders and people with disabilities to live independently and with dignity," said PHI President Steven Dawson, in a media release.
"National and state policymakers must work together to ensure that direct-care jobs, which are primarily funded through public dollars, are quality jobs that attract a stable, compassionate workforce. Without these workers, families will not be able to provide the support elders need to live independently and to continue to enjoy the relationships and activities that give their lives meaning," Dawson said.
In 2008, the median hourly wage for direct-care workers was $10.42, which is more than one-third less than $15.57, the median wage for all U.S. workers. Without competitive wages, the older women who are filling these positions today are likely to look elsewhere for employment, PHI said.
Direct-care workers, who are 90% female, tend to be older than women in the nation's overall workforce—22% of direct-care workers were age 55 and older in 2008 compared to 18% for the overall female workforce. An even larger proportion—28%—of personal and home care aides were aged 55 or older in 2008.
The PHI projections were made using data from the 2009 U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, and applying the information to the Bureau of Labor Statistics Employment Projections Program, 2008-18 National Employment Matrix.
Declining admissions has prompted HCA's Spring Branch Medical Center in Houston to cease inpatient operations by May 1, with nearly 500 employees expected to lose their jobs or transfer.
Outpatient services, including radiation oncology, imaging, and emergency care will continue, the hospital chain announced this week.
"Spring Branch Medical Center has had declining inpatient utilization for several years, but the services we are retaining there are obviously still needed and can be sustained," said Maura Walsh, HCA Gulf Coast Division president, in a media release.
Walsh said inpatient admissions have declined in the past few years and this trend is not expected to change. The vast majority of area residents are going elsewhere for inpatient care. Despite capital improvements to make Spring Branch viable, Walsh said there have been significant operational losses over the last five years. The hospital, built in 1958, is licensed for 299 beds, but is staffed for 160 beds.
"Since there has been significant utilization of these outpatient services by the community, HCA Gulf Coast Division recognizes the importance of maintaining these critical services at the campus for the more than 25,000 patients we expect to continue to serve this year," Walsh said. "By preserving these services, it will enable us to continue to serve over 40% of all of our patients in their own community."
HCA said about 40 of the hospital's 538 employees will be retained when inpatient services are shuttered. Management will work closely with the laid-off employees to find jobs at other HCA-affiliated facilities or with other employers. Job fairs and career transition seminars will also be made available, Walsh said.
Walsh said HCA will also work with Spring Branch's medical staff to ensure continuity of care for patients, and will assist physicians who want to transfer to other HCA-affiliated hospitals.
Physicians are key drivers of hospital revenues, and a single physician averages more than $1.5 million a year in net revenue for his or her affiliated hospital, a new national survey of hospital CFOs reported.
The survey by Irving, TX-based physician recruiters Merritt Hawkins asked CFOs in 114 U.S. hospitals to quantify how much revenue physicians in 17 specialties generated for their hospitals in the last 12 months, including net inpatient and outpatient revenue derived from patient referrals, tests, and procedures performed in the hospital.
Neurosurgeons topped the list. A single, full-time neurosurgeon generates an average of more than $2.8 million a year on behalf of the affiliated hospital. Other high revenue generating specialists include invasive cardiologists ($2.2 million), orthopedic surgeons ($2.1 million), general surgeons ($2.1 million), and hematologists/oncologists ($1.5 million), the survey showed.
Primary care physicians also generate substantial revenues for hospitals. A general internist brings in nearly $1.7 million a year on average for the affiliated hospital, a family physician more than $1.6 million, and a pediatrician more than $856,000, the survey showed.
Merritt Hawkins President Mark Smith said the survey demonstrates the central role that physicians play in the healthcare delivery system.
"The most powerful tool in healthcare remains the physician's pen," Smith said in a media release. "Patients are not admitted to the hospital or discharged, tests ordered, or procedures performed without a physician's signature. Hospitals depend on doctors to drive patient care, which in turns drives revenue."
Merritt Hawkins last conducted the survey in 2007, when the average annual revenue generated per physician across all specialties was nearly $1.5 million, slightly lower than the 2010 average. Smith said the revenue increase during a recession suggests that physicians continue to provide a high level of hospital-based services.
"Both the recession and declining reimbursement have prompted many physicians to seek closer relations with hospitals," Smith said. "More physicians are employed by hospitals today than they have been in the past and the interests of the two parties are more closely aligned."
Alpharma Inc. will pay $42.5 million to resolve whistleblower kickback and False Claims Act allegations for its marketing of the painkiller Kadian, the Justice Department said.
Federal prosecutors alleged that between 2000-2008 Alpharma paid healthcare providers to promote or prescribe Kadian, and made misrepresentations about the safety and efficacy of the morphine-based drug.
Alpharma was sold to Bristol, TN-based King Pharmaceuticals Inc. in November 2008. Calls Tuesday night to King Pharmaceuticals were not immediately returned.
The settlement resolves a lawsuit brought by whistleblower Debra Parks in 2006. Parks will receive $5.33 million out of the federal government's $33.6 million share of the recovery, and several states will share approximately $8.9 million.
"Healthcare decisions must be based solely upon what is best for the individual patient and not on which pharmaceutical company is paying the doctor the biggest kickback," said Rod J. Rosenstein, the US Attorney in Maryland, in a media release.
The Justice Department's total recoveries in False Claims Act cases since January 2009 have topped $3 billion, according to the department.
