Archive for January, 2010

Gaming The System – The Evolution of the PPO Model

Sunday, January 31st, 2010


ERISA or PPO? Managed Care Slavery or ERISA Superhero

Sunday, January 31st, 2010


One of the most misguided and financial suicidal concept in healthcare reimbursement is that health care providers are historically and fundamentally as well as legally taught and convinced that any and all denials or reductions of your claims with or through managed care entity are a PPO discount, a consensual compromise or defeat, instead of ERISA benefits denial, in whole or in part, based on relevant plan benefits provisions governed under ERISA, the federal as a public policy, even though every managed care contract, managed care network medical policy, managed care provider manuals have specifically and unambiguously disclaimed and instructed that provider contracts are for provider voluntary reduction from the total amount that each members benefit plan has already approved as benefits reimbursement, specifically based on each individual patient/member benefits plan provisions, Summary Plan Description (SPD), governed by federal law ERISA, for any ERISA regulated employer sponsored health benefits plan in private sector.

 ERISA is a federal law, governing ERISA plans, health insurance/benefits through employment in private sectors.  The simplest way to understand and identify an ERISA plan is if your patient obtained health insurance from employment in private sector, from both self-insured and fully insured (through purchase of insurance) benefits plans.

 SPD (Summary Plan Description) is ERISA version of insurance policy, SPD controls insurance/benefits coverage, limitation, and conditions for reimbursement. Each individual patient eligibility, qualification, coverage, limitation, and circumstances for disqualification are specifically determined by the terms and conditions of each individual plan SPD.  Any managed care contract, PPO, POS, EPO, P4P and HMO, may not be intended, or shall not be construed, to supercede, alter or limit the rights or remedies otherwise available to any Person under § 502(a) of ERISA or to supercede in any respect the claims procedures of § 503 of ERISA.

 Managed care contract between healthcare providers and  manage care entities or organizations, or even directly with ERISA plans or insurers, are legally a third-party business contract, independently and separately from an ERISA plan. A managed care contract is primarily used to solicit or offer provider discount in exchange of wholesale referral (network access) and prompt reimbursement.

 Any claim denials or delays for plan coverage, limitation, medical necessity, UCR, network provider access, coordination of benefits, pre-existing condition, eligibility determination, anything about money and rights for any participant and beneficiary, except for pure PPO discount, are governed by ERISA, as a public policy, and determined based on each individual benefits plan provisions, however if all of the above are not in dispute, or moot, but there is a pure PPO or managed care discount, that would be a provider PPO dispute, determined by each individual manage care contract, governed by specific individual state laws where contract was entered and choice of law was agreed by parties of such contract.

 Therefore, any PPO  discount or dispute is not triggered unless or until ERISA benefits questions or disputes are resolved or moot.

 As a national insanity or stupidity in US health care crisis, managed care contracting has been used to hijack, interfere, substitute, replace and discount or deceit the compliance and enforcement of ERISA, a federal law as public policy.

Editor’s Note: ERISA pre-empts all PPO contracts much to the displeasure of medical care providers. See entire article here –

Sample Hospital Contract

Saturday, January 30th, 2010


Our readers may find this interesting. Below is a sample hospital contract rate page send to us by a major hospital chain. We have reviewed numerous PPO hospital contracts in the past several years, from multiple payers, and can tell our readers that all of them look almost exactly like the one posted below. Just fill in the blanks.


