Archive for October, 2009

UniCare Exits Texas Market – Blue Cross Collaborates in Transition

Saturday, October 31st, 2009


Unicare has announced that they are exiting the commercial health insurance maket in Texas.

Their press release states “While UniCare continues to be financially secure, competitive pressures have made it increasingly difficult for us to maintain our high standards for excellent customer service and affordable, quality benefits that you expect from us.”

UniCare has entered into an agreement to transition existing business to Blue Cross Blue Shield of Texas.

Editor’s Note: United HealthCare seeks new business:

UnitedHealthcare Strongly Positioned with Recent Health Insurer Exit 

UnitedHealthcare is ready to help you and your clients – today. The recent announcement of a health insurer to exit the Texas market makes this an ideal time for you to consider UnitedHealthcare for your clients and prospects. UnitedHealthcare serves over two million residents in Texas by consistently delivering:

  • Broad Access to Affordable, Quality Health Care with more than 460 hospitals and 34,000 physicians.
  • Personalized Client and Broker Support with Texas-based representatives to serve you and your clients’ every need.
  • Broad Product Portfolios from medical plans to specialty products, all designed to meet a wide variety of client needs. Including UnitedHealthcare PlanBienSM – popular health plans enhanced with bilingual materials and services for our Spanish-speaking members.
  • New Product Introductions like our soon to be released PacifiCare SignatureEliteSM
    Plus HSA plans.
  • A Stable and Growing Network with more than 460 hospitals and 34,000 physicians
    in Texas.

For more information on how we can immediately assist your clients with their health care coverage needs, please contact your UnitedHealthcare representative today. Thank you for your consideration of UnitedHealthcare.

Whistle Blower Paid $5.5 Million – Health Care Fraud in South Texas

Saturday, October 31st, 2009;jsessionid=AD9F92F8BAAD8297528F094CF6898B40?contentguid=85uPFAkK&src=cat&full=true#display

Price Discrimination By Hospitals

Friday, October 30th, 2009


“It might be argued that because hospitals initially bill all of their patients at their chargemaster prices, they do not engage in price discrimination – the practice of charging different customers different prices for identical goods and services. Invoices at chargemaster prices, however, are insincere, in the sense that they would yield truly enormous profits if those prices were actually paid. The reality is that hospitals accept different payments from different payers for identical services, and that can proberly be called price discrimination.”

“Price discrimination is sometimes decried as unfair, and it may be so. It is, however, commonly practiced by the hotel, airline, pharmaceutical, and telecommunications industries; by public utilities; and by universities, where different classes of students are granted widely varying discounts off full tuitiion, partly as a reward for intellectual acumen, or on the basis of the family’s ability to pay. Price discrimination also is a perfectly natural phenomenon in any health system not subject to price regulation.”

“All of these industries have several things in common: They have high annual fixed costs relative to the incremental cost of producing additional services; they can segment their markets into distinct classes of customers, each with different degrees of price-sensitivity; and customers cannot resell their products among themselves, because it is either technically impossible (such as for physician or hospital treatments) or illegal (such as for pharmaceutical products).”

Source:  The Pricing of U.S. Hospital Services: Chaos Behind A Veil of Secrecy – by Uwe E. Reinhardt

Editor’s Note: Read full article here –

$60 Billion Medicare Fraud – 60 Minutes Reports

Thursday, October 29th, 2009;photovideo  – Video;cbsCarousel – Article

A Modern Fairy Tale

Saturday, October 24th, 2009


Once upon a time, Molly Mulbrier hired a general contractor to help her build her house. The General Contractor came highly recommended with impeccable credentials. And, he was only going to charge her a flat fee of $48,000 to help her build her $40,000,000 dream home. Molly was ecstatic.

The General Contractor promised Ms. Mulebrier that he would bid out all the subcontractor jobs to get the very best deal for her. He bid out for the foundation work, electrical, plumbing, painting, dry wall, etc. on her behalf.

