Filed under: Advertising & Lobbying, Private Insurance, Public Plan
In a recent Chicago Tribune article, “Health-care reform: Medical insurers poised to reap a healthy ‘bonanza,’” the following paragraph concerning The Lewin Group caught my eye
One of the Democratic proposals that most concerned insurers was creation of a “public option” government-sponsored insurance plan. The industry launched a campaign on Capitol Hill, distributing arguments opposing the government option that often were grounded in a study published by The Lewin Group, a health policy consulting firm owned by UnitedHealth.
In an effort to stay abreast, I read a fair amount of opposition commentary–and “The Lewin Group” comes off the lips of Republicans and others opposed to the Public Option often enough. Although The Lewin Group connection with UnitedHealth has been made public by a number of sources, I’m not sure that it’s common knowledge. And perhaps, as always, when dealing with information–especially information doing duty as a foundation upon which Medical Insurers stand “poised to reap a healthy bonanza”–considering the source– and considering that the source of that information is owned by one of the nation’s largest insurers– may be worth a moment or two.
This description of The Lewin Group comes from The Lewin Group in their Testimony before the before the Energy and Commerce Committee, U.S. House of Representatives, dated June 25, 2009, and updated July 9, 2009
About The Lewin Group
The Lewin Group is a health care and human services policy research and management consulting firm. We have over 25 years of experience in estimating the impact of major health reform proposals. The Lewin Group is committed to providing independent, objective and nonpartisan analyses of policy options. In keeping with our tradition of objectivity, The Lewin Group is not an advocate for or against any legislation. The Lewin Group is part of Ingenix, Inc.,which is a wholly owned subsidiary of the UnitedHealth Group. To assure the independence of its work, The Lewin Group has editorial control over all of its work products. (emphasis added)
The Lewin Group was purchased by Ingenix (and thus UnitedHealth) in 2007, somewhat presciently in time for the Health Care debate. I do not doubt that The Lewin Group has a stated and formal editorial control over its work products; I do doubt that it looks to bite the hand that feeds it. And I would suggest that as an arm of UnitedHealth, despite Mr. Kellar’s claims above, self decapitation– at least in the corporate world– is less a “mystery” than it is an illusion.
A recent Washington Post article also noted The Lewin Group’s relationship to its immediate parent
Ingenix, a UnitedHealth subsidiary that was accused by the New York attorney general and the American Medical Association, a physician’s group, of helping insurers shift medical expenses to consumers by distributing skewed data. Ingenix supplied its parent company and other insurers with data that allegedly understated the “usual and customary” doctor fees that insurers use to determine how much they will reimburse consumers for out-of-network care.
In January, UnitedHealth agreed to a $50 million settlement with the New York attorney general and a $350 million settlement with the AMA, covering conduct going back as far as 1994.
Ingenix chief executive Andrew Slavitt said the Ingenix data was never biased, but Ingenix nonetheless agreed to exit that particular line of business. “The data didn’t have the appearance of independence that’s necessary for it to be useful,” Slavitt said.
This may give us some idea of where Mr. Slavitt’s bar for data’s “appearance of independence that’s necessary for it to be useful” is set. But there is of course a possible difference to be had between “useful” and “valid” and “valid as used.” Distinctions the video below, as well as the Chicago Trib article, may help to clarify.
It should be noted, however, that according to WaPo,
Lewin Group Vice President John Sheils said his firm had nothing to do with the allegedly flawed Ingenix reimbursement data. Lewin has gone through “a terribly difficult adjustment” since it was bought by UnitedHealth in 2007, because the corporate ownership “does create the appearance of a conflict of interest.”
“It hasn’t affected . . . the work we do, and I think people who know me know that I am not a good liar,” Sheils said.
Mr. Sheils also noted to WaPo that those who pay for studies also have the option of “burying” those studies:
But not all of the firm’s reports see the light of day. For example, a study for the Blue Cross Blue Shield Association was never released, Sheils said.
“Let’s just say, sometimes studies come out that don’t show exactly what the client wants to see. And in those instances, they have [the] option to bury the study — to not release it, rather,” Sheils said.
I wonder if UnitedHealth gets the in-house rate.
