qotd: Hospitals go where the money is

California Healthline
July 5, 2014
Inadequate State, Federal Payment Rates Forcing Hospital Closure,
Officials Say
By David Gore

Doctors Medical Center in San Pablo, about 10 miles north of Oakland, is
slated to shut its doors at the end of July, unless some kind of deal
can be worked out to keep it operating.

There are many contributing factors to the financial death spiral at
Doctors Medical Center, according to said Eric Zell, chair of the West
Contra Costa Healthcare District board of directors, which oversees
Doctors Medical Center. But there is one fundamental and underlying
reason it cannot remain economically viable:

"It's the Medi-Cal and Medicare reimbursement rates," Zell said. "The
rates are just too low."

Zell added, "The payer mix is 80% Medicare/Medi-Cal and about 10%
uninsured. There's only about 10% private pay, and that's not enough to
keep us going."

According to hospital officials, Doctors Medical Center is paid 60 cents
for every dollar it spends to treat each Medi-Cal patient and just 90
cents on the dollar for every Medicare patient.

When you're looking at 100 patients a day and you lose money on 90 of
them, the losses mount quickly, according to John Gioia, a longtime
district supervisor on the Contra Costa Board of Supervisors.

Most medical facilities have a payer mix with a much higher percentage
of people with commercial health insurance to mitigate the losses of
their Medi-Cal, Medicare and uninsured patients, Gioia said.

And when you have such a large population of people living at poverty
level, that also means the residents of western Contra Costa County
don't have much money to try to underwrite the hospital.

Doctors Medical Center is one of the few remaining stand-alone small
district hospitals left in the state, Gioia said. "There have been many
places like this, hospitals like this in similar circumstances," he
said. "Many have closed, dozens of them in California."

"This hospital represents a larger problem and issue," Gioia said,
referring to the access issue that would emerge in the west county if
Doctors does shut down. "This represents a larger problem and issue," he
said. "Is there a model that's more sustainable?"

"I think this is a failure of our health care system," (state Sen. Loni)
Hancock said. "We need to have a single payer health system."

But at its root, Hancock said, it shouldn't be up to hospitals in the
area to pick up the slack for low Medi-Cal and Medicare rates.

"Look, it's a great health care system for employed, insured people,"
Hancock said. "But this is not a health care system for people who are
poor."

http://www.californiahealthline.org/insight/2014/inadequate-state-fed-payment-rates-forcing-hospital-closure-officials-say

Doctors Medical Center is owned and operated by the West Contra Costa
Healthcare District.

http://www.wcchd.ca.gov

Doctors Medical Center Has an Emergency

If it doesn't get financial help in the next few months, it will close
its doors permanently. More than 40,000 people use Doctors Medical
Center for emergency room services every year. If you have a heart
attack or stroke, or you are in an accident, the ER at DMC is often the
first stop for an ambulance. Without it, an ambulance trip could take up
to an additional hour. That time could mean the difference between life
and death.

http://www.savedmc.org

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Comment by Don McCanne

It does not take much intellect to understand that hospitals should be
located where they are needed and that they should be financed by a
system that would ensure that adequate funds would be available to pay
for appropriate health care services for the community. Based on our
current methods of hospital planning and financing, it may be intellect
that is in short supply.

Today a hospital that is located in a community with high levels of
poverty is dependent on income from Medicare and Medicaid. In California
these programs, especially Medicaid (Medi-Cal), pay rates below costs of
providing that care. Insolvency is inevitable. This is directly related
to our dysfunctional, fragmented system of financing health care through
a multitude of private insurers, public programs, and no programs at all.

With the private sector making decisions on hospital planning, areas
with assurance of revenues will be selected — usually areas with a high
percentage of privately insured patients plus Medicare patients with
higher regionally adjusted payment rates. The private planners do not
select areas with high poverty rates and high numbers of uninsured and
Medicaid beneficiaries. Private planning decisions are based on money,
not on local need.

Under a well designed single payer system, capital spending is budgeted
separately. Hospitals are built in areas of need. The hospital
operations are financed through global budgets, just as with our fire
and police departments. Public financing obviates the need to consider
wealth when establishing the location of health facilities.

If Doctors Medical Center is closed down, the billionaire who is passing
through town and is critically injured in an accident may die if his
ambulance has to drive past a padlocked emergency department and
continue for another hour to a different facility. No amount of money
will buy your way to the front of that queue.

We need to adopt a system that will provide both appropriate planning
and appropriate financing. Our current fragmented system can't do that.

