2011-06 – June

Patients Can Compare Quality and Cost of Local Health Care with New Robert Wood Johnson Foundation Website

PRINCETON, N.J. (June 28, 2011)–The Robert Wood Johnson Foundation today launched the nation’s most comprehensive online directory for patients to find reliable information on the quality of health care provided by physicians and hospitals in their communities. From Maine to California, medical patients can scroll over a U.S. map and find web-based resources to help them choose a doctor or hospital in their town based on whether patients received recommended tests and treatment, the outcomes of their care, their experience with providers, or the overall cost of care.

Comparing Health Care Quality: A National Directory is a map-based listing of health care “performance measurement” resources available across the country. The directory links to 197 free and publicly available reports in 46 states, as well as 27 reports with information on the performance of physicians and hospitals nationwide. There are no reports for Alaska, Hawaii, Idaho and Alabama.

For example, people living in Washington State can use the directory to find information on care provided by clinics and hospitals from the non-profit Puget Sound Health Alliance, or the cost and quality of hospital care from the Washington State Hospital Association.

“The directory is a place to go for people who want to research doctors and hospitals for themselves and others,” said John R. Lumpkin, M.D., M.P.H., senior vice president at the Robert Wood Johnson Foundation. “Measuring the quality and cost of our health care and making it publicly available enables those who give, receive and pay for care to make the right choices for them, to improve health care and lower costs.”

RWJF officials say the number of websites that compare health care quality is increasing, and a recent study found that 80 percent of Internet users look for health information online. Comparing Health Care Quality: A National Directory lists websites that offer information that is quantifiable and based on recognized national standards of how health care should be delivered, such as ensuring that patients receive the right preventative screenings or that patients with diabetes receive appropriate blood sugar tests.

Choosing the right doctor or hospital is one of the most important health care decisions people will ever make, but they have little information to help guide that decision.

“Most people still obtain their care where grandma says it’s good, or brother says it’s good or that’s where my friends go. And I heard this is a good doctor and I heard this is a good hospital,” said John Hickner, M.D., M.S., chairman of the Department of Family Medicine at the Cleveland Clinic. “What I think they will do though is they will encourage healthy competition amongst health care systems and physicians to improve their product,” Hickner added about the directory.

Data on the performance of health care providers helps patients take a more active role in managing their health care because it lets them see what proper care looks like and whether local hospitals and physicians are delivering it. They can use this information to talk to their doctors about their own care. Performance data also enables hospitals, physicians and other health care providers to examine their own performance, compare it with others and identify areas for improvement.

Employers and those who pay for care can use the directory to find local information to determine the value of the care they are purchasing and discuss ways to lower overall costs.

The national resources listed in the directory are also useful for businesses whose employees move or receive care in different areas of the country, or for those with out-of-town relatives.

“People move around the country, and have relatives all over the country,” said Jim Chase, M.H.A., president of Minnesota Community Measurement. “You have data in Minnesota but my mom lives in Iowa. So what can you tell me about the care there? This kind of tool is helpful for people to see what kind of information is available.”

For nearly a decade, the Robert Wood Johnson Foundation has been dedicated to the research and development of initiatives to improve health care quality, and its funding has helped define the field of quality improvement by developing national quality standards, initiating pay-for-performance experiments, creating improved care models for patients with chronic illnesses, improving quality and safety in hospitals, and engaging stakeholders to measure performance and publicly report on the quality of care.

To view the directory, visit http://www.rwjf.org/qualityequality/product.jsp?id=71857. For more information on quality health care, visit www.rwjf.org/qualityequality.

Affordable Care Act Delivers Cheaper Prescription Drugs to Nearly 500,000 People

Law Has Already Saved $260 Million, Averaging $545 for People in Donut Hole

WASHINGTON, DC (June 28, 2011) — Thanks to the Affordable Care Act, nearly 500,000 people with Medicare Part D who reached the gap in coverage know as the “donut hole” have received an automatic 50 percent discount on their covered brand name prescription drugs. The Centers for Medicare & Medicaid Services (CMS) posted data today that shows 478,272 Medicare beneficiaries have benefitted from the 50 percent discount in the first five months of 2011. These beneficiaries saved a total of $260,534,102, or an average savings of $545 per beneficiary.

The number of seniors benefiting from this discount continues to grow. In the month of May alone, the total number of beneficiaries who received the discount rose by over 76 percent, while the dollar amount of savings rose by over 56 percent. Based on data from past years, CMS expects that as many as 4 million additional beneficiaries will fall into the coverage gap later this year and benefit from these discounts.