Filed under: Health Policy Community, Health Reform, Medical Journals
As we posted back in January, “California Foundations Advocate for Health Care Reform,” the L.A. Times had reported that Paul Brest, “president of the William and Flora Hewlett Foundation in Menlo Park and author of a book on philanthropic strategies” stated that: “What I’ve seen is foundations moving from thinking all we needed to do is support good research in the field and the rest will happen to realizing that unless we are going to support organizations to take the research and try to turn it into policy, then the research is going to sit in the bottom of a pile somewhere.” With a noted caveat (“Advocacy is risky for foundations, since most are categorized by the IRS as 501(c) nonprofits, which restricts them from direct lobbying or participation in partisan politics.”), one welcomes the foundations and their massive intellectual and financial capital further into the fray. They hold the talent and ability of some of the best and brightest among us.
Having said that, the Robert Wood Johnson Foundation (RWJF) has advanced the battle line one smart step forward. Whereas the lobbying spoken of above goes to delivery of the “message,” RWJF has undertaken to put the message in a more deliverable form.
There’s an interesting post on the subject over at the RWJF Health Reform Blog, The Users’ Guide to the Health Reform Galaxy. The post was written by Brian Quinn, Ph.D, a program officer in the RWJF Research and Evaluation Unit, and goes to the question of form regarding applied research, or “How to package the evidence for health reform.”
Mr. Quinn smartly points out that considering the abundance and complexity of journal articles and reports intent on health reform that each day brings, without some form of translation and synthesis geared to those who will actually make decisions about health reform, the “applied” portion of “applied research” may turn out to be nothing more than just an intent.
As a means of cultivating application, and assuring that worthwhile research doesn’t languish “at the bottom of the pile,” RWJF has initiated the Synthesis Project, “to produce user-friendly briefs and reports that synthesize research findings on perennial health policy questions.” The Project is timely and their work is well worth a look.
At the end of a post the other day, I noted some personal experience relating to the sensibility of providing cancer patients with “Navigators” to help them best understand and utilize the health care resources at hand. I finished the post by stating: “It is simply not reasonable to think that patients will do (or do well) that which they do not understand.” Substitute “policy makers” for “patients” and the statement still holds true.
Employees, Fearing Increased Cost-Sharing and Loss of Benefits, Utilize Current Employer-Based Health Plans More
Filed under: Health Benefit Costs, preventive care, Private Insurance
The Kaiser Family Foundation reports that a recent survey reveals that employees are utilizing employer-based health plans more in fear that their plans will increase cost-sharing or dissolve altogether.
U.S. workers are making more use of their employer-sponsored health insurance benefits because of concerns that employers could cut benefits or increase costs during the economic recession, according to a survey released Friday by the International Foundation of Employee Benefit Plans, the Milwaukee Journal Sentinel‘s “Dollars & Sense” blog reports. IFEBP surveyed its members between March 30 and April 6 and found that one-third reported an increase in their workers filling prescription medications or undergoing costly medical procedures before their insurance runs out, the study found. Sally Natchek, senior director of research for IFEBP, said, “Plan participants are feeling anxious about the possibility of increased cost-sharing and a reduction in benefits due to the financial crisis.”
The International Foundation reports that:
[W]hile few plan sponsors (3.6%) are cutting or considering cutting health care benefits altogether, many are ramping up their cost-sharing approaches. Thirty-five percent of plan sponsors are increasing employee deductibles, coinsurance or copays due to the financial crisis. Nearly the same proportion are also increasing employee premiums. Other cost-sharing actions that plan sponsors are taking include adding consumer-driven health plans as an option (12.8%), replacing a current plan with a consumer-driven plan (9.6%) and instituting spousal charges (10.8%).
The Foundation report confirms that more employers are using consumer-directed health plans in an attempt to rein in the cost of health benefits.
Perhaps the silver lining of this survey, though, is that there was also found to be “a heightened focus on wellness programs. Eighteen percent of the respondents have introduced or are considering introducing wellness initiatives due to the economy (Foundation).” In a recent post, we noted that Kaiser had reported that
Eighty percent of large U.S. companies this year are offering chronic disease management programs for workers in an effort to reduce health care costs, up from 51% last year, according to a new survey by Hewitt Associates, the Houston Chronicle reports.
At the confluence of unfavorable economic conditions, rising health care and insurance costs and an administration which has vowed reform, these burgeoning trends may be only the forward guard in changes to employer-based plans. Driven by economic concerns, there seems to have been generated among employers an understanding that one way of avoiding the high costs associated with acute and/or catastrophic health care, is simply to help employees to avoid becoming sick (it may be only a matter of time before employers begin handing out “an apple a day.”) Unfortunately, with increasing frequency employers also seem to be learning that another means of avoiding the costs of health care is to simply discontinue, decrease, or “shift” the costs of health benefits. The numbers seem to suggest that employees have read the writing on the wall, and are visiting their doctors while they still can.
