Tag Archives: Hospitals

A Deeper Dive into Medical Cost Rising for Lost-Time Claims

It is said, a picture is worth a thousand words, and I have ten pictures, courtesy of NCCI’s Barry Lipton’s presentation on that subject.

It was brought to my attention by my fellow blogger, James Moore, of J&L Risk Management Consultants. I met James back in February at the NCCI 2017 Data Education Program in West Palm Beach.

Mr. Lipton is the Senior Actuary and Practice Leader, and his presentation was called, “Medical Cost Trends Then and Now.

Yesterday’s posts regarding the slight increase in the average medical costs for lost-time claims only scratched the surface of the subject. I hope this post will dive deeper into it, so that we can see the whole picture.

In my first post from yesterday, “Slight Increase in Average Medical Costs for Lost-Time Claims, Part 1”, I discussed how physician costs and prescription drug costs impacted medical costs for lost-time claims.

On the issue of physician costs, Mr. Lipton showed that there was a decline in the 2015 medical payments per claim due to physician costs, but as the following chart proves, despite this decline, physician costs contribute a larger share of the total costs.

Chart 1.

Chart 6.

Source: NCCI Annual Issues Symposium 2017

According to James, the main reason for the reduction in costs is the physician utilization per claim. Even though it is only a3% reduction, it is significant, James says, in a time of upward spiraling medical costs. Chart 2 bears this out.

Chart 2.

Chart 7.

Source: NCCI Annual Issues Symposium 2017

The second part of my post yesterday, “Slight Increase in Average Medical Costs for Lost-Time Claims, Part 2”, looked at the steady rise of the average medical cost for lost-time claim.

If we compare the chart from yesterday’s post to the one Mr. Lipton presented, we will see that his chart does show increases and decreases over time in the average medical costs per lost-time claim, but my chart indicates that ever since 1995, it has been rising steady.

Both charts, do show that the average medical cost per lost-time claim is hovering around $30,000, and if the numbers are consistent with ones for earlier years, represents almost 60% of the total claims cost.

My Chart.

Chart 2.

Chart 3.

Chart 4.

Source: NCCI Annual Issues Symposium 2017

To examine this in greater detail, Mr. Lipton broke down the Accident Years into three separate periods and slides, to show the change in medical cost per lost-time claim. He compared the change in Personal Health Care (PHC) Spending per Capita with the Medical Cost per Lost-Time Claim.

In the period, 1995-2002, the average growth rate (AGR) for WC was 9%, and the AGR for PHC was 6%. In the next period, 2002-2009, WC AGR was 6%; PHC AGR was 5%, and finally, in the last period, 2009-2015, the WC AGR was 1%, while the PHC AGR was 3%, as seen in chart 4.

Chart 4.

Chart 10.

Source: NCCI Annual Issues Symposium 2017

To understand what was driving the decline in Accident Year 2015, Mr. Lipton identified six different drivers, as indicated in chart 5.

Chart 5.

Chart 8.

Source: NCCI Annual Issues Symposium 2017

Finally, Mr. Lipton discussed how hospital costs contributed to medical cost per lost-time claims by highlighting the difference between inpatient and outpatient costs, which are rising.

The following chart looks at the four years prior to the 2016 Accident Year, 2012-2015.

Chart 6.

Chart 9.

Source: NCCI Annual Issues Symposium 2017

In 2012, Hospital Inpatient Paid per Stay amounted to $19,514, in 2013, it rose to $22,944 (18% increase), in 2014, it was $24,558, or a 7% increase, and last, in 2015, it was $25,320, or 3% increase over the previous year.

As for Hospital Outpatient Paid per Visit, the number are considerably lower for each year when compared to Inpatient Stays, but nonetheless have been rising.

So perhaps this, at the end is why the average medical cost per lost-time claim has been rising over a period of over twenty years, from 1995 to 2015.

I wrote to James last night when I saw his recent posts on this presentation, and he responded that we are both correct in our analysis, but looking at it from different points of view.

My conclusion after reading this presentation and my discussion with James suggests to me that there are two things going on here. One, when a worker is injured and receives medical care, unless and until he or she goes to a hospital, the best way to lower costs is through what James calls one of his six keys to reducing workers’ comp costs. One of those keys is medical control by the employer, which James said reduced cost by 75%.