California State Senator Loni Hancock is right. "This is a failure of
our health care system. We need to have a single payer health system."

qotd: Private Medicare Part D insurers pay 69% more for brand drugs than does Medicaid

United States Government Accountability Office (GAO)
June 2014
Prescription Drugs
Comparison of DOD, Medicaid, and Medicare Part D Retail Reimbursement Prices

GAO found that Medicaid paid the lowest average net prices across a
sample of 78 high-utilization and high-expenditure brand-name and
generic drugs when compared to prices paid by the Department of Defense
(DOD) and Medicare Part D. Specifically, Medicaid's average net price
for the entire sample was $0.62 per unit, while Medicare Part D paid an
estimated 32 percent more ($0.82 per unit) and DOD paid 60 percent more
($0.99 per unit). Similarly, Medicaid paid the lowest net price for the
subset of brand-name drugs in the sample, while DOD paid 34 percent more
and Medicare Part D paid an estimated 69 percent more. Medicaid also
paid the lowest net price for the subset of generic drugs, while
Medicare Part D paid 4 percent more and DOD paid 50 percent more.

GAO found that multiple factors affected the net prices paid by each
program. Specifically, a key factor for the entire sample and the
brand-name subset was the amount of any post-purchase price adjustments,
which are the refunds, rebates, or price concessions received by each
program from drug manufacturers after drugs have been dispensed to
program beneficiaries. These price adjustments ranged from about 15
percent of the gross price for Medicare Part D to about 31 percent for
DOD, and nearly 53 percent for Medicaid across the entire sample. The
gross prices each program negotiated with pharmacies and the magnitude
of beneficiary-paid amounts also contributed to differences in net
prices paid by the three programs, but to a lesser degree.

In some cases, VA beneficiaries can obtain drugs on a fee-for-service
basis through non-VA facilities. These make up a very small proportion
of VA drug expenditures (less than 1 percent in fiscal year 2010).
Therefore we did not include VA in this report comparing prices paid to
retail pharmacies.

The statutory framework allowing each program to obtain post-purchase
price adjustments contributes to the wide range of percentages observed.
Medicaid's federally mandated rebates apply to virtually all drugs,
while DOD's refunds only apply to certain drugs (i.e., primarily
brand-name drugs). Furthermore, we found that even when DOD received a
refund for a given drug, DOD's per-unit refund amount was less than
Medicaid's per-unit rebate for most of the drugs in our sample even
though we applied only the federally mandated (i.e., URA-based) rebates
for the calculation of Medicaid net prices. If we had been able to
accurately apply the Medicaid state supplemental rebates, the per-unit
Medicaid rebate amounts would be even larger (i.e., a greater percentage
of the gross unit price) than we report. Finally, we found that Medicare
Part D obtained the lowest per-unit price adjustments among the three
programs. In contrast to the statutory authority allowing DOD and
Medicaid to collect specific refunds and rebates, Medicare Part D plan
sponsors rely on independent negotiations to obtain price concessions
from drug manufacturers. As we have previously reported, plan sponsors
have noted limitations on their ability to negotiate price concessions
for some drugs due to formulary requirements set by CMS, lack of
competitors for some drugs, or low utilization for some drugs that limit
incentives for manufacturers to provide price concessions.

http://www.gao.gov/assets/670/664521.pdf

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United States Government Accountability Office (GAO)
Apr 19, 2013
Prescription Drugs
Comparison of DOD and VA Direct Purchase Prices

When GAO compared prices paid by the Department of Defense (DOD) and the
Department of Veterans Affairs (VA) for a sample of 83 drugs purchased
in the first calendar quarter of 2012, DOD's average unit price for the
entire sample was 31.8 percent ($0.11 per unit) higher than VA's average
price, and DOD's average unit price for the subset of 40 generic drugs
was 66.6 percent ($0.04 per unit) higher than VA's average price.
However, VA's average unit price for the subset of 43 brand-name drugs
was 136.9 percent ($1.01 per unit) higher than DOD's average price.
These results were consistent with each agency obtaining better prices
on the type of drugs that made up the majority of its utilization:
generic drugs accounted for 83 percent of VA's utilization of the sample
drugs and brand-name drugs accounted for 54 percent of DOD's utilization
of the sample drugs. DOD officials told GAO that in certain
circumstances they are able to obtain competitive prices for brand-name
drugs - even below the prices for generic equivalents - and therefore
will often preferentially purchase brand-name drugs.

http://www.gao.gov/assets/660/654019.pdf

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Comment by Don McCanne

These two GAO reports explain prices that the federal government pays
for drugs and the mechanisms for pricing of those drugs within the
Department of Veterans Affairs, Medicaid, Department of Defense, and
Medicare Part D programs. The mechanisms are complex, and you have to
read the full reports to fully understand them.