Finally the day came when the General Contractor laid out his bid spreadsheet for Mrs. Mulbrier and her banker. “The best overall bid package” he explained,  “will cost you $40,000,000. But, one of my subcontractors, the electrician,  has promised to give you a credit for $1 million, so your net cost is only $39,000,000. This beats all the other bids we got for you. Of course, you must pay the full $41,000,000 up front, then I will carefully monitor the money flow and make sure you get back the $1 million at some point in time”.

“Hmmmmm”, mulled Molly, “I see nothing in your contract with me that references this. Can I see your contract with the electrician?” …………….”Unfortunately Ms. Mulebrier, I cannot show you that contract because of my Confidentiality Agreement with the electrician, but just trust me, I will make sure that he lives up to his end of the bargain!” sneered the snarling  and sinister contractor.

And so the house was built.

Editor’s Note: This is a fictional fairy tale (as opposed to a true fairy tale). Any similarities with a real life scenario is purely coincidental.  Molly Mulebrier is our in-house private detective who has agreed to allow us to use her real fictional name.

New PPO Contract Released – Tremendous Claim Savings Touted

Friday, October 23rd, 2009

Some American Hospitals Already Have Price & Quality Transparency, As Long As You Are A Foreigner

Wednesday, October 21st, 2009

If this article is disturbing to you, then your completely normal.

Tyler Independent School District Proves Direct Contracting Works

Tuesday, October 20th, 2009

Bill, you can share the following if you’d like:

 Last fiscal year (Oct-08 through Sep-09), TISDs Medical Benefit Plan paid 22.1% of billed medical charges.  Total charges were $28,985,140.10, total payments were $6,393,165.45.  And that was including a >$600K premi claim.

Direct contracting works… I’d like to see anyone match these discounts.

David Herbert, M.D.
President, Medical Administration
(325) 224-3245

Editor’s Note: Dr. Dave and his partner, Michael Jeneke assist employers throughout the United States in contracting with medical care providers. The Tyler Independent School District is a stunning representation of what can be accomplished by directly contracting with medical care providers. They have proven that hospitals and doctors will compete for business if given the opportunity. For more information go to

State of Texas Now Provides Mediation Service for Out-Of-Network Hospital-Based Health Care Provider Claims

Monday, October 19th, 2009

Did BISD Sign A Non-Compete With A Vendor?

Sunday, October 18th, 2009


Readers of this weblog will know that we are investigating the recent award of a $40,000,000 health insurance contract at the Brownsville Independent School District.  We have requested information from the BISD through the Open Records Act and to date have received very little from the district – BISD has refused to provide us with all the information we have requested and has asked the Texas Attorney General to intercede.

One of the items requested from BISD are copies of all contracts with vendors associated with the self-funded health plan. Various vendors include the third party administrator (TPA), pharmacy benefit manager (PBM), preferred provider organization (PPO), and stop-loss carrier. 

We know that the BISD has signed a contract with the TPA because we have obtained a copy of that contract (see posting below). So, we assume that the BISD has signed all the other contracts as well. But, did someone in the BISD read these contracts before signing, and did anyone, including the hired consultant for BISD, compare the contracts to original and final proposals submitted by vendors during the RFP process?

Do any of these contracts include a stipulation that the BISD will not compete with the vendor? For example, should the BISD wish to directly contract with area medical providers, will they be able to do so or will they be prevented from doing so for a two year period upon termination of the vendor contract? If that is the case, which we are confident is the case, then the BISD will be prohibited from negotiating directly with interested medical care providers for the next three years.

An example of a non-compete clause in contracts can be found in the San Benito ISD contract with an on-site medical clinic for employees. Several years ago the SBISD contracted with a third party to administer their on-site clinic. But, the contract contained a non-compete clause prohibiting the SBISD from retaining the on-site clinc physician upon termination of the contract. After two years on board with SBISD, the physician became extremely popular with SBISD patients who developed a strong trust with him. A change in clinic administrators last year brought the non-compete section of the contract to light. Although SBISD wanted to retain their beloved physician, they were prevented from doing so and had to go out and find a replacement.

