iProtean—Investors Expect Insurers to Benefit from Health Reform

Stock prices for large publicly traded insurance companies have risen in recent weeks, signaling investors confidence that health reform will improve insurance companies’ bottom lines despite dire warnings from the industry itself.

 

America’s Health Insurance Plans, the industry’s trade group, has been predicting a troubling if not catastrophic outlook for insurance companies. It cited CMS’s 2015 rate reductions for Medicare Advantage plans (although the cuts are expected to be lower than anticipated). But stock prices for the five insurance companies with the largest number of Advantage enrollees have risen by at least 6 percent over the last several weeks—two of those have seen double digit increases. (“Health insurance stocks are hot, despite chilly predictions,” Modernhealthcare.com, March 21, 2014)

 

In addition, some of these companies have also done very well on the health insurance exchanges. The market leader, Wellpoint, had anticipated that 80 percent of its exchange enrollees would make their first payment on time, but that has risen to 90 percent in recent weeks. (“Health insurance stocks are hot, despite chilly predictions,” Modernhealthcare.com, March 21, 2014)

 

This financial strength positions large insurers for additional endeavors in regional markets.  iProtean’s upcoming course, Strategic Responses to the Competitive Market, has a segment on the impact of insurers on the competitive environment (excerpted from the course):

 

“As hard as hospitals, physicians and other providers are working to determine what they need to do position themselves competitively, health insurers have been spending at least as much effort, if not more, on determining the implications of the health reform law. The way markets are evolving really is a function of what both the health plans of the insurers and the providers are doing. This is very much an iterative process and a “back and forth” as each tries to figure out the implications of the strategies others in the market are adopting so they can develop their own strategies. That is, each can and will be influenced or shaped by what the other is doing.

 

“So if you have a very aggressive health system adopting a forward-thinking accountable care strategy, essentially moving closer and closer to the insurance business, perhaps even setting up its own health plan, a major insurer is going to look at that very carefully and it could help inform and determine their competitive response. Likewise, if you have a marketplace where the insurer really wants to adopt aggressive health exchange strategies, they will expect the hospitals and doctors to provide even deeper discounts to be part of a limited network or panel that is tied to their particular insurance product.

 

“Insurers really can have a very significant impact in shaping the market, but it isn’t one-dimensional. It also is very much a function of where the hospitals and the physicians are in the marketplace as well. These two forces are both in play and are serving to define exactly how markets unfold and how they are going to look.”

 

 

iProtean subscribers, a new advanced Finance course, Strategic Responses to the Competitive Environment featuring Michael Irwin and Dan Grauman, will be the next course in your library. Topics include: payment innovations and increasing competition, the continuum of competitive strategies, four competitive models, the risk of being “cautions” and capital requirements.

 

For a complete list of iProtean courses, click here.

 

For more information about iProtean, click here.

 

iProtean—Boards, Executives and Attorneys Eye Legal Issues for 2014

The Affordable Care Act (ACA) and other compliance issues will challenge boards and executives throughout 2014. Many of these challenges have legal implications. AHLA Connections recently provided a list of the top 10 health law issues in 2014 (“Top 10 Health Law Issues 2014, AHLA Connections, February 2014):

  • ACA implementation
  • Moving from quantity to quality based reimbursement
  • States’ role in implementing healthcare reform
  • Data breaches and security
  • Fraud and abuse enforcement
  • Impact of ACA on employers
  • Mental health and addiction
  • Compliance mandates for long term care under ACA
  • Telemedicine expansion
  • Remaining challenges to ACA

 

We have reported on many of the issues related to health reform implementation over the last few years. Two in the list above deserve our attention today: data breaches and security and telemedicine expansion.

 

Data Breaches and Security

According to the American Health Lawyers Association, data breaches resulting from security problems accounted for four out of five of the Office for Civil Rights’ enforcement actions last year. Lapses in physician security (lost thumb drives, stolen laptops, for example) account for the majority of data breaches.

 

However, network security is of increasing concern, according to contributing authors of the AHLA Connections article. “EHRs are a lucrative commodity in the illicit trade of personal data,” they wrote. The comparison to other forms of illicit trade in personal data is astounding: black market prices for credit card numbers are worth approximately $1.00 each, Social Security numbers about $3.00 each. But EHRs go for $45.00 each because they contain a vast amount of personal information. The variety of personal data in each EHR can be used by cybercriminals to circumvent fraud detection.