Most of these discounts are helping Americans with serious medical conditions – nearly 14 percent of the benefits provided to date – more than $36 million – are for cancer drugs, more than 8 percent or $21 million for drugs to help control high blood pressure and cholesterol, and another more than 7 percent – about $20 million – are for drugs provides to diabetic patients.

“Without the Affordable Care Act, many seniors and people with disabilities would pay twice as much for their prescription drugs in the donut hole,” said CMS Administrator Donald M. Berwick, M.D. “People on Medicare will now be able to better afford their medicine, and these discounts will continue as coverage in the gap grows until the donut hole is closed.”

A November 2010 analysis by the U.S. Department of Health and Human Services estimated that Medicare improvements in the Affordable Care Act would provide average savings for those enrolled in traditional Medicare totaling more than $3,500 over the next 10 years, with even higher average savings of as much as $12,300 for those with higher drug costs.

New AMA Health Insurer Report Card Finds Increasing Inaccuracy in Claims Payment

CHICAGO, IL (June 20, 2011) – The overall rate of inaccurate claims payments increased since last year among leading commercial health insurers, according to American Medical Association’s (AMA) fourth annual National Health Insurer Report Card. Claims-processing errors by health insurance companies waste billions of dollars and frustrate patients and physicians.

According to the AMA’s latest findings, commercial health insurers have an average claims-processing error rate of 19.3 percent, an increase of two percent compared last year. The increase in overall inaccuracy represents an extra 3.6 million in erroneous claims payments compared to last year, and added an estimated $1.5 billion in unnecessary administrative costs to the health system. The AMA estimates that eliminating health insurer claim payment errors would save $17 billion.

“A 20 percent error rate among health insurers represents an intolerable level of inefficiency that wastes an estimated $17 billion annually,” said AMA Board Member Barbara L. McAneny, M.D. “Health insurers must put more effort into paying claims correctly the first time to save precious health care dollars and reduce unnecessary administrative tasks that take time and resources away from patient care.”

Most of the health insurers measured by the AMA failed to improved their accuracy rating since last year. UnitedHealthcare was the only commercial health insurer included in this year’s report card to demonstrate an improvement in claims-processing accuracy. UnitedHealthcare came out on top of seven leading commercial health insurers with an accuracy rating of 90.23 percent. Anthem Blue Cross Blue Shield had scored the worst of those measured with an accuracy rating of 61.05 percent.

To encourage a more efficient claims payment system, the AMA’s National Health Insurer Report Card provides an annual check-up for the nation’s largest health insurers and benchmarks the systems they use to manage, process and pay claims. Key findings from this year’s report card include:

Insurer Non-payment. Physicians received no payment at all from commercial health insurers on nearly 23 percent of claims they submitted. There are many reasons a legitimate claim may go unpaid by an insurer. Claims may be denied, edited or deferred to patients. During Feb. and March of this year, the most common reason insurers didn’t issue a payment was due to deductible requirements that shift payment responsibility to patients until a dollar limit is exceeded. Real-time claims processing would save time and money.

Denials. Dramatic reductions in denial rates have occurred since last year at Aetna, Anthem Blue Cross Blue Shield, Health Care Service Corporation and UnitedHealthcare, which cut its denial rate by half to 1.05 percent. CIGNA maintained its industry leading low denial rate of .68 percent. Lack of patient eligibility for medical services continues to be the most frequent reason for denials.

Administrative Requirements. For the first time the report card measured how frequently claims included information on insurers requiring physicians to ask permission before performing a treatment or service. CIGNA had the highest rate of claims requiring prior authorization, with more than six percent of claims indicating physician work associated with these requirements. A recent AMA survey of physicians indicated that insurers’ requirements to preauthorize care delayed or interrupted medical services, consumed significant amounts of time and complicated medical decisions.

Accuracy. In addition to measuring overall claims-processing accuracy, the report card examined how accurately insurers reported the correct contract fees to physicians. UnitedHealthcare has shown consistent improvement during the last four years in reporting correct contract fees. Other commercial health insurers showed progressive improvement over four years, but had slight declines this year. The exception was Anthem Blue Cross Blue Shield, which scored 14 percent lower on this measure than it did four years ago.

Timeliness. The report card found that CIGNA and Humana have cut their median claims response time in half during the last fours years. Response time varied for commercial health insurers from six to 15 median days.

The National Health Insurer Report Card is the cornerstone of the AMA’s Heal the Claims Process campaign. Launched in June 2008, the campaign’s goal is to spur improvements in the industry’s billing process so physicians and patients are no longer at the mercy of a chaotic payment system.