Health Care Reform and the Public Insurance Plan: “Framing the Debate,” and Fording the Corporate Dam of Shareholder Wealth Maximization
Filed under: Medicaid, Medicare, Private Insurance
Kaiser.org has recently noted that “Liberal and conservative interest groups ‘have begun a fierce ideological battle, with each side trying to shape the public’s perception of a public insurance plan,’ the Christian Science Monitor reports.”
The Health Policy Consensus Group, a coalition of conservative interest groups spearheaded by the Heritage Foundation, listed the creation of a public insurance option as the No. 1 “deal killer” for health care reform. The group argues that the government would use its “regulatory, pricing, and taxing authority” to make it nearly impossible for private insurers to compete, leaving U.S. residents without a private alternative.”
Let’s attempt to understand the argument against a public insurance plan. To do so, I would suggest that it will be of some help to understand the nature of a “public plan,” and, perhaps just as importantly, where the interests lie.
When we speak of “a public insurance plan,” we speak essentially of expansion, not creation: Medicare, Medicaid and SCHIP are “public plans,” as are those administered by the Veterans Administration and the Indian Health Service. At present, however, these plans are tailored to bring medical care to people who meet certain criteria. At present, this country is estimated to have close to 50 million people who are uninsured: primarily people who either lack the money or employment requisite to obtain private health insurance or who fail to meet the criteria requisite for enrollment in any of the public plans as they are presently configured.
The “public plan” proposal would expand the criteria for enrollment in extant “public plans” and perhaps constitute other service providers to administer to the need. So…the argument against a public plan is essentially an argument against making these plans (or very similar plans) available to a greater number of people. Why? Simply put, those who would be serviced by an expanded “public plan” would thereby be rendered unavailable to Private Insurers as customers and generally speaking, less customers = less profit.
Understandably, those who oppose a “public plan,” such as America’s Health Insurance Plans (AHIP), have proposed that as a means of achieving universal coverage, all Americans should be forced (“mandated”) to purchase health insurance from, well, Private Insurers. The plan calls for the Government to subsidize this purchase of private insurance. Given that there are close to 50 million uninsured, this would result in an increase of tens of millions of paying customers for Private Insurers. This proposal has been rather aptly compared by Jeff Emanuel of The American Spectator to an automaker bailout which would require each American to buy a car.
The Heritage Foundation’s Health Policy Consensus Group, opposed to a public plan, is said to argue that with the advent of an expanded public plan
“the government would use its “regulatory, pricing, and taxing authority” to make it nearly impossible for private insurers to compete….” Read more
Filed under: Health Benefit Costs, Health Reform
Throughout the country, newspapers are reporting on the meeting of the Health Reform Dialogue Group (the “Group”). The diverse group has been meeting to discuss the overhaul of the current national health care system.
The Associated Press reports:
Eighteen groups representing consumers, business, insurers, doctors and hospitals say they have reached agreement on how they would like to see the nation’s health care system overhauled.
The groups, calling themselves the Health Reform Dialogue, say the uninsured should be covered through a combination of expanded government programs and subsidies to purchase private health coverage.
The 18 organizations in the group have been meeting for six months. While they failed to resolve several major issues, their agreement could serve as a starting point for lawmakers trying to craft a plan this year that can win broad support.
Some of the major health care players within this 18-organization group includes: AARP, American’s Health Insurance Plans, American Hospital Association, American Medical Association, Blue Cross and Blue Shield Association, and U.S. Chamber of Commerce. This group represents both private and public interest groups.
Often, the costs of health care can seem abstract: we speak in the aggregate of billions and co-pays and deductibles and the labyrinth which is the “donut hole” formula for Medicare prescription drug payments. But sometimes we get to a number which instantly makes sense and allows us to have some grasp of the actual cost and the impact that health care costs can have. Fidelity Investments has just released such a number. Kaiser.org reports that
A 65-year-old retired couple this year would need $240,000 on average to cover medical expenses, according to a recent study by Fidelity Investments, the AP/Long Island Newsday reports. The study assumed that the couple is covered by Medicare and has no employer-provided insurance. It also assumed that the male partner would have a life expectancy of 17 years, while the female partner would have a life expectancy of 20 years. The estimate includes Medicare deductibles, copayments and certain services that might not be covered by Medicare.
