Queries…
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It’s that time of year again - the time when Harvard Pilgrim starts building its budget for the next calendar year. As part of that process, we contemplate what we think we’ll end up negotiating out with our provider partners for rate increases for next year. While some of these contracts are multi-year, most of them operate on evergreen operating principles with annual rate adjustments.
So, viewing audience, what’s a “reasonable” rate increase for hospital services and physician services in 2008? 3%? 5%? 7%? 10%? More? Less? Trust me - we’ll all feel it one way or another come January of next year, so let me know what you think it should be. I’ll let you all know where we end up at the end of the contracting cycle for this year.
Second question - what do people think of Minute Clinics - fast, quick medical stops operated inside CVS stores and managed primarily by Nurse Practitioners? CVS already has about 100 Minute Clinics up and operating across the country, and is planning to open a bunch of these quick visit clinics in Massachusetts over the next couple of years. As long as they can transfer the data from a visit for a sore throat, stomach ache, skinned knee and the like to the patient’s primary care physician, I’m all for it. They say they can. Therefore, I’m in. Anything that takes down the waiting time for simple health care services and opens up another avenue for busy people to take care of simple health care needs is a good thing. And they’re much, much cheaper than doctor’s offices and Emergency Rooms. They may even save us all a few bucks. Thoughts and comments welcome.
As some one with “inside information” (I’m a former pharmacy technician at a CVS where a Minute Clinic will be installed), I think that these new Minute Clinics will be beneficial in a number of ways. Firstly, as pointed out in Charlie’s message, they will relieve some of the burden from emergency rooms and urgent care facilities. Also, they should help greatly in improving the overall experience of filling prescriptions in a retail setting. As many of you are aware, multiple complications can arise during the seemingly simple process of filling a prescription. From issues with the fax or electronic transmission between a provider’s office and the pharmacy, down to the age-old problem of the messy handwriting that seems to plague so many physicians, a high number of prescriptions require additional work to complete. This can become a serious issue when a customer decides to wait in the store. When you take into account that the Minute Clinics will be treating immediate (though maybe not urgent) health concerns, it makes sense that they will be writing a large number of prescriptions for customers that will in turn wait in the store. Due to their proximity and assumed affiliation, the channels of communication should be greatly improved between the clinic and the pharmacy, leading to the potential for a quick wait for the prescription, and an overall quicker resolution of the health concern. Of course, we’ll have to wait and see just how effective these clinics are before getting too excited, but I agree with Charlie, they do seem like a promising development in healthcare.
Anything that makes that much sense and seems relatively simple to implement should keep our premiums costs down, maybe even lower them. That may afford HPHC to shift some budget dollars to some non-profit providers for services not covered by HPHC. Health care costs in our small company of 18 is our second largest expense next to payroll.
Great post Ian. Hopefully, someone from CVS who’s looking for a smart response on why this makes sense is reading.
No triglyceride (TG) tests offered at these clinics, no cholesterol tests. This is disappointing.
As one who is concerned about the high rate of diabetes in American adults, I particularly regret the absence of TG tests. After all, at least 10% of adult Americans have high TGs, they are associated with both diabetes and atherosclerosis, and often TG levels can be normalized by changes in diet and exercise. So it seems that easier access to TG testing might be a cheap way to benefit the health budget in the long run (besides making life easier for the diabetes-prone).
Of course besides access, there would need to be education about TGs, to create the requisite demand for tests. And this is hardly the job of CVS. The big question is, whose job is it?
Well Charlie, given the minimal or negative change in Medicare and Medicaid rates to hospitals and doctors, I’m afraid it will again fall to the private insurers to make up the difference in the legitimate increases in costs faced by hospitals and doctors. This hidden subsidy of the federal and state government health plans by employers and employees is a shame, but it is a fact of life when the government fails to pay its fair share.
The key appeal of retail clinics, in my opinion, is immediate access to care for minor problems. While the services offered are very limited, they also have complete price transparency which is a good thing as well. The charges at my local Minute Clinic in NJ are mostly in the $59 and $69 range, which is not much cheaper than a routine doctor visit (at contract rates). Some doctors are complaining about the clinics skimming off the “easy” cases on which they make the most money. The appropriate competitive response, however, should be to organize into larger groups so they can offer evening and weekend hours as well as reserve a certain number of appointment slots for people who have a problem that should receive same day attention.