The findings from the 2011 National Health Insurer Report Card are based on a random sampling of approximately 2.4 million electronic claims for approximately 4 million medical services submitted in February and March of 2011 to Aetna, Anthem Blue Cross Blue Shield, CIGNA, Health Care Service Corporation, Humana, The Regence Group, UnitedHealthcare and Medicare. Claims were accumulated from more than 400 physician practices in 80 medical specialties providing care in 42 states.

“In spite of notable improvements by insurers in the four years since the AMA introduced the National Health Insurer Report Card, precious health care resources are wasted because each insurer uses different rules for processing and paying medical claims,” said Dr. McAneny. “This variability adds no value to the health care system and only increases unnecessary administrative costs.”

Deceleration in US Healthcare Costs Continues

NEW YORK, NY (June 16, 2011) — Data released by S&P Indices for the S&P Healthcare Economic Composite Index indicate that the average per capita cost of healthcare services covered by commercial insurance and Medicare programs increased by 5.39% over the 12-months ending April 2011. Since May 2010, annual rates of growth of healthcare costs have been largely decelerating.

At +5.39%, the Composite index posted its lowest annual growth rate in its six-year history. The highest rate for the Composite index was during the 12-months ending May 2010, when it was up 8.74%.  In less than a year, this index has seen a steep fall in its annual growth rate by 3.35 percentage points.  Even steeper has been the decline in the Medicare index, with its April 2011 +2.48% annual growth rate down 4.36 percentage points since May 2010, and down 5.53 percentage points since its November 2009 high.

Over the year ending April 2011, healthcare costs covered by commercial insurance increased by 7.13%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of 2.48%, as measured by the S&P Healthcare Economic Medicare Index. With April’s data, the Medicare Index posted another record low annual growth rate in its six-year history.

“The trend of deceleration in US healthcare costs, which started in May 2010, continues,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The Composite Index rose by 5.39%, the Commercial Index by +7.13% and the Medicare Index was up 2.48%, compared to their April 2010 levels. Both the Composite and Medicare Indices posted record low annual growth rates with this month’s report.  But while we continue to see healthcare costs decelerate, all three rates are still above core inflation, significantly so for Commercial healthcare costs.

“Our three headline indices witnessed record high growth rates in late 2009/early 2010, and have sharply decelerated since that time, with two of them reaching new lows. The highest annual growth rates for the Composite and Commercial indices were during the 12-months ending May 2010, when they were up 8.74% and 9.87%, respectively.  The Medicare index posted its high of +8.01% in November 2009.  Since their respective highs the Composite has decelerated by 3.35 percentage points, the Commercial by 2.74 percentage points and the Medicare by 5.53 percentage points.

“Additionally, both the Hospital and Hospital Medicare indices growth rates hit new six-year lows. The Hospital index posted an annual growth rate of +4.86% and the Hospital Medicare index was up a scant +0.93%, arguably the only healthcare costs that are in line with or below core inflation rates. With an annual rate of +5.73%, the Professional Services index is only 0.05 percentage points away from its historical low of +5.68% recorded in February 2009.

“Historically, there has been a general pattern of healthcare trends declining on a lagged basis following economic downturns. Much of our spending on healthcare is related to supply-side factors – in particular, the supply of new technology and procedures. It takes considerable time for investments in healthcare to translate into increased supply and, conversely, reduced investments often result in a reduction in trend a few years later. The decline in index growth rates that began in mid-2010 may be a result of  trends slowing due to reduced capital spending during the recession that began in 2007.”

The S&P Healthcare Economic Indices estimate the per capita change in revenues accrued each month by hospital and professional services facilities for services provided to patients covered under traditional Medicare and commercial health insurance programs in the U.S. The annual growth rates are determined by calculating a percent change of the 12-month moving averages of the monthly index levels versus the same month of the prior year.

The S&P Healthcare Economic Composite Index is a weighted average of the S&P Healthcare Economic Commercial Index and the S&P Healthcare Economic Medicare Index.  Alternatively, it is a weighted average of the S&P Healthcare Economic Hospital Index and the S&P Healthcare Economic Professional Services Index, as each of these indices has the analogous Commercial and Medicare component.

The table below summarizes the year-over-year change in the S&P Healthcare Economic Indices for the 12-month period ending April 2011. With each monthly release, the index levels, including the 12-month moving averages, are recalculated for the full history of the indices, whenever there are revisions to underlying data used in the models. The entire revised history, as well as full results for the underlying S&P Healthcare Economic Indices, is available from Standard & Poor’s as a subscription service.