So, is anyone reading the contracts at the BISD, or just signing them without question?

BISD To Audit Health Plan – A +$371,000 Overcharge? – $5 Million Claim Savings?

Monday, October 5th, 2009


The Brownsville Independent School has advertised for a Request for Qualifications for auditor to conduct a review of the BISD health insurance program. We think that the first course of action for the auditor is to review the work product of the BISD’s insurance consultant for a comparison to actual contracts signed by the district. Our preliminary review indicates that Mr. Aguilar, President of the BISD school board, may have signed a contract that  appears will cost the taxpayers an additional +$371,000 in administrative fees. If true, someone needs to be held accountable for this significant variance from the recommendation/s made to the BISD Board of Trustees (a $371,000 additional administrative cost = approx. 15% variance in total administration costs).

The auditor’s job will be only as good as the BISD wants it to be. The parameters within which the auditor will be empowered will be dictated by the those that hire him/her.  In our opinion, the auditor should be given a full and wide range of parameters within which to work. A $40 million budget item deserves close scrutiny – the cost of the audit should not be a deciding factor in hiring.

MedReview LLC was at one time hired by the BISD. Their report received little attention from the Board of Trustees at the time. A review of the video of the board meeting during which a representative of MedReview LLC made his presentation, will show total lack of interest, with cursory remarks made by members of the then sitting board. The presenter wanted to begin a slide show presentation, but was asked not to by one of the board members who stated “no need to spend time on your slide show…………we have all read your report and we are good with it.”

However, a close and careful review of the MedReview audit details concise and informative information. We are positive that if the same comprehensive review is performed again, significant findings will be exposed.

The auditor should be directed to review all contracts in place that are associated with the BISD health plan. These contracts need to be compared, line item by line item, to proposals recieved during the recent RFP process, as well as compared to the consultant’s work product and written recommendations. Any variances should be questioned as to accuracy.

There are many forensic auditing firms in the market that specialize in self-funded employee welfare plans. We hope that the BISD selects a firm that is non-local, independent with a proven track record of forensic auditing. We hope that the BISD will give the auditing firm wide berth to investigate the entire BISD health plan and not limit the examination to a selected and few hand picked areas of focus.

Editor’s Note: We hope that the FBI and the Texas Attorney General open an investigation into the BISD insurance program. We suspect they already have done so.

This is What You Thought You Bought, This is What You Bought, and This is What You Are Paying For

Saturday, October 3rd, 2009


The Brownsville Independent School District, a 7,400 life school district located in deep South Texas, recently went out for a Request for Proposals for their self-funded employee health insurance program. The district developed proposal specifications internally, advertised for public proposals, then hired an independent fee based insurance consultant to review the submissions acquired as a result of this process, negotiate with vendors and make recommendations to the BISD Board of Trustees.

Dispite being the largest employer south of San Antonio, the BISD does not employ an in-house professional risk manager or staff with the experience and qualifications to manage a $40 million self-funded health plan. The BISD has historically relied on outside insurance experts to assist in the management of the plan.

Based on the recommendations of the consultant, the BISD awarded the group health contract to a new third party administrator as the best and lowest proposal. The consultant represented to the Board of Trustees that the move would save the district money in administrative costs, as well as an estimated savings in claims of $4.5 to $5 million.

The vendor who lost the business cried foul. On public record, they provided a line by line rebuttle of the consultant’s recommendation and urged the BISD to audit the process and reconsider their decision to move.  This peaked our curiosity. We asked the BISD to provide us information under the Open Records Act.

As of this post, we have not received all the information we have requested, however we have enough so far to place doubt as to the integrity of the RFP process.

In reviewing the consultant’s spreadsheet that was presented to the BISD Board of Trustees, with a comparison to the Administrative Services Agreement that was executed by Rolando Aguilar, President of the BISD Board of Trustees, we find that in comparing the consultant’s numbers to the actual contract, there is an annual difference in administrative costs of $371,349.36. 