    Criteria Rate Legend
1 Medical/Surgical     PD
3 Obstetrics      
4 Vaginal Delivery 1-2 days   FF
5 Vaginal Delivery with Sterlization and/or D&C 1-2 days   FF
6 C-Section Delivery 1-3 days   FF
7 C-Section Delivery with Sterilization and/or D&C  1-3 days   FF
8 Additional Day(s) Mother Only      PD
9 Normal Newborn     PD
10 Carve Outs/Pass-Throughs      
11 Implants/Medical Devices     BC
12 Pharmaceutical Drugs     BC
13 Catastrophic      
14 Threshold     BC
15 Payment Basis     BC
17 All Outpatient     BC
BC = Billed Charges      
FF = Fixed Fee        
PT = Per Treatment      
PD = Per Diem        
These footnotes are an integral part of the rate sheets          
  Service Description MS-DRG(s) Rev Code(s) ICD-9 / CPT Code(s)
Line INPATIENT        
1 Medical/Surgical     100, 101, 110, 111, 112, 113, 114, 116, 117, 120, 121, 122, 123, 124, 126, 127, 130, 131, 132, 133, 134, 136, 137, 140, 141, 142, 143, 144, 146, 147, 150, 151, 152, 153, 154, 156, 157, 160, 164, 167, 169  
2 ICU/CCU/NICU/PICU/TELE (MICU, SICU, NICU, CICU) This rate applies to all days baby is in NICU.   172-174, 200-204, 206, 209-213, 214, 219  
3 Obstetrics If baby is admitted to NICU during specified length of stay, NICU rate will be paid in addition to case rate. OB case rates reflect pricing for the obstetrical service of delivering. Hence, payment of full amount of case rate will be made regardless of the status of the newborn.      
4 Vaginal Delivery   768, 774, 775    
5 Vaginal delivery with sterilization and/or D & C   767    
6 C-Section Delivery   765, 766    
7 C-Section delivery with sterilization and or D & C   765, 766   ICD-9 codes 66.2 – 66.4
8 Additional Day(s) Mother Only This rate applies if Mother’s stay exceeds the case rate day criteria.       
9 Normal Newborn This rate is paid in addition to the Obstetric case rate.   170, 171, 179  
10 Carve Outs/Pass-Throughs Implants/Medical Devices and Pharmaceutical Drugs as defined below are reimbursed as an add-on to ALL services unless noted otherwise.      
11 Implants/Medical Devices Hospital will be paid for covered implants, medical devices, prosthetics, pacemakers, seed implants and stent(s), as an add-on to ALL services herein when billed with revenue codes 274, 275, 276, 278 and 279 identified on submitted UB forms at the specified BC percentage. No invoice is required.   274, 275, 276, 278 and 279   
12 Pharmaceutical Drugs Hospital will be paid for covered pharmaceutical drugs, as an add-on for ALL services herein when billed with revenue codes 252 or 636 identified on submitted UB forms at the specified BC percentage. No invoice is required.   252, 636  
13 Catastrophic For any case where total hospital charges are greater than the rate sheet threshold, reimbursement will be at the rate sheet specified percentage of BC effective from the first billed dollar for the entire case. Gross charges associated with Revenue codes 274, 275, 276, 278, 279, 252 and 636 as defined in the implant and pharmaceutical drug reimbursement sections are included in the Catastrophic Threshold calculation and shall be paid at the applicable Catastrophic Payment percentage of BC.       
14 Threshold The minimum amount of gross billed charges that qualifies a case for payment under the catastrophic clause.      
15 Payment Basis The percent of reimbursement applied to the total billed charges qualified by the threshold.      
16 OUTPATIENT Outpatient includes all services provided by hospital billed as outpatient. Implants/Medical Devices and Pharmaceutical Drugs as defined below are reimbursed as an add-on to ALL services. The Outpatient service categories below are additive unless noted otherwise.       
17 All Outpatient All services performed during the stay.       


Editor’s Note: In our opinion, self-funded employer groups should negotiate directly with hospitals with the intent of paying a fair and reasonable rate agreed to by both parties. However, from the payer’s perspective, the following items need to be addressed: (1). Right to audit must be included (2). Outliers must be removed (3). Discounts off imaginary and inflated numbers must be removed entirely and (4). Contract must be publishable.

AG Finds Clout of Hospitals Drive Costs

Friday, January 29th, 2010

Hospital Chargemaster

Massachusetts insurance companies pay some hospitals and doctors twice as much money as others for essentially the same patient care, according to a preliminary report by Attorney General Martha Coakley.

It points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs

The yearlong investigation, set to be released today, found no evidence that the higher pay was a reward for better quality work or for treating sicker patients. In fact, eight of the 10 best-paid hospitals in one insurer’s network were community hospitals, which tend to have less complicated cases than teaching hospitals and do not bear the extra cost of training future physicians.

Coakley’s staff found that payments were most closely tied to market leverage, with the largest hospitals and physician groups, those with brand-name recognition, and those that are geographically isolated able to demand the most money.

“Everybody knows that there is dysfunction in the system, and nobody is happy with it,’’ Coakley said in an interview yesterday. “These rising costs are unsustainable. If we don’t do something about it, the only thing we’ll be able to afford is health care. No one will have money for food or housing.’’

The report did not identify insurers and providers by name, and Coakley declined to release the names of the highest-paid, saying she wanted to lay out systemwide problems, not blame individual organizations. More detailed information may come to light during Patrick administration hearings on how to control medical costs, scheduled to begin March 16.

A 2008 Globe Spotlight Team series focused on the Boston market found that hospitals such as Massachusetts General Hospital and Brigham and Women’s Hospital typically are paid 15 percent to 60 percent more for essentially the same work as other hospitals, even though the quality is not superior.

Coakley’s statewide investigation found that the payment gap was wider than the Globe determined. The report shows that a small group of about 10 hospitals statewide command significantly higher payments than the other 55, ranging from 10 to 100 percent more than their competitors for similar work.

While academic medical centers are widely thought to be the most costly, the report noted that one major teaching hospital that treats some of the state’s sickest patients was paid less than dozens of others with healthier patients.

The investigation also discovered that hospitals that treat large numbers of poor patients, who can be more expensive to care for, are as a group paid 10 percent to 25 percent less than average by commercial insurers.

The report, the result of legislation that directed Coakley to investigate why medical costs are rising so rapidly, is based on tens of thousands of contracts and other documents subpoenaed from insurers and providers and depositions from more than 30 key health care executives.

The attorney general concluded by raising concerns about some of the solutions being discussed to control health costs.

Last year, a state commission, with the backing of some key legislators and Patrick administration officials, proposed radical changes to the way providers are paid, with the goal of slowing the rise in the use of medical services. They urged scrapping the current fee-for-service system and paying providers a per-patient annual fee, called a global payment, to cover all of a patient’s medical care.

But Coakley’s investigators found that Massachusetts health care costs, which are growing by 7.5 percent annually, are mostly the result of rising prices, not patients getting more imaging tests, surgery, and other procedures. For one major insurer, provider price increases accounted for 80 percent of the total growth in medical expenses between 2006 and 2009.