S&P Healthcare Economic Indices
(12-Month Moving Average)
Index…………………………………………………………………..1-Year Change (%)
S&P Healthcare Economic Composite Index……………………………………………..5.39%
S&P Healthcare Economic Commercial Index……………………………………………7.13%
S&P Healthcare Economic Medicare Index……………………………………………….2.48%
S&P Healthcare Economic Hospital Index…………………………………………………4.86%
S&P Healthcare Economic Hospital Medicare Index………………………………….0.93%
S&P Healthcare Economic Hospital Commercial Index………………………………7.93%
S&P Healthcare Economic Professional Services Index……………………………..5.73%
S&P Healthcare Economic Professional Services Medicare Index………………4.46%
S&P Healthcare Economic Professional Services Commercial Index………….6.26%
Source: Standard & Poor’s
Data through April 2011

We continue to observe that medical costs funded by commercial insurance plans significantly exceed those funded by Medicare.

The S&P Healthcare Economic Indices were developed in consultation with Health Index Advisors, a joint venture between Aon Hewitt and Milliman, Inc., and were derived from the former Milliman, Inc. Health Cost Index™ which was first published in 1987. The complete methodology, fact sheet and supporting research for the S&P Healthcare Economic Indices are available at www.healthcareindices.standardandpoors.com. A whitepaper introducing the S&P Healthcare Economic Indices has been published by Standard & Poor’s and can be accessed here http://bit.ly/hhTvLb.

Standard & Poor’s does not sponsor, endorse, sell or promote any S&P index-based investment product

Employees’ share of health plan premium costs up dramatically

WASHINGTON, DC (June 16, 2011) — Employees of private-sector companies contributed up to 121 percent more in 2009 for their yearly share of their employer-sponsored health insurance coverage than they did in 2001, according to the latest News and Numbers from the Agency for Healthcare Research and Quality.

By comparison, the total average annual premium for employer-sponsored health plans, which includes both the cost to the worker and to his or her employer, rose at a slower pace during the same period.

Data from the federal agency found that the average annual premium share for workers with employee-plus-one coverage soared 121 percent – from $1,070 to $2,363, while the average annual contribution for workers with family coverage went up nearly 100 percent – from $1,741 to $3,474. Workers with single coverage experienced an increase of 92 percent in their average annual share– from $498 to $957.

Specifically, the total premium increases for the different categories of coverage were:

• For an employee-plus-one plan – $5,463 to $9,053 (66 percent)
• For a family plan – $7,509 to $13,027 (73.5 percent)
• For a single plan – $2,889 to $4,669 (62 percent)

AHRQ, which is part of the U.S. Department of Health and Human Services, improves the quality, safety, efficiency, and effectiveness of health care for all Americans. The data in this AHRQ News and Numbers summary are taken from 2001 to 2009 Medical Expenditure Panel Survey (MEPS), a detailed source of information on the health services used by Americans, the frequency with which they are used, the cost of those services, and how they are paid. The data in this report are not adjusted for inflation. For more information, go to Changes in Premiums and Employee Contributions for Employer-Sponsored Health Insurance, Private Industry, 2001-2009.

Dramatic Changes as Physician Employment Grows

Physician Employment Trends Will Force Revised Business Strategies

NEW YORK, NY (June 13, 2011) — U.S. physicians continue to sell their private practices and seek employment with healthcare systems, according to a new survey from Accenture. As physicians migrate from private practice to larger health systems, the new landscape will require healthcare IT, medical device manufacturers, pharmaceutical companies and payers to revise their business models and offerings. At the same time, hospitals will need to determine how to retain and recruit the correct mix of physicians, especially in high-growth service lines, including cardiovascular care, orthopedics, cancer care and radiology. Patients will increasingly move to large health systems, as opposed to the current trend of visiting doctors in private, small practice settings.

According to Accenture, the rate of independent physicians being employed by health systems will grow by an annual five percent over three years. By 2013, less than one-third of physicians are expected to remain truly independent.

“Health reform is challenging the entire system to deliver improved care through insight driven health,” said Kristin Ficery, senior executive, Accenture Health. “We see an increasing number of physicians leaving private practice to join hospital systems, which will force all stakeholders to revise and refine their business models, product offerings and service strategies.”

According to the survey, physicians are increasingly attracted to the benefits offered by hospital-based employment opportunities. These benefits include:

• Relief from administrative responsibilities;
• Greater access to leading-edge healthcare IT tools, facilities and equipment;
• A more manageable work week; and
• Stability in a business environment made uncertain by developments such as payment reforms.