According to Walgreens, which is also moving aggressively into this space, a good clinic can see 30-50 patients per day. By contrast, a successful store generally has about 1,000 customers per day, so the clinics should not be a significant driver of incremental front end merchandise or prescription sales.
Personally, I hope these clinics proliferate because I think they will take some pressure off overcrowded emergency rooms. They may also make primary care both more readily available and more responsive to consumers’ needs. Whether or not they ultimately save money for the system, I have no idea.
Regarding the increase in contract rates for next year, most for profit insurers that I talk to expect their overall medical cost trend to increase 7.5% this year plus or minus 50 basis. I believe they expect the 2008 increase to be in the same range.
To respond to what Susan L posted, I’d like to say that I don’t think it fits into the mold of the Minute Clinic service model, or those of the like, to be testing for or treating chronic conditions. The main idea of the clinics seem to be the quick resolution of more short term or immediate conditions, in the mold of a more general retail experience (hence the retail setting). I do think, however, it would be interseting to see what larger, more established healthcare entities (i.e. hospitals) think about the possibility of similar “clinics” being placed within their facilites and being geared more to towards the testing Susan alludes to. It would seem to make sense on a customer service level, and if communication channels were to be established between the clinic and the hospital that work similarly to those between the Minute Clinic and CVS, the hospital would benefit, as well. Hopefully Paul Levy is reading…
Oh come now paul, it is a little known fact (outside of the healthcare industry) that insurance company’s key their payment off of medicare rates. At least be honest about it.
BC - so the for-profit crowd says medical expense trend overall of 7-8%. Hmmm…that means a rate increase of what - 4-5% - with a couple of points for utilization increases? That would be grand, but unlikely, I think, in this marketplace. And Paul - I sat through a presentation yesterday that the Medicaid folks made to the MA Health Care Quality and Council, and they said hospital payments by Medicaid for this year and next year are up by 8 percent this year, and 8 percent again next year. Docs, too, but I don’t know by how much. Unless you all are getting creamed by Medicare, Medicaid, at least for now, should be a good news story.
And that’s not to diminish the shift in funding from the public payors to the private payors that’s gone on over the past few years. That’s real. But this time, Medicaid looks like they’re making up for previous shortfalls, no?
And I was on a panel with the Minute Clinic folks this AM, and when I read Susan’s comments to them about TG and cholesterol tests, they said they were “thinking” about that. Pretty cool.
As far as an increase for physician services, I think the best way to determine it would be to increase the payment yearly based upon physician practice costs. Each year, the cost of practice increases based upon several factors — malpractice rates, rent, employee expenses such as health insurance and salaries, and even more mundane things like paging service costs, transcription, etc. The amount that each of these goes up is variable across the country, so a simple percentage is not applicable for everyone. However, just to maintain the same income, a yearly increase is certainly appropriate — especially in light of ongoing decreases in Medicare reimbursement.
For Aggravated DocSurg: wouldn’t tying the yearly payment increase directly to expenditures just open the door for the increased inflation of physician costs? It would seem that one of the benefits of the current set up is to keep these increases in check. If they were tied together, some sort of regulation would be required, which could open all sorts of floodgates, and lead to further wrangling and headaches. A question I have is: could there be a way for those on the insurance side to control hospital costs through a process that subjected certain services to a periodic formulary review? Does that already exist in some form?
ADS - what, exactly - has been happening with Medicare and Medicaid reimbursement rates for you over the past couple of years? And what do you think will happen next year? And all readers should know that it varies from specialty to specialty and from region to region - so we can’t draw across the board conclusions from what’s happening to ADS.
Charlie – I’m not sure I understand why you can’t price your product to reflect the increase in the medical cost trend. Is there a regulatory impediment? Most large employers, if they don’t want to swallow the full proposed rate increase, will “buy down” the benefit structure by increasing the copays and/or the deductible. Or, they might scrap their current comprehensive plan in favor of a CDHP which is a less than ideal solution, especially for lower paid employees.