And, rather than disclosing line item costs in the Administration Agreement, the costs shown are inclusive of various services / products to be included.  That is much like receiving a telephone bill or credit card statement with the total amount due without a line-by-line transaction report to support it.

Since the information we have obtained seems to not support the consultant’s work product, we question other areas of concern that a prudent risk manager should recognise as a fiduciary duty to his client. We have made several additional Open Records requests but to date have not received the information. The BISD has requested an opinion from the Texas Attorney General on some of the items we have requested, as they should do to protect trademark secrets, privacy, etc.

Unfortunately, after reviewing the Administrative Agreement we conclude that some of the contracts involved in the BISD health program will probably be unavailable to public inspection. It appears that the BISD is a third party beneficiary of some of the contracts, and therefore not a party to the contract. If that proves true, not even the BISD will be able to read, review and analyze some to the contracts in place. And, it is our opinion that when you cannot review a contract, you are probably paying more than you should.

BISD Consultant Presentation  BISD Consultant Presentation vs Signed Contract  Consultant Presentation to BISD Board  Exhibit B-Compensation BISD MAA

Editor’s Note: This is just a preliminary review of material received from the BISD. There is much more work to do here in analyzing the data submitted during the RFP process. We will attempt to find every single line item cost associated with this $40 million group health plan. If there are any hidden revenue streams, we will find them in time.

Of particular interest will be the stop loss policy (why did the consultant show only ING? Why did ING increase premium 10% with the TPA they were doing business with versus the TPA who was awarded the business? Was there a better stop loss proposal, with better contract language and lower premium? If so, why was that not shown on the spreadsheet?) Of additional interest will be the Pharmacy Benefit Manager contract – are there fees/commissions within the PBM contract, and if so, what are those fees? Lastly, the PPO contracts will provide useful information as to the claim that the BISD “will save $4.5 – $5 million next year with the new PPO network.”

The BISD Board of Trustees has decided to hire an outside independent auditor to review the BISD health plan, and we applaud that decision. We hope that this is not just lip service to the tax payers of Brownsville.

This is What You Thought You Bought, This is What You Bought, and This is What You are Paying For…..

Friday, October 2nd, 2009


The costs associated with administering a self-funded employee medical program can be confusing to many. There are  many “moving parts”, some of which are inter-dependent while some are not. Some of the “parts” are much like a vermiform appendix, completely useless. Each part is assigned a cost factor, much like an automobile engine. The water pump costs $250, fan belt is $34, spark plugs are $3 each, ect.

In a Request for Proposal for a self-funded group medical plan, consultants usually ask vendors to indicate costs on each line item of their proposal. For example, how much is the cost of claim administration, PPO access fee, stop loss insurance, broker commissions, utilization review fees, etc. An Excel spreadsheet is utilized to compare line item costs by vendor and this is usually provided as part of the consultant’s recommendation and upon which a decision to purchase is made.

However, somewhere and somehow during the RFP process, a process that is “fluid” in some instances, interpretations and understanding of proposals submitted can be misinterpreted or misrepresented utilizing the all-famous method of comparing various vendors – the dreaded Excel Spreadsheet.

A careful post review of an awarded contract would entail three considerations; What did the Plan Sponsor (employer)  think they were awarding, 2). What was awarded and 3). What will the Plan Sponsor actually pay contractually?

So, if the water pump costs $250, and the fan belt is $34, as shown on the consultant’s Excel Spreadsheet, why would the contract show: “For providing a water pump and a fan belt, the total all inclusive cost is $300”? Would it not be a prudent business practice to question why the “all inclusive”cost is $16 higher than the cost shown on the consultant’s Excell spreadsheet? Would you sign this contract? A 7,400 life Texas public school district just did.

Editor’s Note: We will post an actual real life example of a recent award of a $40 million self-funded health contract with documentation obtained under the Texas Open Records Act. We will leave it up to the reader as to conclusions to be drawn.