A “shift to global payments may not control costs,’’ the attorney general concluded, “and may result in unintended consequences if it fails to address the dynamics and distortions of the current marketplace.’’

Coakley said in an interview that she supports payment reform, but that a switch to global payments should be accompanied by other measures, such as lessening price differences among providers and discouraging contract provisions that promote disparities.

Dr. JudyAnn Bigby, secretary of Health and Human Services, said switching to global payments could help control price increases if it is done right. One option is to have an oversight authority set parameters for the prices paid to providers.

“Everyone agrees there needs to be some sort of mechanism for addressing the disparities in the market right now,’’ Bigby said.

Officials at Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, acknowledged that insurers pay some hospitals and physician groups far more than others, mostly because they have to. Andrew Dreyfus, executive vice president for health care services, said hospitals in high demand or serving geographically isolated populations can hold out for higher payments.

“We need to change it,’’ said Dreyfus, who had not seen the report. “The deeper question is how do you do that? We think that the most promising way to moderate hospital costs is to improve care and then to guide our members’’ to the ones that do it most cost-effectively, he said.

A spokesman for Metrowest Medical Center in Framingham and Saint Vincent Hospital in Worcester said the two community hospitals have struggled for years with lower payments for the same quality services as nearby teaching hospitals.

“The fact that some hospitals are reportedly being reimbursed twice as much for services of comparable quality is outrageous,’’ said Dennis Irish, spokesman for the owner of the two hospitals, Vanguard Health Systems. “Not only is this grossly unfair to our hospitals and doctors, but it significantly drives up the cost of care.’’

Officials at Partners HealthCare, the parent organization of Mass. General and the Brigham, said they welcome Coakley’s report, though had yet to see it.

“We hope that this report helps to guide a meaningful discussion of the many factors contributing to the issue of cost increases both here and across the country,’’ said Partners spokesman Rich Copp.

© Copyright 2010 Globe Newspaper Company.

Hospital Official Tells Us Cost-Plus is an Illegal Scheme

Friday, January 29th, 2010


One of our clients whose self-funded health plan is currently payng hospitals on a cost-plus basis, had an initial contact with a local hospital yesterday to discuss a possible agreement regarding hospital reimbursment methodology both sides could agree to.  The hospital administrator started the conversation by saying that he was familiar with what the employer was doing and thought that cost-plus reimbursement methodology our  client was employing was “illegal.”

We passed that comment on to our auditing firm and below is their response:

“We had a file yesterday  where a patient went to xxxxx xxxxxxx for a highly specialized retina  procedure. In the hospital for three days and the bill was  $ 18,000 , including the OR.  My guess was that most of the NJ and TX hospitals would charge more in the area of 35 to 50 K . We paid xxxx xxxxxxxx $ 12,000  based on audit and they accepted without a fight.  xxxxx xxxxxxx , like other Maryland hospitals , hospital may not develop outrageous  chargemasters because of  regulation. ”

“So , xxxxx xxxxxxx , arguably  one of the finest hospitals in the world has no problem with our process  and accepts the payment.    These other guys  ( that couldn’t hold a candle to xxxxx xxxxxxx ) charge ficticous amounts and then threaten patients and employers when they don’t get their way.   If that is “ illegal “ ,  then we need to change the laws.    But we are not doing anything illegal in performing reasonable fiduciary duties on behalf of a Plan.   I look forward to speaking with Mr. xxxxxxx and it sounds like Barbara gave him a good  walk through.   These are all positive developments : transparency , maybe competition  between providers in the near future  .    Can you imagine ?”

Editor’s Note: This particular hospital administrator needs professional counseling. We have a bevy of attorneys lathering at the bit to address the legality of cost-plus with anyone who is stupid enough to spout off like an uneducated moron.  We have redacted the name of the hospital herein since we do not want “flavor” future discussions with this particular hospital system.

If You Can’t Beat Them, Join Them

Sunday, January 24th, 2010


Paying hospitals on a cost-plus basis makes sense to many, except hospitals.  

Until now.

With more and more employers in Texas embracing the concept of cost-plus claim payment methodology, and the ability to channel millions of health care dollars, hospitals are coming to the negotiating table. Sitting across from one another, employers and hospitals are finally talking to each other. Money, it seems, drives behaviour.

Missing from the room are greedy health care intermediaries whose value is now openingly questioned by many.

In meeting with once arrogant and obnoxious hospital administrators, we find that most are pretty good guys after all. We are encouraged.

Fuzzy Math

Sunday, January 17th, 2010

fuzzy math

The following email was received this morning from a source with impeccable credentials:

Recently I had a CAT Scan done at a clinic which is down the block from Valley Baptist Medical Center (VMBC) and is owned by VMBC. My insurance is through Blue Cross with a $10,000 front-end deductible. Prior to receiving the CAT Scan, I asked the lady in charge what the normal fee would be for the procedure to be done (lower abdomen with dye injection). She entered the data in her computer to find the charge. It took her only a few minutes, at which time she wrote down the following and handed it to me:
CT Abd.Pelv. w/o – $1,815.00
I asked her what the price would be if I paid cash. I returned the note to her and she wrote:  $1,815 X 50% Disc – $907.50.
A cash payment would have earned me a 50% discount off billed charges.
So, I said “let’s see what Blue Cross has negotiated with you. Please file the claim, and I will pay you the balance.”
I just received my Blue Cross EOB which showed:
     Billed Charges              $ 2,886.00
     Non-Allowed               $ 1,856.32
     Covered                       $ 1,029.68
It looks like Blue Cross came through for me with a whopping 64% discount off billed charges, much better than the measly 50% discount I was able to achieve simply by asking.
Bottom line: With my Blue Cross insurance plan, I am going to have to pay 13% more for this service than if I had no insurance and paid cash. Yet if I were a Blue Cross salesman, I would tout my 64% discount as a wondrous thing.
Since the EOB does not show the CPT code, I dont know what Medicare would have allowed, but I can guess.
If VMBC had given me the same deal as Blue Cross, a 64% discount would put my bill down to $654.
BTW – the charges described above are only for the CAT Scan. The dye injection was billed at $1,100, of which $707.52 was non-allowed, leaving me a balance to pay of $392.48. Again, BCBS achieved a whopping 64% discount for me. The radiologist bill was $544.00, of which $385.61 was non-allowed, leaving me a balance to pay of $ 158.39. This is a 70% discount off billed charges – one hell of a deal. Thank you Blue Cross!
So, what is the deal here? Billed charges for me was quoted at $1,815 but were quoted to Blue Cross at $2,886, +60% more. With cash, I could have achieved a better deal than BCBS, a huge insurance company, negotiated for me. This is upside down.
Of course, you have heard many similar stories from others. I think this illustrates a systemic problem within our industry (insurance). The solutions are readily apparent. As individuals we all can beat the PPO discounts foisted upon us by middlemen. Providers and employers can work together to achieve a mutually acceptable financial relationship that makes sense and is totally transparent.
Editor’s Note: This story is not uncommon. We have all heard similar stores in the past. The patient in this case happens to be a knowledgeable health insurance consultant who saw how the system works up close and first hand.

Cost Shifting is a Myth

Friday, January 15th, 2010


Everyone knows that hospitals lose money on Medicare patients. To make up for the losses hospitals shift costs to private payers, as much as 400-800% higher. Medicare revenue typically account for 60% or more of a hospitals cash flow on average.

But do hospitals really lose money on Medicare patients? Insiders tell us no. In fact, each hospital’s Medicare reimbursement rates are based, to a large degree,  on a cost-plus approach. Hospitals must file with CMS and attest to their costs.

If hospitals are not required to accept Medicare patients, and if it is true that hospitals lose money on Medicare patients, why do they continue to accept them?

A hospital administrator summed it up this way: “Hospitals do not lose money on Medicare, they make a profit. Any hospital administrator whose hospital loses money on 60% of their revenue will not be employed very long by the Board of Directors.”

Editor’s Note: The American Medical Association disputes the theory that hospitals make money on Medicare patients (see However, go to and do a little research in your spare time. There is an answer out there somewhere to the question – Do Hospitals Lose Money on Medicare Patients? Some say “Yes” and some say “No”. Who is telling the truth?

Hospitals Beg Iowa To Tax Them in Medicaid Scam

Friday, January 15th, 2010


In Iowa, a new scheme is underway to soak the feds for more Medicaid money. Here’s how the trick works: Hospitals asked to be taxed by the state. (Right now, most states hospitals are nonprofits and therefore exempt from most taxation.) This generates $40 million in “provider assessment” fees. The state plows the money back into Medicaid, triggering federal matching spending on that cash. (The feds pay about two-thirds of Medicaid.) That money goes right back to the hospitals in exchange for services provided to Medicaid patients. It’s a kind of Do-It-Yourself multiplier effect!

The Iowa Hospital Association, which backs the idea, says the state also would benefit from the arrangement. The association estimates that after the hospitals reap their reward, the state could wind up with about $65 million.

Everybody wins. Except, well, everybody—since this whole runaround is just a way of reshuffling the money of federal taxpayers and dealing it out to hospitals and state governments.

Editor’s Note: Source –, written by Kathern Mangu-Ward, January 8, 2010

It’s Amazing What Strangers Will Tell You

Thursday, January 14th, 2010


Today, during a flight to Houston, one of our operatives, Miss Molly Mulebriar, sat next to a fellow from San Diego whose profession is PPO network development. Mulebriar could not wait to call our office upon landing, breathlessly telling us of all that she had gleaned from this most interesting conversation.

Once Mulebriar memorializes the conversation, we will publish it here for our readers. Isn’t it amazing what perfect strangers will tell you on airplanes?

Medical Center Fights Cost-Plus – Rallies the Troops

Thursday, January 14th, 2010


The cost-plus methodology to reimburse hospital facilities is catching on in Texas.  Basically, the concept is simple; pay hospitals their cost as reported to CMS plus a 12% guaranteed profit margin. That seems fair. After all, this is not a new concept but an old one pioneered years ago by Blue Cross. Back in those days hospitals were paid cost-plus 5%.