That’s out of pocket. That’s a house.
Or at least a house mortgage (not for a particularly big house here in metro New Jersey, but a house nonetheless). And to think that one would have to face that expense– equivalent to the mortgage on a whole other house–after presumably realizing (though the presumption is not as solid as it once may have been) the American dream of having fully paid off that 30 year mortgage on the “first” house– is daunting to say the least, and arguably unconscionable as part of a social compact.
Kaiser reports that
The $240,000 estimate is a 6.7% increase from last year’s projection. Since Fidelity first released its annual report in 2002, projected medical expenses have increased by 50% (AP/Long Island Newsday, 3/31).
Filed under: Fraud & Abuse, Medicaid, State Initiatives
Kaiser Family Foundation reports that Florida Senators will likely pass legislation aimed to prevent Medicaid fraud.
Florida Senate Health Regulation Committee Chair Don Gaetz (R) and state Senate Health and Human Services Appropriations Committee Chair Durell Peaden (R) at a news conference on Wednesday “expressed confidence” that lawmakers will pass legislation (SB 1986) aiming to prevent and detect Medicaid fraud, the Tallahassee Democrat reports. Medicaid fraud has become a considerable issue in Southeast Florida, where home health care clinics open quickly and operate with little to no regulation or accountability, according to Gaetz and Peaden. Miami alone has twice as many home health providers than all of California, they noted.
Florida is susceptible to heightened Medicaid abuse given its relatively large Medicaid enrollment and the concomitant funds devoted to Medicaid. In 2005, Medicaid enrollment in Florida was almost 3 million people. In Florida, Medicaid home health participants have increased by approximately 50% between 1999 and 2005 (from 14,793 in 1999 to 21,192 in 2005). In 2006, Florida spent approximately $12.7 Billion on Medicaid. Approximately $1.5 billion of the $12.7 billion was spent on home health and personal care. In 2007, Florida Medicaid expenditures increased to over $14 Billion.
In addition to other fraud prevention and detection measures, the bill would also create greater incentives for whistleblowers. KFF states:
The bill also would increase to 25% the share of recovered money that whistleblowers would be eligible to receive. Peaden said money recovered from fraud would be redirected by his panel “into health care for the truly needy.”
Further, KFF reports:
The bill also would target companies’ recruiting of patients and the practices of filing claims for non-existent patients and ordering unneeded devices and treatments. Gaetz said Florida would work with federal and local agencies to create a database that would prevent operators of fraudulent companies from re-incorporating new clinics or home services and allow regulators to prevent fraudulent companies from renewing their operating licenses. Peaden said a companion bill is being worked out in the state House (Cotterell, Tallahassee Democrat, 3/26).
As we noted recently, a Florida case (Federal Court) which would fall rather squarely within the intended aim of the proposed legislation took 10 years to discover and prosecute. The Florida legislation is similar in purpose to the Federal Civil False Claims Act, which members of the U.S Senate have proposed to amend to strengthen a whistleblower’s action as well.
Filed under: Electronic Medical Records, EMR, HHS, IT
President Obama has appointed Dr. David Blumenthal as the National Health Care Information Technology Coordinator. Dr. Blumenthal is a former Harvard Medical School Professor who, as reported by Kaiser.org, “has conducted a number of studies related to health care IT” and has “served as director of the Institute for Health Policy at the Massachusetts General Hospital/Partners HealthCare System and as a senior adviser to President Obama during his campaign.”
As National Health Care IT Coordinator, Dr. Blumenthal can be expected to play a large role in the direction of how the 19 billion dollars apportioned for Health IT in the recently enacted stimulus package will be spent.
Dana Blankenhorn over at ZDNet Healthcare has written a short and interesting post on Dr. Blumenthal. Among other things worth noting in the post, Blankenthorn writes that Blumenthal has been quoted as “saying IT grants should go to inner-city and rural hospitals, as well as small practices, while most health IT money should go to incentives for improving the quality of care.”
As for the choice of Dr. Blumenthal, Blankenhorn writes
The good news is he’s a policy expert and not a vendor. The bad news is he’s a policy expert and not a technologist. He is a renowned health IT advocate who knows his way around bureaucracies but he is not a geek.
This means Blumenthal has not expressed a view on open source vs. proprietary software. He also hasn’t gotten his hands dirty in the health IT trenches.
Having said that, one might hope that Dr. Blumenthal is familiar with the work of Professors Sharona Hoffman & Andy Podgurski.