But I also realized that when an injured worker goes to the ER or an Ambulatory Service Center as an Outpatient, has an Inpatient stay, that this is where the medical costs go up.

Naturally, Workers’ Comp medical spending is only a fraction of the overall health care spend of the US, and as costs for health care in general rise, so too does costs in workers’ comp.

So, while many have argued or shown that they can lower costs on the front end, from time of injury to return to work for most claims where no surgery is required, one of the largest reasons for the steady rise in the average medical cost per lost-time claims is hospital costs.

On this, both James and I agree. However, it is important that many in the industry see this as well. Keep thinking that it will change by doing this or that has not worked, the numbers prove that. Maybe it is time for something out of the box.

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Slight Increase in Average Medical Costs for Lost-Time Claims, Part 1

It’s that time of the year again, the time when I review the NCCI State of the Line Report.

As an added feature this year, I am including a look at the Medical Cost data, a new subject which I heard about back in February, when I attended NCCI’s 2017 Data Education Program.

First up is the distribution of medical costs by category. NCCI supports regulatory and legislative initiatives by providing State Medical Data Reports using data from their Medical Data Call.

For Service Year 2015, the distribution of payments across the various categories is based on data for all jurisdiction where NCCI provides ratemaking services, except Texas.

The key takeaway, as the following table will show, is that in 2015, physician costs were almost 40% (38%) of total medical costs, combined inpatient and outpatient hospital costs were approximately 30% (31%), and prescription drug costs were about 11%.

Table 1.

Table 1.

Source: NCCI’s State Medical Data Reports

Drilling down further, the distribution of physician costs for Service Year 2015, indicates that the bulk of the costs were associated with physical medicine, 30%, and surgery was associated with 24%, 10% associated with radiology, as shown in Table 2.

Table 2.

Table 2.

Source: NCI’s State Medical Data Reports

Getting even further, the next area the report covered was prescription drug payment changes over time.

The key takeaways here are the following:

  • In 2011, generic equivalents represented 47% of payments for all drugs prescribed. This increased to 58% by 2015, and driven largely by brand-name drugs.
  • Repackaged drugs now represent a small portion of overall drug payments because several states have implemented regulation on reimbursement.

Table 3.

Table 3.

Source: NCCI’s Medical Data Reports

NCCI analyzed the impact of prescription drug fee schedules on the cost of drugs by classifying states into one of four categories. States that had fee schedules were classified as Low, Medium, or High, based on the size of the Average Wholesale Price (AWP). The fourth category were states without a schedule.

The key takeaways here are:

  • Transitioning from not having a schedule to a low-fee schedule significantly reduces prices for WC prescriptions
  • Moving from no schedule to a high-fee schedule may increase drug costs, as shown in the following chart.

Chart 1.

Chart 1.

Source: NCCI’s Medical Data Reports

NCCI also looked at physician payments as a percentage of the Medicare reimbursement rate. In most states, they said, WC physician services are subject to fee schedules, just like the ones in group health and Medicare.

One way to measure physician costs across the states is to compare WC payments to the Medicare reimbursement rate.

The key takeaway from this is:

  • Prices paid relative to Medicare vary widely, from about 100% (Florida – 101%) to over 250%
  • Of the five jurisdictions with the largest percentage, all but Alaska (263%) are currently operating without a fee schedule
  • Countrywide the average is 150%

What does this mean for you?

While there are some positives in these numbers, especially with the cost savings from going to a low fee schedule for drugs, and an increase in the use of generic over brand-name drugs, and a decline in the percentage of repackaged drugs, medical costs are still very high for workers’ comp.

In the next post, I will look at the medical lost-time claim severity.

H-1B Visa Order To Limit Number of Foreign-Born Doctors

Before most of the Risk Management and Workers’ Comp industry goes to Philadelphia for next week’s Risk and Insurance Management Society (RIMS) annual conference, I want to share an article on Kaiser Health News about what the recent executive order on H1-B visas will have on healthcare, and by extension, workers’ comp.

I wrote about this two weeks ago when I said that the travel ban will affect the physician shortage in the United States.

According to Kaiser, limiting the number of foreign doctors who can practice in the US could have a significant impact on certain hospitals and states that rely on them.