The City of Sherman changed their employee health insurance plan in October 2009 to pay hospitals on a cost-plus basis. Below is a memorandum issued by a local medical center to their medical staff members:

See Memorandum here – WNJ

What is interesting to us is the path choosen by the medical center. Would it not be better to have a face-to-face meeting with the employer and negotiate a direct contract mutually agreeable to both sides? And since all of this boils down to money, and since the monies involved here are predominately public monies (taxpayers are ultimately funding the City of Sherman’s employee benefit plan), total transparency should be the order of the day. And that is what the city is apparently attempting to do – they are paying cost (documented by filings to CMS) plus a seemingly fair profit margin of 12%. Our question to the hospital at this point is “What are you getting profit margin wise from the PPO networks you are a party to, but which we cannot see?”

In all fairness to Wilson N. Jones Medical Center, the Memorandum does state that they are seeking a meeting with the city. That is a good thing.

Our recommendation to the city: Inform the medical center that there will be no discussions regarding “discounts” off “billed charges” unless there is a definitive way to benchmark costs.

Exciting and Rewarding Insurance Position in Kabul, Afghanistan

Sunday, January 10th, 2010


The further expansion and success of the Insurance Corporation of Afghanistan has created the requirement for a number of key positions to be filled. They offer the opportunity to join a dynamic company that is making a significant contribution to the developing economy of an emerging market.

Positions include General Manager, Senior Account Executive, and Account/Marketing Executives. Interested applicants should forward their CV by email to

Coca Cola Gets Approval for Captive Benefits Funding Plan

Sunday, January 10th, 2010


The Coca Cola Company has received tentative authorization from the Labor Department for its groundbreaking approach to funding retiree health care benefits through a special trust and its captive insurance company.

Under its plan, the company will use assets in a voluntary employee’s beneficiary associaion to purchase medical stop-loss policies from Prudential to pay claims over the expected lifetimes of roughly 4,000 retirees and dependents. Coca Cola established the VEBA in 2006 and contributed $216 million to the trust.

Prudential will use the premium it receives from Coca Cola to reinsure the risk with Red Re Inc., a South Carolina captive insurer and one of three captives owned by Coca Cola.

Benefit experts say there are significant financial advantages to Coca Cola’s funding approach and that other companies will follow after the transaction receives final approval from the Labor Department.

Up In Smoke – The Joys of A Lingering Death

Saturday, January 9th, 2010


Watching patients suffer or die from preventable disease tends to color a physician’s thinking. Meet Joel Dunnington, MD.

A radiologist at The University of Texas M.D. Anderson Cancer Center and consultant for the Texas Medical Association’s Council on Public Health, Dr. Dunnington is an outspoken tobacco opponent. His views on the most preventable cause of premature death and disease in the United States may seem radical to some. He openly calls for holding executives, board members, lawyers, and lobbyists associated with the tobacco industry accountable for crimes against humanity for racketerring, conspiracy, and murder. He also speaks with sorrow and outrage about the toll tobacco-related diseases take on the patients he treats.

“I see people who can’t swallow, they can’t talk, and they have artificial tubes between their airway and esophagus so they can speak,” he said. “I see these folks every day. Twenty-five percent of patients who come to M.D. Anderson do so because of smoking.”

Many physicians have walked in Dr. Dunnington’s shoes and can relate to the harsh consequences of tobacco. Christopher Ruud, MD, president of the Texas Society of Medical Oncology, is among those who have witnessed the ravages of lung cancer. Even with advanced treatments, smokers diagnosed with the disease face a grim reality. “What’s more compelling for smokers is to find out they won’t die a sudden death, but that in fact it’s going to be a lingering death,” said Dr. Ruud, chair of TMA’s Committee on Cancer.

The Texas numbers are appalling. The Campaign for Tobacco-Free Kids estimates that tobacco kills 24,200 adult Texans every year. Secondhand smoke and smoking during pregnancy account for 2,420 to 4,300 deaths per year. The organization projects that 503,000 children living in Texas today will ultimately die from smoking.


Editor’s Note: This is a portion of an article that appeared in TexasMedicine, December 2007, written by Crystal Conde. TexasMedicine is a publication of the Texas Medical Association.

Do PPO’s Represent You or their Providers?

Thursday, January 7th, 2010


This letter was sent to one of our clients from the PPO that they were accessing for discounts to their self funded medical plan.  The story is as follows:

This client had a $550,000 claim incurred on a premature baby. The facility that provided service is a childrens specialty hospital in North Texas .  Due to the fact that this facility is a specialty hospital the PPO discount is 20% across the board on all charges and with all PPO networks.  The client’s stop loss carrier had the claim audited to review for excessive markups and inappropriate services.  The audit reduced the original bill by approximately $100,000 due to excessive markups on services beyond U&C and inappropriate charges such as speech therapy, occupational therapy and educational training (on a premature baby).  The 20% discount was then applied to the reduced amount of $450,000.

The hospital complained about the audit to the PPO network and the network sent our client the letter terminating the PPO contract if the employer did not agree to pay the claim as billed minus the 20% discount.  This letter clearly states that no U&C can be applied to any bill and no audit of any type is allowed in their agreement.

 WHO ARE THE PPO’S WORKING FOR??     Read this PPO Letter before you decide what the answer is.


Hospital Charge Master Released to Public

Tuesday, January 5th, 2010


In California, hospitals must publish their Charge Masters.  Seems to us that hospitals can publish their prices like any other business – see sample Charge Master here:                Sample Hospital Charge Master

Conservatives Pushing States To Op Out Of Federal Health Reform Legislation

Sunday, January 3rd, 2010

Conservative politicians in states such as Florida and Arizona are proposing measures to opt out of federal health reform legislation, according to a report by the New York Times.