Director, Center for Health Law Studies
Chester A. Myers Professor of Law
Saint Louis University School of Law
Senator Baucus’ March 3 press conference sponsored by the Kaiser Family Foundation Health Care Reform Newsmaker Series: Sen. Max Baucus (D-MT) offered a few insights into the early state of the debate on health reform legislation.
Two points stood out. First, he observed that “delivery reform” was for him a central element in designing reform legislation. Pressed to define what he meant, Baucus mentioned value based purchasing and the medical home concept. Second, he stated that the tax exclusion for employer health insurance payments was on the table, noting two characteristics that make it an appealing target: regressivity and potential source of considerable “revenue.” On these and other issues, Baucus stressed the critical role OMB scoring will play in shaping the ultimate design of the legislation.
The known unknown here, however, is how some of the relatively novel delivery reforms like medical homes will be defined and implemented — and hence ultimately scored by OMB for their impact on system costs. One problem is that the “medical home” may encompass a wide range of delivery/financing arrangements. In general the medical home has been broadly defined as a physician-directed practice that provides care that is “accessible, continuous, comprehensive and coordinated and delivered in the context of family and community.” But as Bob Berenson and colleagues pointed out in Health Affairs last September, few primary care medical practices are close to having the size, management capabilities and infrastructure (electronic and otherwise) to function as medical homes. Transitioning to such practices (even on a virtual office basis) will surely take time, money, and a sea change in culture and practice style. Estimating the pace and effectiveness of such change may prove as daunting as projecting next months Dow Jones average.
 Robert Berenson et al., A House is Not a Home: Keeping Patients at the Center of Practice Design, 27 Health Affairs 1219 (Sept/Oct 2008)
Seton Hall Law School’s Center for Health & Pharmaceutical Law & Policy Releases White Paper Recommending Reform of Drug and Device Promotion
Filed under: Drugs & Medical Devices, FDA, Medical Device, Prescription Drugs, Seton Hall Law, Transparency
Seton Hall University School of Law’s Center for Health & Pharmaceutical Law & Policy has called for broad reforms in the marketing of drugs and devices. In a whitepaper, entitled, “Drug and Device Promotion: Charting a Course for Policy Reform,” the Center proposes legal and policy changes to address conflicts of interest in the relationship of medicine and industry. “The time is right for reform in the marketing of drugs and devices to doctors,” said Center Executive Director Tracy Miller. “Conflicts of interest have become pervasive in medical practice. Reform is needed to ensure that patients’ interests are at the heart of medical education, practice, and research,” she said.
The Center recommends: (1) making payments by drug and device companies to doctors transparent, with public disclosure by industry and physicians of their financial relationships; (2) adopting federal legislation to ban gifts, meals and other benefits provided to doctors as part of the current marketing model; (3) setting new policies to give FDA the authority to require studies of safety and efficacy of drugs and devices used off-label; and (4) undertaking a fundamental change in funding for continuing medical education to end industry support.
Moving to Transparency. The Center recommends that payments by drug and device companies to doctors should be publicly disclosed. “Transparency is critical to shore up public trust in physicians and the collaboration of industry and medicine,” said Tracy Miller. Transparency would also foster better practices by doctors and industry, advance government oversight, and provide information to the press and public. Pending federal legislation, the Physician Payments Sunshine Act, would require industry to disclose payments to doctors.
The Center supports this approach. It also recommends that states undertake disclosure by doctors, and decide how information about physician financial relationships with industry could best be shared with patients. Law Professor Kathleen Boozang adds that, “If doctors had to disclose payments from industry it would prompt them to examine their practices through the eyes of their patients and peers.”
Banning Gifts, Meals, Perks. The Center proposes adoption of federal legislation to ban the use of gifts, meals, and other perks to promote drugs and devices. The states have taken the lead to date–Massachusetts, California, Minnesota, and the District of Columbia have passed laws to limit or ban gifts and meals that are now routine in marketing practices. Concluding that industry self-regulation is not sufficient, the Center calls for national legislation to create uniform practices by industry and physicians. As urged by Professor Boozang, “the benefits of drugs and devices should drive promotion and physicians’ decision to prescribe, not a marketing model that depends on gifts and meals.”