The bottom line is that government agencies are far more effective in
negotiating optimal pricing than are the private insurers that
administer the Medicare Part D program. As an example, the Medicare Part
D insurers paid 69 percent more for brand-name drugs than did Medicaid.

The private Part D plan sponsors tout their effectiveness in using
market principles to obtain best prices - supposedly the reason for
their existence - yet they complain that they have not been as
effective as the government because of "formulary requirements set by
CMS, lack of competitors for some drugs, or low utilization for some
drugs that limit incentives for manufacturers to provide price concessions."

Formulary requirements? The government agencies include in their
formularies the drugs that patients need. The private insurers attempt
to exclude from their formularies drugs that do not provide optimal
profit opportunities. Complaining about "formulary requirements set by
CMS" does not explain their inability to to obtain best prices for the
government since the government has its own de facto formulary
requirements for the VA, DOD and Medicaid programs.

Lack of competitors for some drugs? The government agencies also
negotiate within the same pharmaceutical environment wherein there is a
lack of competitors for some drugs.

Low utilization for some drugs that limit incentives for manufacturers
to provide price concessions? The government agencies also include low
utilization drugs in their formularies.

Medicare Part D was designed based on the fraudulent contention that
private marketplace dynamics are more effective then government
negotiation in obtaining maximum value - a position that wastes
government/taxpayer funds by paying excessive prices in the private
sector compared to the price concessions that the government can obtain.
We would not be tolerating this fraud if we had a properly designed
single payer national health program.

qotd: Anthem Blue Cross punishing patients and providers for their own error

California Medical Association
CMA Alert
June 30,2014
Error on Anthem ID cards results in claim denials

In late March, the California Medical Association (CMA) began receiving
complaints from physicians in San Diego, Orange and Bay Area counties
about denials from Anthem Blue Cross. Practices reported that patients
presented to their offices with Anthem ID cards that indicated they had
a Covered California/mirror PPO product and subsequent eligibility
verification also indicated the patient had a PPO product.

However, Anthem later denied the claims stating the services were not
covered under the patients' benefit plans because they received services
from out-of-network providers.

CMA escalated the issue to Anthem and learned that while the Anthem ID
card and eligibility verification indicated these patients had purchased
PPO products, it was a mistake. These patients had actually purchased
EPO products, with no out-of-network benefits.

While Anthem is offering a PPO product for their Covered
California/mirror patients in most counties, they are only offering an
EPO product in San Francisco, Los Angeles, Orange and San Diego
counties. The Anthem EPO product does not provide any benefits if
patients receive services from out-of-network physicians/facilities.

At CMA's urging, Anthem corrected the affected patient ID cards and
reissued new cards to EPO patients in May. Anthem also confirmed they
have updated the information that displays when physicians verify
eligibility to accurately reflect the correct product type.

CMA requested that Anthem automatically reprocess affected claims at the
PPO rates, the product the ID card and eligibility information
reflected, but Anthem was unwilling to do so. Instead they are requiring
patients to appeal each individual claim to Anthem.

http://www.cmanet.org/cma-alert/archives/2014/june-30-2014

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Comment by Don McCanne

Anthem Blue Cross made a mistake in that they provided ID cards and
eligibility verification for their EPO (exclusive provider) patients
that indicated they were PPO (preferred provider) patients. PPO patients
can obtain some care out-of-network but with reduced benefits. EPO
patients are not eligible for any benefits out-of-network.

The California Medical Association has requested that Anthem Blue Cross
reprocess those claims based on the PPO status that they had verified.
Anthem has refused to do so, insisting that each claim be appealed
individually. For an industry noted for administrative excesses and
placing an administrative burden on health care providers, they are
carrying it to an extreme wherein they are requiring much more
administrative excesses to rectify their own error - punishing patients
and providers for their own mistake.

How can this industry be so crass? Yet this industry, which should be
placing patient service above all else, places its own business
interests first. Such an insensitive response would never take place if
our health care financing system were to be managed by our own public
administrators. EPOs wouldn't even exist. It's time to replace the
private insurers with a publicly-admiinistered single payer system.