The Goldwater Institute in Arizona, for example, is sponsoring such a measure as an amendment on the state constitution that will be the Arizona ballot next year, and it is looking to put it on ballots in other states.

Insurance companies, hospitals and other health care interests have become involved in these state-level movements, hoping that they can influence the final wording of the federal bill.

Read the New York Times‘ report on health reform.

HR 3962

Sunday, January 3rd, 2010

Health Care Reform Bill presents 10 major problems: (1). The Bill lacks meaningful ways to control health care costs, (2). The Bill sets the nation up for even worse deficits and crushing nation debt, (3). There is no support for evidence-based medicine, (4). There is no independent commission that could help Congress make the decisions to eliminate wasteful and harmful treatments and spending, (5). Bill does nothing to correct medical liability problems, (6). The Bill does not expand employers’ ability to help employees actively engage in wellness activities or achieve health goals, (7). There are serious questions about the public option and how it would operate , (8). It opens ERISA plans to unacceptable burdens, (9). The Bill requires employers who are currently covering retirees to continue new and current retirees indefinitely, (10). Employers that provide comprehensive health care benefits could still be subject to an 8% payroll tax if employees decline coverage because it costs more than 12% of their income.

Editor’s Note: This was taken from Editors Desk, 8 December 2008 edition of Employee Benefit News.

Are PPO’s Relevant In Managing Health Care Costs Today?

Sunday, January 3rd, 2010


MyHealthGuide Source: Dwight Mankin, President, NCN,, 12/2009 via Passion for Subro

Over the last few months we have seen a spotlight directed at healthcare. Whether the debate is focused on access or cost, we are faced with dealing with the structure and delivery of healthcare for the future. But as the debate goes on, one has to ask the question, “How did we get here?” It is by asking the question and answering it in an intelligent manner are we best able to avoid the mistakes of the past and provide a workable solution for the future. We cannot afford to have history repeat itself.

What Happened

For decades, the concept of pre-negotiated discounts for in-network care has been the most common approach for keeping rising healthcare costs at bay. Employers keenly focus their cost-containment efforts on in-network services offered by PPOs, since between 70 and 90% of medical expenses of insured patients are incurred on in-network procedures. So if most insured procedures are in-network with deep, negotiated discounts, why are medical costs so extreme and health insurance premiums so high?

The Promise of Steerage

What does the PPO vendor have to offer a provider in exchange for a deep discount? The answer is, simply, patients — what the heath care industry refers to as “steerage”. In theory a carrier approaches a provider (facility or physician) and offers a volume of customers — its members — in lieu of discounts passed on to those members. By listing the provider as part of its exclusive network, the PPO can offer its patients better pricing for that service than the patient would get otherwise. Patients want more than just discounts, they want options.

The Appeal of Options

For patients and employee groups, the price of the health insurance premium plays a huge part in selecting a PPO network, but that factor can adjust with co-pay and deductible thresholds. The real appeal is the PPO’s size and relevance of its network. For example, brokers to large employers measure their effectiveness on how well they can fit a company’s plan with a carrier that manages and covers the employee base with as many in-network facilities and doctors as possible. In essence, a larger, more developed network gives patients (the employee base) more choices, making opportunity for in-network pricing more likely. It is the development of these large PPO networks and even the supplemental (wrap) networks outside them that are a driving force in the rising cost of healthcare.

Over-developed Networks

As PPO networks expand their list of “preferred” providers, their steerage becomes less exclusive. Yet deep discounts are still required of providers to maintain their inclusion in the network. As a result, providers have to raise the “retail” cost of care to offset the discounts offered, since the discounts are not overcome by the volume and steerage expected. Bruce Japsen, long-time health-care business reporter for the Chicago Tribune, puts it in blunt terms: “Once the market is saturated with PPOs (and HMOs), rates must reflect the true costs of delivering care plus a modest profit or the health care market will collapse.”

A New Model

Industry veterans agree that the quickest way to bring US healthcare costs in check is real price transparency that helps the patient make informed decisions. Dr. Stanley Feld, retired endocrinologist and avid proponent of healthcare reform states that “The consumer is not stupid. When they are in control of their healthcare dollar, they will force real price transparency.” The “real price transparency” he refers to is a cost-based model, not a superfluous detailing of charges. Until such cost-based methodology is widely adopted by healthcare payers and providers, patients will suffer the consequences of an industry that ineffectively tries to repair itself through contract negotiations, restructured administration and expanded PPO networks. If this if not dealt with quickly, history will surely repeat itself.

About NCN

NCN is the national leader in cost management for out-of-network claims. We use cost-based data and transparent reporting to maximize savings on healthcare claims. At NCN we claim a better way for payers, providers and patients. Visit

Editor’s Note:  Cost-plus hospital reimbursement methodology is becoming an important risk management tool employed by self-funded employer groups. See White Paper – Health Care Strategies for Texas Political Subdivisions

Friday, January 1st, 2010


This California company has figured out a way to offer prospective clients a value added service in the selection of group health insurance plans –

Doctor Makes Case for National Health Care

Friday, January 1st, 2010
December 30, 2009, 7:00AM


As a family physician I must write to convey my frustration and indignation with the Senate health care bill.