Promoting Scientific Study of Off-Label Uses. The Center proposes that national policy should be redesigned to assure that physicians, patients and government have reliable information to make informed choices about off-label medications. Estimates suggest that as many as 40% of all prescriptions are for off-label uses. The FDA has recently issued guidelines to promote integrity and accuracy in medical articles that drug and device companies give to doctors. The Center urges that this policy guidance, while useful, does not go far enough to provide crucial information about the safety and efficacy of drugs and devices prescribed by doctors for uses other than those approved by the FDA.
The Center proposes giving FDA the authority to mandate scientific studies for off-label medications and devices that have high sales volumes or large profits but lack needed evidence of efficacy or safety. This would protect the interests of patients and advance sound choices about the risks, benefits, and economic value of off-label uses.
Reforming Funding for Continuing Medical Education (CME). Most states require physicians to undertake continuing medical education to maintain their medical license. The drug and device industry currently funds over half of the accredited CME courses available to physicians. The Center recommends that industry funding for continuing medical education should be phased out, and replaced by an educational process driven by physicians. As stated by Tracy Miller, “Physicians need to retake control of their professional education. CME should focus on doctors as professionals caring for the whole patient, not just as prescribers of drugs and devices.” While the transition to new funding occurs, the Center recommends that speakers at CME events should disclose more information about their financial interests, and physicians who are paid to promote drugs and devices should not speak at CME events about those products.
Factual Background for the Recommendations
- Ninety-four percent of physicians have some kind of financial relationship with industry, as reported in a major recent national study.
- Five states–Maine, Massachusetts, Minnesota, Vermont and West Virginia– have required industry to disclose financial relationships with physicians.
- As shown by a recent Congressional investigation of payments by industry to prominent psychiatrists, even at universities with strong disclosure policies, practices have not kept pace, leaving the public in the dark about financial ties between physicians and industry.
- Medications are widely used off-label, especially in certain fields such as psychiatry, pediatrics, and oncology. A recent study found that 73% of off-label uses lack evidence of efficacy.
- Commercial support for accredited CME, nearly all of it from drug and device manufacturers, grew from $302 million in 1998 to $1.2 billion in 2006.
Read Whitepaper here.
Kaiser Family Foundation reports the intervention of two qui tam civil False Claims Act actions. The qui tam actions involve the off-label marketing of medication unapproved for certain usages. The medication in question is Natrecor, a heart failure medication. There are two qui tam actions against Scios, a subsidiary of Johnson and Johnson. Kaiser states:
The Department of Justice on Thursday announced plans to join two whistleblower lawsuits filed against Johnson & Johnson subsidiary Scios over allegations that the company illegally marketed the heart failure medication Natrecor for unapproved uses and defrauded Medicare and other federal health care programs, the San Francisco Chronicle reports. FDA in 2001 approved Natrecor for use in hospital patients who experienced shortness of breath caused by acute congestive heart failure (Egelko, San Francisco Chronicle, 2/20). Read more
Filed under: Drugs & Medical Devices, FDA, FDA Center for Devices and Radiological Health
The article focuses on a recent report by the Project on Government Oversight (POGO) which exposes a dramatic decrease in medical device lab inspections over the course of the last few years.
“Medical devices are overseen by an FDA division called the Center for Devices and Radiological Health. The center has been shaken by recent complaints from its own scientists that managers squelched debate, leading to the approval of devices that were of questionable effectiveness and perhaps not entirely safe.”
The Center has also been accused of allowing political influence to be a determinate factor in the approval process of medical devices.
The decline in laboratory inspections outlined by the POGO report is both precipitous and alarming. AP writes that the report shows that
“…the Food and Drug Administration has dramatically reduced inspections of “good laboratory practices” at facilities that do the earliest testing of medical devices. Such inspections declined from 33 in 2005, to seven in 2007, to just one last year, according to a report the group was releasing Wednesday. No inspections are planned for this year, the report said.”
Read the full POGO report here.
Filed under: 501(c)(3), Hospital Finances, IRS
Kaiser.org has written an interesting article about the recent two year IRS Study of nonprofit hospitals under 501(c)(3). The IRS queried 5oo nonprofit hospitals, with the study’s findings based primarily upon examination of 489 of those. Under the strictures of 501(c)(3) nonprofits are confined to paying executives “reasonable compensation” and supplying “community benefit.” Unfortunately, neither of these terms are particularly well defined. In the study’s executive summary, the IRS puts it so:
“The community benefit standard is the legal standard for determining whether a nonprofit hospital is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code.”
“Observations. Both the community benefit and reasonable compensation standards have proved difficult for the IRS to administer. Both involve application of imprecise legal standards to complex, varied and evolving fact patterns.”