A study in JAMA found that more that 2,100 US employers were certified to fill nearly 10,500 physician jobs nationwide in 2016, representing 1.4% of physician workforce overall.

States such as New York, Michigan, and Illinois account for most of the H1-B visa applications for foreign physicians. a third of the total.

North Dakota, on the other hand, had the most applicants as a percentage of its workforce, or 4.7%.

While the focus of the executive order was to clamp down on the loopholes in the program that allowed tech companies to hire foreign workers for high skilled jobs that Americans could take, it will also have a negative effect on how patients will receive care in some US hospitals.

And coupled with the fact that the process of getting to practice here without an executive order is difficult and time-consuming, means that both general health care and workers’ comp patients may not be able to get necessary treatment due to the predicted physician shortage.

So while general healthcare can offer an alternative in the form of medical travel, it is high time that work comp does the same.

Or do you really want your claimant patients to wait months before getting needed surgery or other medical procedures?

 

ACA Repeal Opens Up Medical Travel: A Second Look

Note: Here is Laura’s second article on repeal of the ACA and its’ impact on medical travel. She breaks the article down by areas of the healthcare industry that will be affected by repeal and that might benefit from medical travel.

Repeal of Affordable Care Act Impacts International Medical Travel
by Laura Carabello

wphealthcarenews.com- The repeal of the Affordable Care Act (ACA) has been met with considerable market uncertainty. As the transition gets underway, many Americans will be scrambling to access affordable, quality care.

Fortunately, the international medical travel industry -“Travel for Treatment” – may finally gain the attention it deserves from the American public and U.S. employers. Experts predict that the number of Americans traveling abroad for medical care or episodes of treatment is expected to increase 25 percent annually over the next decade.

Medical travelers are likely to come from every market sector: the growing ranks of uninsured individuals, self-insured employers facing higher healthcare expenditures, disenfranchised Medicaid beneficiaries, as well as Medicare enrollees with high out-of-pocket expenditures and the loss of coverage for preventive care.

Individual Consumers
Once “minimum essential healthcare coverage” is no longer mandated, the burden of payment will transfer onto healthcare providers and systems that will be forced to continue cost shifting onto the backs of paying customers.

Fewer insurance companies will be willing to underwrite coverage in the exchanges. In fact, many will leave the individual marketplaces altogether because of the potential loss of federal subsidies for both beneficiaries and insurance companies themselves.

Burdened by hefty cost-shifting, more Americans will be forced to pay out of their own pockets for surgeries or treatments in the U.S. Those who can afford a plane ticket will find it increasingly attractive to travel outside the country for quality, affordable options, such as joint replacement, cardio-thoracic surgery, oncology, bariatrics, and a host of other medical procedures, including treatment for Hepatitis C.

Low-Income (Medicaid) and Seniors (Medicare)
For Medicaid beneficiaries who remained optimistic that their home state would offer expanded coverage, their prospects look dim. The unraveling of the ACA will leave millions of the poorest and sickest Americans without insurance. Many states may either abandon Medicaid expansion or be forced to significantly redesign their programs to ensure that individuals below 400 percent of the federal poverty level can receive affordable healthcare coverage and services.

While these low-income families may not have cash reserves to fund expensive care in the U.S., they might be able to gather the resources to access needed surgeries overseas – and pay less than half of the US rates. Those who have emigrated from Latin American countries, in particular, will take advantage of opportunities to travel to their homelands to gain access to care that is substantially less expensive, and in a familiar setting.

The 57 million senior citizens and disabled Americans enrolled in Medicare could also benefit from accessing international medical travel. Under a full repeal of the ACA, seniors face higher deductibles and co-payments for their Part A, which covers hospital stays, and higher premiums and deductibles for Part B, which pays for doctor visits and other services. Medicare enrollees may also lose some of their free preventative benefits, such as screenings for breast and colorectal cancer, heart disease and diabetes. The opportunity to access quality care at lower costs – plus prescription drugs that are sold at far lower price points outside the US – present attractive options.