Accenture’s analysis suggests that complexities in the changing healthcare landscape may result in:

• Hospitals enhancing expertise and boosting patient volumes and revenues in high-growth service lines;
• Companies serving diverse markets will shift their sales force structure from national to regional;
• Payers encountering greater negotiating leverage, which must be factored into future business strategies, as physicians increasingly associate with larger groups and healthcare systems; and
• Companies working to reach the physician market will find their efforts more challenging.

Survey Methodology

Accenture’s Physician Employment Report includes highlights from a survey and assessment of physicians and hospitals and business behaviors emerging from healthcare reform. The report highlights the impact to physician employment, care delivery and clinical coordination, which is relevant to policy makers, health systems and patient advocates. Accenture held in-person and phone interviews with c-suite hospital executives and industry stakeholders between September to November 2010 and the analysis completed in 2011.

KPMG Releases 2011 U.S. Hospital Labor Costs Study

LOS ANGELES, CA (June 8, 2011) — As the economy begins to show signs of recovery and pressure returns on nurse wages, attrition, and labor availability, hospital executives face the challenge of managing labor costs and scarce clinical personnel while managing patient care.

KPMG LLP recently conducted a study that explores how hospital executives view their use of full-time and supplemental labor in the current economy. The study addresses hospitals’ views on quality of patient care, direct employee labor costs, and temporary nurse usage. KPMG’s 2011 U.S. Hospital Nursing Labor Costs Study, which is based on a survey of 120 senior hospital executives throughout the United States, provides labor cost benchmarks useful in labor model analysis.

The National Association of Travel Healthcare Organizations (NATHO) believes this survey discusses important issues and will help hospitals better understand the all-in cost of their permanent RNs as well as the benefits of utilizing temporary travel RNs to augment their staff. NATHO is a non-profit association of travel healthcare staffing organizations founded in 2008 to create and enforce standards of practice, ethics, and dispute resolution.

“The study offers an unbiased view of the comprehensive costs associated with full-time, direct care nurses and the financial impact of utilizing direct care staff to manage a hospital’s fluctuating demand for clinicians,” said Mark Stagen, NATHO President. “Findings are drawn from the responses of those at the heart of the industry, offering valuable insight on current trends and future opportunities. The study also seems to confirm what many of our members have said all along that the cost of a permanent RN isn’t that different than the cost of a travel nurse.”

Labor Cost for a Full-Time Registered Nurse

According to the survey, the all-in cost of a full-time direct care hospital registered nurse (RN) is on average $98,000/year ($45/hour), of which only $55,739 is base wages ($25.84/hour). Fully-loaded payroll, which includes base wages, employer taxes and paid time off represents 76-78% of the total cost of the RN labor force at facilities. The balance comes from non-productivity costs (12-13%), insurance costs (8-9%), recruiting costs (1-2%), and other costs (1%).  In other words, the actual cost per hour for a full time nurse is on average 176% of their base hourly wage. These are important factors in evaluating whether to add staff, increase overtime or use contingent nurses to meet patient needs.

“Hidden” Costs of Full-Time Nursing Labor

There are also significant additional “hidden” nursing labor costs, which are mainly the result of non-productive labor hours and associated opportunity costs, as well as attrition and time required to fill a permanent direct care RN position, the KPMG study reports. Non-productive labor hours on average represent 13% of total hours, according to respondents.

Optimum Staffing Levels and Quality Override Cost as Decision Factors

Two-thirds of the hospital executives responding to the survey say they are currently using travel or per diem nurses. The key reasons for using traveling nurses were supply and demand, and quality of these nurses. These appear to be even more important decision factors than cost. Some of the reasons given, which enable some hospitals not to use traveling staff, include the use of extra full-time staff, part-time employed staff, incentives to limit turnover and to encourage working overtime, as well as the current economic downturn leading to limited turnover. Many of these factors may be of a temporary nature, and increase costs and turnover over the long term. Respondents also stated that the ideal balance is 90% permanent staff and 10% supplemental labor.

About the Survey

The 2011 U.S. Hospital Nursing Labor Costs Study, conducted by KPMG LLP, looks at the current condition of United States hospital labor costs and explores issues that could shape a hospital’s labor strategy in the coming years.

About NATHO

The National Association of Travel Healthcare Organizations (NATHO) is a non-profit association of nearly 40 healthcare staffing travel organizations founded in 2008 to create and enforce standards of practice, ethics, and dispute resolution. It has set the gold standard for conduct that is aligned among member agencies on behalf of travel healthcare candidates and clients, with its ultimate focus on maintaining quality patient care within the travel healthcare industry. For more information, visit www.natho.org.