The Kaiser article notes that according to the NY Times, “Lawmakers over the last few years have ‘raised concerns over whether nonprofit hospitals provide enough free care and other community benefits to justify their tax exemptions,’ but no test exists for ‘measuring how much community benefit is enough or even what constitutes community benefit.’”
These limitations may be seen in the characterizations of “community benefit” available to the hospitals in the study. Bad debt and Medicare payment shortfalls may be construed as “community benefit.” As the debt, the credit injury, and the collection calls all inure to the community member who received treatment but could not pay, one might question if the “community benefit” involved in a failure of collection practices might be distinguishable from the “community benefit” involved in intentional charitable care. In addition, there simply is no set criteria to determine the appropriate amounts to be charged as “community benefit.” The IRS study poses the following under the heading of
“Limitations: …although the IRS designated the general categories of activities that could be reported as community benefit for purposes of the study, determining what was treated as community benefit (for example, bad debt or Medicare shortfalls) and how to measure it (cost versus charges) was largely within the respondents’ discretion.
Which is to say that those being monitored (nonprofit hospitals) to gauge the amount of money spent– to justify their tax exempt status– were free to characterize their contributions in the manner they thought best.
Medicare shortfalls: So… if a non-profit hospital has a fee schedule rate of $100 for a procedure, and Medicare has a reimburse rate of $80 for that procedure, if a “charge” rate of measurement is used then there has been a $20 “community benefit” if the federally designated tax exempt nonprofit hospital accepts as payment the federally designated and predetermined Medicare reimbursement amount. Significantly, 19% of the hospitals also claimed “shortfalls” in payment from private insurers as uncompensated care/community benefit (See Chart: “Figure 82,” p. 105, full report).
Cost vs. Charge: So… if a procedure has a cost to the hospital of $80 and a fee schedule rate of $100, and the recipient of the procedure does not pay and the hospital categorizes the non-payment as “bad debt,” it has the ability to count as “community benefit” not only the cost of its unintended largesse, but also the amount it had expected as profit.
Perhaps even more telling than this latitude in characterization are the amounts actually submitted to the IRS as community benefit. Here are a few of the findings:
- The average and median percentages of total revenues reported as spent on community benefit expenditures were 9% and 6%, respectively.
- Uncompensated care accounted for 56% of aggregate community benefit expenditures reported by the hospitals in the study.
- Uncompensated care was the largest reported community benefit expenditure for each of the study’s demographics, other than for a group of 15 hospitals reporting large medical research expenditures (93% of all research expenditures reported by the study’s respondents).
- Further, the group of 15 hospitals reporting large medical research expenditures materially impacted the overall numbers in this area. For example, when the research group is removed, the percentage of total community benefit expenditures reported as spent on uncompensated care increases from56% to 71%, and that spent on medical research decreases from 15% to 1%.
- Uncompensated care and community benefit expenditures were concentrated in certain hospitals and unevenly distributed. For example,9% of the hospitals reported 60% of the aggregate community benefit expenditures of the overall group; 14% of the hospitals reported 63% of the aggregate uncompensated care expenditures.
So… if we were to take the 15 research hospitals out of the mix, 73% of the “community benefit” for the remaining 474 hospitals was in the form of uncompensated care–Medicare (and private insurance) shortfalls and bad debt inclusive.
In addition, of the substantial uncompensated care component, hospitals contributions were disparate: 14% of the hospitals reported 63% of the total–which is to say that roughly 68 hospitals out of the 489 accounted for 63%, while the other roughly 421 hospitals chipped in a somewhat less magnanimous 37% of the total. This despite the considerable latitude in characterization.
The Kaiser article notes that according to the NY Times
“In a statement, Sen. Chuck Grassley (R-Iowa), who since 2005 has sought to require not-for-profit hospitals to justify their tax exemptions, said that the study did not include adequate definitions or comparable information on community benefits for-profit hospitals provide. He said, “Neither the IRS nor Congress has done a very good job when it comes to establishing the criteria for enjoying this tax status since the IRS scrapped charity care for its community benefit standard in 1969″ (New York Times, 2/13)”
New Bill to Create Prescription Drug Benefit Through Original Medicare as CMS Expansion of Off-Label Drugs for Cancer Treatment Draws Criticism
Yesterday, Congressional Democrats introduced legislation (HR 684, S 330) that would allow Original Medicare to establish one or more plans to compete with private plans under the Part D prescription drug benefit, according to CQ HealthBeat. The legislation would also require the Secretary of Health and Human Services to negotiate directly with pharmaceutical companies for the prices of medications under Part D.