Employers
Healthcare will continue to be driven through employers, and cost pressures will push high-deductible plans, risk-based contracting and consumerism. In the United States today, even a negotiated, discounted rate for a total knee replacement at a local hospital may well exceed $45,000, $60,000, or more. The bottom line for self-insured employers – the coverage model that now dominates the marketplace: even after factoring in the cost of travel and accommodations for the patient and the companion, as well as waiving deductibles and co-pays as incentives to program adoption, the savings on surgical procedures such as joint replacement are significant.

Employers will also be more likely to send workers to emerging COEs outside the country in light of the many partnerships that are underway between US providers and foreign hospitals. These collaborative programs are bringing American ingenuity, sophisticated technology and advanced levels of care to institutions throughout the world.

Quality and safety standards at many institutions are now equal to or exceed US benchmarks. Many foreign hospitals are accredited by Joint Commission International, an extension of the US-based Joint Commission. Select hospitals outside the country adhere to US clinical protocols.

In fact, one organization that serves self-insured employers – North American Specialty Hospital in Cancun – even offers U.S. surgeons with US malpractice insurance who perform pre- and post-operative care in the US and then travel to Cancun for surgery. This ensures continuous engagement and continuity of care.

Hospitals
The ACA has contributed to hospitals experiencing higher volumes of insured patients, but those volumes would drop with the law’s repeal. It could also cause fewer people to keep prescription coverage, which would be modestly negative for the pharmaceutical industry.

Experts believe the majority of primary care physicians are open to changes in the law but overwhelmingly oppose full repeal, according to a survey published in The New England Journal of Medicine.

Insurance coverage for the 20 million people who obtained insurance from the exchanges sparked growth in patient numbers for hospitals, which offset lower payments. Without this, hospitals can expect deepening economic problems. This could lead to higher prices, and greater impetus among individuals to seek medical care outside of the U.S.

Key Destinations for International Medical Travel
With the growing ranks of uninsured, medical travel options are likely to emerge as a critical solution to healthcare cost woes. Hospitals and providers in nearby locations such as Latin America – known as the LAC Region – are likely to become destinations of choice: less expensive travel expenses, reduced language barriers, and cultural familiarity. Individuals and employers will require guidance in terms of choosing the right providers and determining costs to overcome the challenges that lie ahead.

To view the original article, click here.

Top 10 Orthopedic Hospitals by Procedure

Last year, Christmas Eve, to be exact, I wrote a short post about the top ten hospitals for total knee replacement under $50,000.

This year, I’d like to expand on that and discuss the top ten orthopedic hospitals outside of the US for such procedures as Arthroscopy (knee or shoulder), Disc Replacement, and Rotator Cuff Repair.

The website I linked to in my post last year, Archimedicx.com, is the same website I used now to illustrate the difference between costs in the US and elsewhere in the world.

This website is by no means the definitive source of such information. There are other websites that provide similar prices and are only ballpark figures, not actual quotes, or firm prices. Archimedicx’s website will give you a quote once you have chosen from among a list of hospitals you searched for, depending on what procedure you want to have.

I have limited the discussion here to only the three I mentioned above, as arthroscopic procedures for both knees and shoulders, resulted in the same hospitals being displayed.

The price range column indicates those hospitals who charge the amount stated or less, as the website allows an individual to choose the price range they want.

In the table below, the quality score is the ranking algorithm that generates a unique quality score for each procedure in each analyzed hospital (on a scale of 1 to 5). For the sake of clarification, a certain hospital can have different quality scores, depending on the procedure or treatment in question.

 

Table – Top Ten Orthopedic Hospitals by Procedure

top-ten-ortho-hosp

For each procedure examined, there were at least a few hundred other hospitals that one could look at, but I only wanted the top ten, as you see, ranked by quality scores. There are no doubt other hospitals on the website that may score better on other websites, or can provide these procedures for far less than they do.

The idea here is to point out that the US is more expensive than others, and as the following chart shows, we are dead last in terms of care.

nhs-best-system

But it is sad that Americans do not realize this and do what the other countries in that chart have done, provide health care to all.

It is also sad that our system for treating on the job injuries also does not allow people to seek medical care outside of their states or the country. Only two states do that, Washington, and Oregon, but as I’ve said before, there have been exceptions.

Now with a new administration seeking to destroy the social safety net and the ACA, we may see more case shifting and more crowded ER’s and not enough medical personnel to treat them.

And for what?  The commodification of health care for those who can afford it, and for the profit of those who pay for it.