 

Another reason for the high black market value of EHRs is, of course, Medicare fraud. The Federal Trade Commission notes that medical identity theft allows thieves to visit healthcare providers, get prescription drugs and file insurance claims. “While the healthcare industry learns to combat this problem, criminals likely will seek to hack hospital servers . . . [healthcare executives and boards] should be proactive and evaluate security vulnerabilities to avoid a big data breach,” the authors wrote.

 

Telemedicine

Cost and accessibility are two key components of health reform. Technology contributes to efficiency and access—thus the movement to EHRs and other technology-driven enhancements to provider business operations and the delivery of patient care. An upsurge in telemedicine is expected, yes, in 2014.

 

CMS defines telemedicine as “the provision of clinical services to patients by practitioners from a distance via electronic communications.” It covers a range of services, from remote monitoring of stroke and cardiac patients to diagnostic interpretations completed at a distant location.

 

Telemedicine has its own set of legal issues:

  • Reimbursement will remain a barrier to telemedicine in 2014. Coverage under Medicare is limited and Medicaid reimbursement varies from state to state. “Providers should be aware of the reimbursement requirements and restrictions that may affect their billing practices,” the authors wrote.
  • Credentialing and privileging will be challenging. When entering into written agreements with distant sites, healthcare organizations must confirm that any written agreement they sign reflects current legal requirements.
  • Peer review must continue so hospitals and telemedicine entities should develop policies and procedures for monitoring telemedicine practitioners and sharing internal review information so privacy of peer review and patient information is protected.
  • Patient privacy must be protected, so the telemedicine entity and the hospital will need to ensure secure communication channels and all that entails.
  • Compliance with state requirements may change, but today most states require physicians engaging in telemedicine to be licensed in the state where the patient is located. Healthcare organizations need legal guidance to navigate individual state requirements, including licensure, consent and practice of medicine issues.

 

iProtean subscribers, a new advanced Finance course, Strategic Responses to the Competitive Environment featuring Michael Irwin and Dan Grauman, will be in your library next month. Topics include: payment innovations and increasing competition, the continuum of competitive strategies, four competitive models, the risk of being “cautions” and capital requirements. This course is the first in a two part series; the second will be released in early June.

 

For a complete list of iProtean courses, click here.

 

For more information about iProtean, click here.

iProtean—2015 Budget Proposal Cuts Healthcare Costs by $400 Billion

The administration’s fiscal year 2015 budget proposal details more than $400 billion in cuts to Medicare, Medicaid and other federal health spending over the next 10 years. Medicare provider payments would be cut $3.5 billion; $1.5 billion of those payment cuts would come from post-acute providers and $960 million from graduate medical education (GME).

 

Projected savings over 10 years for proposals related to Medicare include but are not limited to:

  • Reducing coverage of bad debts ($30.8 billion)
  • Reducing graduate medical education by 10% starting in 2015 ($14.6 billion)
  • Reducing payment updates for certain post-acute care providers ($97.9 billion)
  • Bundling payments for post-acute care services ($8.7 billion)
  • Increasing the Medicare Advantage coding intensity adjustment ($31 billion)
  • Aligning Medicare drug payment policies with Medicaid policies for low-income beneficiaries ($117.3 billion)
  • Reducing critical access hospital (CAH) payments from 101 percent of reasonable costs to 100 percent of reasonable costs
  • Prohibiting CAH designations for facilities less than 10 miles from the nearest hospital ($720 million)

 

Projected savings over 10 years for proposals related to Medicaid include:

  • Determining future state disproportionate share hospital (DSH) allotments based on states’ actual DSH allotments ($3.3 billion)
  • Limiting Medicaid reimbursement of durable medical equipment based on Medicare rates ($3.1 billion)
  • Lowering Medicaid drug costs through a variety of measures ($8.6 billion)

 

The cuts should be viewed as signals to what the president would be willing to accept for a limited set of issues such as a sustainable growth rate (SGR) replacement, according to a senior policy analyst at HFMA (reported in HFMA Weekly News). For example, the budget also backed the approach of the bipartisan proposal to replace the Medicare SGR, which sets physician pay rates. The legislation has not identified a way to cover its $138 billion 11-year cost, and has stalled on Capitol Hill.

 

Other notable additions to the proposed 2015 budget include:

  • $3.9 billion over the next six years for the National Health Services Corps to place 15,000 healthcare providers in needy areas
  • $4.6 billion for the “1,200 health centers” program in FY 15 and $8.1 billion over three years to support additional services
  • $5.4 billion over 10 years to extend through calendar year 2015 a requirement that states pay for primary care services at the same rate that Medicare does. (The federal government covers 100% of the difference between the Medicaid and Medicare rate.) This proposal also would expand eligibility to mid-level providers, including physician assistants and nurse practitioners, and exclude emergency codes.