Additionally, it would strengthen the ability of Medicare beneficiaries to appeal denials of coverage for medically necessary medications under all Medicare Part D plans.
The bill was sponsored by Senate Majority Whip Richard Durbin (D-Ill.) and Reps. Marion Berry (D-Ark.) and Jan Schakowsky (D-Ill.). According to Berry, the plans established by Medicare would have the ability to obtain discounts on medications that private plans could not match.
Filed under: Electronic Medical Records, IT, Prescription Drugs
America needs electronic medical records (EMR). There are plenty of reasons why we are so far behind other nations in consolidating medical data: lack of strong central leadership on the issue, unwarranted faith in markets to produce solutions, and overwhelmed medical professionals who have little if any slack time to put a new system into place. Even as President Obama pushes for investment in EMR, privacy concerns are also slowing down progress:
Lawmakers, caught in a crossfire of lobbying by the health care industry and consumer groups, have been unable to agree on privacy safeguards that would allow patients to control the use of their medical records. . . . The data in medical records has great potential commercial value. Several companies, for example, buy and sell huge amounts of data on the prescribing habits of doctors, and the information has proved invaluable to pharmaceutical sales representatives.
“Health I.T. without privacy is an excellent way for companies to establish a gold mine of information that can be used to increase profits, promote expensive drugs, cherry-pick patients who are cheaper to insure and market directly to consumers,” said Dr. Deborah C. Peel, coordinator of the Coalition for Patient Privacy, which includes the American Civil Liberties Union among its members.
Health IT turns out to be one many areas where a drive for prononymity–that is, the de-anonymizing of records of on- and off-line life–is running up against a wall of wary citizens and consumers. In the health field, I think that resistance is only going to end if we have a robust “backstop” of health care in place so that citizens don’t have to worry about losing all coverage if a digital dossier presents them as a bad risk. (Medicaid as presently constituted does not count.) Far from overwhelming the health care system with pent-up demand, universal health coverage may be a prerequisite for generating support for the type of EMR that will provide us all with far better care.
A trend to prononymity in general should be matched with greater commitment to assuring that it won’t result in particularly harsh results. For example, people should not be denied a job for being identifiable as a Democrat in a blog post, whatever Monica Goodling thinks. Nor should doctor’s notes about a patient’s dark thoughts come back to haunt the patient when she or he applies for medical insurance. And if they do, there should be a genuine insurer of last resort available–not the patchwork of Medicaid and charity care that presently leave so many uninsured people falling through the cracks.
That’s one reason why I advocate the development of a Fair Reputation Reporting Act, which would allow individuals to know the documentary basis of certain key adverse decisions. I summarize the proposal here:
Reputation regulation has become essential because traditional restrictions on data flows inadequately constrain decisionmakers and important intermediaries (including search engines and bulletin boards). . . . Persistent and searchable databases now feed unprecedented amounts of poorly vetted information into vital decisions about employment, credit, and insurance. Rumors about a person’s sexual orientation (or experiences), health status, incompetence, or nastiness can percolate in blogs and message boards.
Even if the First Amendment and anonymity protect the authors of such rumors, affected individuals deserve to know whether certain important decisionmakers rely on them. In limited cases, the intermediary source of the information should also provide the target of a derogatory posting with the opportunity to annotate it. A Fair Reputation Reporting Act would empower individuals to know the basis of adverse employment, credit, and insurance decisions-and to go to their source (and the source of their salience) to demand some relief from digital scarlet letters.
In summary, privacy concerns are only likely to die down if individuals know either 1) that the consequences of a privacy breach are not likely to be severe or 2) that they can find out instances of the improper use of data. In the health care context in the US, neither qualifier holds: the individual insurance market routinely denies care to individuals on the basis of pre-existing conditions, and individuals have little sense of exactly how such determinations are made. Prononymity needs to work both ways: if our health conditions are to be the subject of increasing availability, so too must the decision-making processes that could use that data to our detriment become more transparent.
PS: Market mavens may promote a “Google Health Search” as the optimal solution here. If this 800 pound gorilla can get all the publishers in line to settle their copyright claims, perhaps it has some chance at bringing the medical industry to heel; however, the political power of doctors and insurers dwarfs that of publishers. The concentration of that much data in one company should also provoke some worries.