 It is an immense bill offering minor advances in the access to health care for Americans via private insurance, the expansion of Medicaid and the increase in money for community clinics. But in cementing the role of private insurance as the vehicle for Americans to access necessary health services, the bill wastes billions of dollars a year due to the inefficiency and profit motive inherent in this system.

 Furthermore, the bill will still leave millions without any insurance and even more people underinsured. Those who have insurance with affordable premiums will find the cost-sharing (deductibles, co-pays and out-of-pocket expenses) onerous. Those with insurance offering adequate access to health services will pay premiums that are unaffordable.

 Finally, by taxing Americans four years in advance of the initiation of subsidies for the purchase of insurance, this bill underestimates the true cost to our country. In the end the bill will mandate that all of us buy into and subsidize the inefficient and expensive private health insurance financing system we have today.

My frustration doubles when I realize that there is a viable, efficient and affordable alternative to health care financing that could be enacted tomorrow. With a system of national health insurance, we could cover 100 percent of Americans at a dramatically reduced cost for families, businesses and our country. Under a national health insurance plan everyone pays into the insurance pool via progressive income or payroll taxes.

Let’s call this our premiums. Then, when we are sick and go to the doctor or have a surgery, the doctor or hospital gets paid from the money in the pool. It is not socialized medicine: Doctors and hospitals continue treating patients as before. They remain private and autonomous.

Since a national health insurance system eliminates the profit motive, as well as the advertising and executive pay associated with private insurance and slashes burdensome and expensive administration on the doctor and hospital level, it would finance access to health care for all while reducing costs dramatically.

Finally, my frustration will pale in comparison to the American people’s anger when they find out what the Senate bill means for them. In the Senate bill, the Congressional Budget Office estimates that a family of four with a household income of $54,000 would be expected to pay 17 percent of their income, or $9,000, on health care costs. On the other hand, a family of four making the median income of $56,000 would pay just $2,900 under a national health insurance plan.

If the American people knew that we could organize our health care financing in an efficient, fair and affordable manner, and reduce their family’s health care costs by a third, they would jump at the chance. If they find out after the fact, when they are paying taxes to subsidize a private insurance system that does not meet their health care needs and puts their personal finances at risk, they will surely be looking for someone to blame.

 Are you paying attention, senators?

Peter Mahr of Southeast Portland is a family physician with Physicians for a National Health Program.

Mayo Clinic to Stop Treating Medicare Patients

Friday, January 1st, 2010


Dec. 31 (Bloomberg) — The Mayo Clinic, praised by President Barack Obama as a national model for efficient health care, will stop accepting Medicare patients as of tomorrow at one of its primary-care clinics in Arizona, saying the U.S. government pays too little.

More than 3,000 patients eligible for Medicare, the government’s largest health-insurance program, will be forced to pay cash if they want to continue seeing their doctors at a Mayo family clinic in Glendale, northwest of Phoenix, said Michael Yardley, a Mayo spokesman. The decision, which Yardley called a two-year pilot project, won’t affect other Mayo facilities in Arizona, Florida and Minnesota.

Obama in June cited the nonprofit Rochester, Minnesota-based Mayo Clinic and the Cleveland Clinic in Ohio for offering “the highest quality care at costs well below the national norm.” Mayo’s move to drop Medicare patients may be copied by family doctors, some of whom have stopped accepting new patients from the program, said Lori Heim, president of the American Academy of Family Physicians, in a telephone interview yesterday.

“Many physicians have said, ‘I simply cannot afford to keep taking care of Medicare patients,’” said Heim, a family doctor who practices in Laurinburg, North Carolina. “If you truly know your business costs and you are losing money, it doesn’t make sense to do more of it.”

Medicare Loss

The Mayo organization had 3,700 staff physicians and scientists and treated 526,000 patients in 2008. It lost $840 million last year on Medicare, the government’s health program for the disabled and those 65 and older, Mayo spokeswoman Lynn Closway said.

Mayo’s hospital and four clinics in Arizona, including the Glendale facility, lost $120 million on Medicare patients last year, Yardley said. The program’s payments cover about 50 percent of the cost of treating elderly primary-care patients at the Glendale clinic, he said.

“We firmly believe that Medicare needs to be reformed,” Yardley said in a Dec. 23 e-mail. “It has been true for many years that Medicare payments no longer reflect the increasing cost of providing services for patients.”

Mayo will assess the financial effect of the decision in Glendale to drop Medicare patients “to see if it could have implications beyond Arizona,” he said.

Nationwide, doctors made about 20 percent less for treating Medicare patients than they did caring for privately insured patients in 2007, a payment gap that has remained stable during the last decade, according to a March report by the Medicare Payment Advisory Commission, a panel that advises Congress on Medicare issues. Congress last week postponed for two months a 21.5 percent cut in Medicare reimbursements for doctors.

National Participation

Medicare covered an estimated 45 million Americans at the end of 2008, according to the Centers for Medicare & Medicaid Services, the agency in charge of the programs. While 92 percent of U.S. family doctors participate in Medicare, only 73 percent of those are accepting new patients under the program, said Heim of the national physicians’ group, citing surveys by the Leawood, Kansas-based organization.