Tug-of-War Over Ailing American Knees: What the Medical Tourism Industry Should Know

Total knee replacements in the US is growing, according to an article today in Kaiser Health News.

660,000 are performed each year, and will likely grow to two million annually by 2030, as reported by Christina Jewett. Knee surgeries are one of surgery’s biggest potential growth markets, and one that the medical tourism industry needs to be aware of.

Ms. Jewett described how an orthopedic surgeon from the Bronx, underwent his own knee surgery in a Seattle-area surgery center performed by a friend of his. The surgery began at 8 am, and by lunch, the doctor was resting in his friend’s home with no pain and a new knee.

Medicare is contemplating whether it will help pay for knee surgeries outside of hospitals, either in free-standing centers or outpatient facilities. Several billions of dollars are spent every year by Medicare for knee replacements, so what may be a bold experiment, may soon be more standard.

However, this issue is dividing the medical world, and the issue of money is just as important as the issue of medicine, according to Ms. Jewett.

Some physicians are concerned that moving surgeries out of hospitals will land vulnerable patients in the emergency room, but proponents say it will give patients more choice and better care. In addition, they contend that it will save Medicare hundreds of millions of dollars.

An “overwhelming majority” of commenters, Ms. Jewett states, said they want to allow the surgeries out of hospitals, as specified in recent rule-making documents.

Even if a policy change is made, according to the article, Medicare would still pay for patients to get traditional inpatient surgery. There would be a huge shift in money, the article reports, out of hospitals and into surgery centers.

Medicare could save hundreds of millions of dollars if it no longer paid for multiple-day stays in a hospital, and investors at outpatient centers could profit greatly, as well as some surgeons, especially those who have an ownership stake in the facility.

An open question remains as to whether this shift is beneficial for patients. Patients on Medicare tend to spend nearly three days in a hospital, and forty percent also spend time in a rehabilitation facility for further recovery.

Data from 2014 suggests that Medicare patients are taking advantage of the post-operation support at hospitals and aftercare centers. However, it is unclear what the percentage of eligible patients would choose outpatient care.

Of equal concern to patients are the financial consequences, and here is where the medical tourism needs to pay attention, because even though less care is given, outpatient procedures require higher out-of-pocket costs.

Medicare covers inpatient procedures 100%, with no co-payment, but outpatient procedures require a 20% co-payment, which could easily add up to thousands of dollars for knee surgeries.

One surgery center in California advertises a knee replacement surgery for $17,0300, and those who support the change in policy believe that a strict criteria should be used by doctors to choose which patients are good candidates for outpatient surgery.

All this began in 2012, Ms. Jewett states, when Medicare first considered removing the surgeries from its “inpatient only: list. At that time, many doctors and hospitals protested, calling the proposal “ludicrous” and “dangerous”, and Medicare abandoned the idea.

Another objection cited research that showed that patients who received such surgeries as outpatients were twice as likely to die, and that even one-day stays were twice as likely to need follow-up surgery.

A panel recommended that Medicare remove the procedure from the “inpatient only” list in August, but if they make a change, it will not go into effect for a year or so later.

It is quite obvious to this writer what you in the medical travel industry need to do, but then again, when did you ever listen to what I say?

Interesting Article on PPO’s

Forbes.com has published an extensive article claiming that PPO’s have perpetrated a great heist [author’s words] on the American middle class.

According to the article,  trillions has been redistributed from the American workforce to the healthcare industry, creating an economic depression for the middle class.

The article consists of an interview conducted by author Dave Chase and Mike Dendy, Vice Chairman and CEO of Advanced Medical Pricing Solutions, Inc., a healthcare cost management company.

Here is the link to the full article:

http://www.forbes.com/sites/davechase/2016/09/05/have-ppo-networks-perpetrated-the-greatest-heist-in-american-history/#25489cd66d00

Is it any wonder why work comp is also so screwed up? Too many cooks (or is that crooks?) taking their “cut” out of the middle class.

But we keep insisting that we have the best health care system in the world, that our workers get the best care when they are injured and don’t need to have any alternatives explored to improve the care and treatment they get, and that the free market is the best way to provide health care. It’s free alright. Free for the greedy to become more greedy. But not for you and me.