Interestingly, non-profits are the dominant insurers in Massachusetts, yet the state has the highest medical costs per capita in the country. At the same time, Minnesota has comparatively low costs and their market is 100% non-profit by law. It seems clear that there isn’t much correlation between healthcare costs in a particular state and the market share split between non-profit and for profit insurers. In a recent interview with Matthew Holt on The Healthcare Blog, Jon Kingsdale made the point that 16% of Medicare beneficiaries on a nationwide basis who are admitted to a hospital go to an Academic Medical Center. In Massachusetts, by contrast, it’s 40%.
On physician reimbursement rates, Medicare uses a system (which I don’t understand) called SGR or sustainable growth rate. According to a couple of experts I recently heard at a conference, if nothing is done, the formula would actually cut reimbursement rates by 9.9% next year. There will probably be legislation to avoid that outcome, but the docs might be lucky to stay flat with last year.
Ideally, doctors should be rewarded for quality and cost-effectiveness and should not be paid on a cost plus basis whether they are good, bad or indifferent. Insurers apparently have plenty of utilization data to identify both the best practicers and the high utilizers. They should be rewarding the former and penalizing the latter.
Charlie,
Please don’t confuse an increase in Medicaid spending overall with an increase in Medicaid rates to individual hopsitals. Notwithstanding the hubbub about an increase in medicaid spending coming out of Chapter 58, our rates for the subsequent year stayed constant.
Joe,
True, they may key them off of Medicare rates, but they are above Medicare rates.
BC - we do price our products as a roll-up of our provider agreements, our assumptions about utilization (and what we think we can do to help our members manage it), and our projected administrative expenses. I was simply suggesting that securing a 4-5% rate increase - instead of a larger one - on the provider side for 2008 would be unlikely in MA. As far as the SGR is concerned, it is the primary calculation for determining Medicare adjustments to physician fees each year. I didn’t know the formula was calling for a 10 percent decrease next year. That will never happen, but it doesn’t bode well for physician fees generally if that’s where the formula starts. And paying more for good care and less for poor case falls smack dab into the “easy to say, very hard to do” category. I’ll blog more on that one later on.
Paul - the presentation I saw implied an 8% annual increase in Medicaid RATES - not simply an increase in Medicaid spending. But I will go back to the state officials who did the presentation to confirm my interpretation. If they do confirm that they’re raising rates by 8% per year, and BIDMC Medicaid payment rates haven’t gone up at all, one of us should check in with MassHealth to find out how that could be the case.
It is my understanding that Chapter 58 boosts Medicaid provider reimbursement rates by $90 million each year (85% to hospitals, 15% to physicians)—or a cumulative $270 million—for fiscal years 2007, 2008 and 2009, and provides funding guarantees for safety-net hospitals. Beginning in October 2007, the law ties provider rate increases to specific performance goals related to quality, efficiency, the reduction of racial and ethnic disparities, and improved outcomes for patients.
All - Linda M. has the budget numbers right. Whether or not that translates into the kinds of rate increases the money implies across some or all providers remains unclear. In following up on Paul Levy’s questions, I asked MassHealth for more information on their proposals, which I haven’t gotten, but I did hear from several hospitals that they got rate increases (5-7%ish) from Medicaid, but didn’t see much on the physician side of things. Hmmm…
In any case, I’ll be back to folks in the fall when the dust settles on our 2008 provider rates to let folks know where we land. Thanks for your input.
An equally important question may be what constitutes a “reasonable” premium increase for employers and members (when they pay a share of premium). Perhaps this should be defined as an increase equal to the increase in company revenues or personal income, so that health insurance premiums would in future consume no higher percent of total revenue (or income) than they do today. Based on other New England markets, increases in corporate revenue and personal income have averaged 3-6% over the past four years. I suspect that leaves very little for provider rate increases, after accounting for utilization.
If reasonable premium increases of 3-6% are unrealistic, what constitutes a “tolerable” premium hike for employers and members? We know some employers continue to offer the same benefits year after year even in the face of 10-20% annual increases, but in general, there is data to suggest that the frequency with which employers terminate coverage or buy down to less generous plans (e.g. higher deductibles) starts to jump when premium hikes top 10%. If 10% is the limit of tolerable for most employers and members, that leaves perhaps 5-6% for provider rate increases after accounting for utilization trends.