Greater access to primary care is a goal of the broad overhaul supported by Obama that would provide health insurance to about 31 million more Americans. More family doctors are needed to help reduce medical costs by encouraging prevention and early treatment, Obama said in a June 15 speech to the American Medical Association meeting in Chicago.

Reid Cherlin, a White House spokesman for health care, declined comment on Mayo’s decision to drop Medicare primary care patients at its Glendale clinic.

Medicare Costs

Mayo’s Medicare losses in Arizona may be worse than typical for doctors across the U.S., Heim said. Physician costs vary depending on business expenses such as office rent and payroll. “It is very common that we hear that Medicare is below costs or barely covering costs,” Heim said.

Mayo will continue to accept Medicare as payment for laboratory services and specialist care such as cardiology and neurology, Yardley said.

Robert Berenson, a fellow at the Urban Institute’s Health Policy Center in Washington, D.C., said physicians’ claims of inadequate reimbursement are overstated. Rather, the program faces a lack of medical providers because not enough new doctors are becoming family doctors, internists and pediatricians who oversee patients’ primary care.

“Some primary care doctors don’t have to see Medicare patients because there is an unlimited demand for their services,” Berenson said. When patients with private insurance can be treated at 50 percent to 100 percent higher fees, “then Medicare does indeed look like a poor payer,” he said.

Annual Costs

A Medicare patient who chooses to stay at Mayo’s Glendale clinic will pay about $1,500 a year for an annual physical and three other doctor visits, according to an October letter from the facility. Each patient also will be assessed a $250 annual administrative fee, according to the letter. Medicare patients at the Glendale clinic won’t be allowed to switch to a primary care doctor at another Mayo facility.

A few hundred of the clinic’s Medicare patients have decided to pay cash to continue seeing their primary care doctors, Yardley said. Mayo is helping other patients find new physicians who will accept Medicare.

“We’ve had many patients call us and express their unhappiness,” he said. “It’s not been a pleasant experience.”

Mayo’s decision may herald similar moves by other Phoenix- area doctors who cite inadequate Medicare fees as a reason to curtail treatment of the elderly, said John Rivers, chief executive of the Phoenix-based Arizona Hospital and Healthcare Association.

“We’ve got doctors who are saying we are not going to deal with Medicare patients in the hospital” because they consider the fees too low, Rivers said. “Or they are saying we are not going to take new ones in our practice.”

To contact the reporter on this story: David Olmos in San Francisco at

City of Amarillo Selects One Hospital – Estimated Savings of $500,000

Friday, January 1st, 2010


Baptist St. Anthony’s Health System was selected Tuesday to be the exclusive provider of hospital services to Amarillo municipal employees, a right held for more than two decades by the system’s chief competitor.

 The Amarillo City Commission unanimously voted to approve an acute care hospital services agreement with BSA, which narrowly bested Northwest Texas Healthcare System in competitive bidding for the work.

The city of Amarillo spent about $4.5 million last year on acute inpatient and outpatient hospital care for the estimated 4,300 employees, retirees and dependents enrolled in its self-insured medical plan, consultant Neal Welch said.

The proposal BSA tendered for an exclusive contract could result in a savings of $400,000 to $500,000 a year, said Welch, who spent the past two months assisting city administrators in evaluating the two hospitals’ offers.

The contract with BSA will take effect Friday and last one year, with the possibility of four subsequent one-year extensions.

Only 4.3 points separated the two hospitals’ proposals in scoring used by Welch and city staff to compare the proposals. The scoring method took into account such things as the prices the hospitals offered for types of services and the range of services to be included in the proposals, Welch said.

Northwest didn’t ask for exclusivity in its offer, Northwest representative Melanie Dennis said, in questioning the scoring method used to make the decision.

Rather, Northwest proposed that the city use both facilities and allow its medical coverage plan participants to choose which hospital they would use at the beginning of the health plan year.

“For a four-point value difference, you’ve chosen one hospital,” Dennis said.

“Also we’re looking at the savings too,” Commissioner Madison Scott replied.

BSA tendered both a nonexclusive offer and an exclusive offer, with the potential of exclusivity resulting in better proposed prices, said Welch said.

“We do not demand exclusivity in any way,” BSA Director of Managed Care Collin Hays told commissioners. “We had a nonexclusive proposal (submitted to the city), but it wouldn’t provide the savings.”

The nonexclusive contract offer from BSA still scored higher than the Northwest proposal in the evaluation.

Trauma services that Northwest provides that aren’t offered by BSA were accounted for in the scoring method, Assistant City Manager Dean Frigo said.

Northwest will continue to provide trauma services, but city health plan participants will be transferred to BSA if they are hospitalized or scheduled for outpatient services, Welch said.

“This has been a good process that we’ve gone through, with the two hospitals playing by the same rules, competing for the city’s business,” Commissioner Jim Simms said. “We appreciate greatly what the hospitals have done and the numbers that they put forward.”

Editor’s Note: The City of Amarillo is well known in the insurance industry as a trailblazer in stablizing their group medical costs. Jim Parrish, Dean Frigo, John Ward are three individuals who could teach the big insurance consulting firms a thing or two.  If those three ever decide to open up an insurance consulting firm, they would no doubt help other Texas political subdivisions millions of dollars.