 

(Sources: “Administration’s 2015 Budget Includes More Than $400 Billion in Medicare, Medicaid Savings,” Health Lawyers Weekly, March 7, 2013; “Obama Proposes $3.5 Billion in Medicare Provider Cuts,” HFMA Weekly News, March 7, 2013)

 

iProtean subscribers, a new advanced Quality course, The Importance of Physician Leaders was posted in your library last week. Be sure to check it out! Coming soon is a new advanced Finance course, Strategic Responses to the Competitive Environment featuring Michael Irwin and Dan Grauman. Topics include: payment innovations and increasing competition, the continuum of competitive strategies, four competitive models, the risk of being “cautions” and capital requirements. This course is the first in a two part series.

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.

iProtean—OIG Releases Its Annual Report on Fraud and Abuse

The HHS Office of Inspector General (OIG) released its annual report on healthcare fraud and abuse last week. According to the report, 71 hospitals and health systems paid $163.4 million to settle healthcare fraud allegations in FY 2013.

 

Some of the more notable results included:

  • Winning or negotiating more than $2.6 billion in healthcare fraud judgments and settlements
  • Total recoveries that included $2.85 billion in Medicare funds and more than $576 million in federal Medicaid money
  • Convictions of 718 defendants for healthcare fraud-related crimes
  • 1,083 new civil healthcare fraud investigations opened by the Justice Department and 1,079 civil healthcare fraud matters pending at the end of the fiscal year
  • Exclusion of 3,214 individuals and entities from Medicare (i.e., providers criminally convicted for Medicare- or Medicaid-related crimes)

 

A health system in Florida negotiated the largest settlement—$26 million— to the state of Florida and the federal government. The settlement resulted from allegations that six of its healthcare facilities submitted false claims to Medicare, Medicaid and other federal healthcare programs for inpatient procedures that should have been billed as outpatient services.

 

The fraud collections did not include funds recovered by contract auditors, such as recovery audit contractors (RACs). In prior years, RACs identified half of all claims they reviewed as having resulted in improper payments, totaling $1.3 billion.

 

Update on “Two-Midnight” Rule

On an issue related to denials for inpatient stays, CMS auditors will double check all Medicare inpatient claims that were denied payment under the new “two-midnight” rule since October 1. The new rule says patients need to be in a hospital bed for two nights, the so-called “two midnights,” to qualify for inpatient care. (See iProtean newsletters October 1, 2013 and January 28, 2014; “Medicare calls for review of ‘two-midnight’ denials,” Modern Healthcare.com, February 26, 2014.))

 

It has been reported that the policy is difficult to implement, and clarifications issued on Sept. 5 and Jan. 30 are raising new complications. CMS said that “Medicare contractors may have denied claims for reasons no longer supported under the latest updates. Therefore, it wants to review all denials under the new rule so far. Those reviews will be handled outside the normal appeals process for payment denials.”

 

CMS has not given the number of claims that may have been denied under the two-midnight rule, but it said its contractors had requested 29,000 medical records to audit as of February 7. It isn’t clear how many Medicare inpatient claims will be affected by the re-reviews.

 

CMS has asked hospitals to work with their local Medicare contractors to make sure denials under the two-midnight rule have undergone re-review before using the formal Medicare appeals process. It also is waiving the normal 120-day window to appeal for denials under the two-midnight rule, but only for decisions that pre-date the Jan. 30 rules, according to the updated policy announced last week.

 

(Sources: “Hospitals Paid $163 Million to Resolve Fraud Allegations in FY13,” HFMA Weekly News, February 26, 2013; The Department of Health sand Human Services and The Department of Justice Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2013, http://oig.hhs.gov/publications/docs/hcfac/FY2013-hcfac.pdf; “Medicare calls for review of ‘two-midnight’ denials,” Modern Healthcare.com, February 26, 2014)

 

iProtean subscribers, a new advanced Quality course, The Importance of Physician Leaders, will soon be in your library. Expert faculty Brian Wong, M.D., Todd Sagin, M.D. and Tom Atchison, Ed.D. discuss the rationale for developing physician leaders in the hospital setting and the role of physician leaders, leadership characteristics including strategic thinking, holding physicians accountable, training physicians leaders, coaching and building teams, leaders as problem solvers and the role of the board. Look for a program summary and preview video in your inbox later this week!

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.