Archive for February, 2011

Allstate to Open A Record Breaking 140 Agencies Across Texas in 2011

Monday, February 28th, 2011

IRVING, Texas, Feb. 23, 2011 /PRNewswire/ — Allstate Insurance Company aims to break recruiting records in Texas this year, by opening at least 140 agencies across the state.

The company’s expansion goals parallel steady population growth in the Lone Star state. Texas’ population jumped more than 20% in the past decade—twice as fast as the nation as a whole—according to newly released 2010 U.S. Census Bureau data (more…)

Cignet Fined $4.3 Million For Refusing Patient Access to Health Records

Monday, February 28th, 2011

WASHINGTON—The first-ever civil fine for violating the privacy rule of the Health Insurance Portability and Accountability Act of 1996 has been assessed against Largo, Md.-based Cignet Health of Prince George’s County.

The U.S. Department of Health and Human Services imposed the $1.3 million fine Tuesday after determining that Cignet violated 41 patients’ rights by denying their requests to access their medical records. (more…)

Texas Hospital System Agrees To Settle Case – Unfair Trade Practices To End

Sunday, February 27th, 2011

The Department of Justice announced late Friday it has reached a settlement with United Regional Health Care System of Wichita Falls that prohibits the hospital from entering into contracts that improperly inhibit commercial health insurers from contracting with United Regional’s competitors.

In a news release, the department said United Regional unlawfully used these contracts to maintain its monopoly for hospital services in violation of Section 2 of the Sherman Act, causing consumers to pay higher prices for health care services. (more…)

How An MGU is Established & Operated

Saturday, February 26th, 2011

Many self-funded medical plans purchase stop loss cover through MGU’s rather than directly from the carrier assuming the risk. This read (novia_underwriters[1]) is a good example of how an MGU was established and their business plan. Novia Underwriters became a profitable underwriter. From inception, their goal was to build up a profitable block and sell it in five years.

Transplant Carve-Out Plans

Saturday, February 26th, 2011

According to the United Network of Organ Sharing (UNOS), there are currently 108,299 people waiting for a transplant in the U.S. A new person will be added to the list every 18 minutes of every day. The average cost of a transplant and related expenses today exceeds $400,000. Some go as high as $1 million*. If you are an employer that self-funds your company’s health plan, these numbers should peak your interest. (more…)

Who Gets Jane’s Kidney?

Friday, February 25th, 2011

The United Network for Organ Sharing (UNOS) the nations organ-transplant network is considering a change in its policy by giving younger, healthier patients preference versus older, sicker people, The Washington Post reported.

Currently, UNOS gives kidneys, which is the most sought-after organ, to patients who have been on the waiting list the longest amount of time, but a new policy would match recipients and organs based on age and health.

Were trying to best utilize the gift of the donated organ, said Kenneth Andreoni, an associate professor of surgery at Ohio State University, who chairs the committee that is reviewing the system for UNOS, which is a non-profit based in Richmond, Va. Its an effort to get the most out of a scarce resource.

The possible changes are being welcomed by some bioethicists and transplant surgeons; however, others worry it would distort the pool of existing organs by modifying the model of people who make living donations. It could also discriminate against middle-aged or elderly patients.

The best kidneys are from young adults under age 35 years. Nobody over the age of 50 will ever see one of those,” said Lainie Friedman Ross, a University of Chicago bioethicist and physician. “There are a lot of people in their 50s and 60s who, with a properly functioning kidney, could have 20 or more years of life. We’re making it harder for them to get a kidney that will function for that length of time. It’s age discrimination.”

There are more than 110,000 Americans on the transplant waiting list. Of those, 87,000 need kidneys and each year, only 17,000 Americans get a kidney transplant. More than 4,600 people die because they did not receive a kidney in enough time.

The public can send in their comments to UNOS until April 1. A decision could be made by June 2012.

Editor’s Note: There should not be an organ scarcity – people die every day, every week, every month and at least once in their lifetime. Organs from the departed can be used to save and prolong lives. There is a value to that. A monetary value.

Gallagher CEO: Health Care Reform Will Lead to Broker Consolidation

Friday, February 25th, 2011


NEW YORK, Feb 18, 2011 (A. M. Best via COMTEX) —

The health care reform law will result in consolidation among smaller brokers, said J. Patrick Gallagher Jr., chairman, president and chief executive officer of insurance broker and risk management services firm Arthur J. Gallagher & Co.

“I think it’s [the new health care law] just horrible for America, but it’s great for Gallagher,” the executive told the audience at the Bank of America Merrill Lynch Insurance Conference in New York, according to a replay of the conference on the company’s website.

“Clients cannot figure this thing out,” Gallagher said, adding his company has built tools to assist clients in determining their costs as the health-reform changes are implemented in the years ahead.

“What this is going to do, in my opinion, is essentially push all the smaller brokers that are in the benefits space out of the space,” Gallagher said, noting that will help his company’s acquisition opportunities.

Gallagher said his company’s “pipeline for acquisitions has never been better,” and estimated there are some 18,000 retail and wholesale brokerages and agencies in the United States.

Recently, the company acquired the Gleason Agency Inc. and its affiliate, Gleason Financial Ltd., both headquartered in Johnstown, Pa. (BestWire, Jan. 11, 2011). Gallagher has long employed a strategy of growing through acquisitions, completing 71 deals, with annualized revenue of $409 million, from 2008 through 2010, according to the company’s presentation at the conference.

Gallagher highlighted the company’s acquisition of GAB Robins (BestWire, Oct. 5, 2010), which he said is going well. Gallagher is intent on international expansion and focusing on building new niches, he noted.

As of Dec. 31, Gallagher had $100 million in available cash.

“We only do three things with our cash: We buy brokers, we pay dividends, and, if there’s excess cash after that, we repurchase shares,” Gallagher said. “And, at this point in time, the share repurchase is not probably where we’re going because we have such great acquisition opportunities.”

Brokers are facing a moment of truth due to the new medical loss ratio rules, Peter Gruenberg, chief placement officer with the human capital practice of Willis North America, recently said. By 2012, large group health plans will be required to issue refunds to policyholders if they spend less than 85% of premium income on medical care and activities to improve the quality of care; for small group and individual plans, the threshold is 80% (BestWire, Jan. 5, 2011).

Founded in 1927, Arthur J. Gallagher & Co. was the fifth-largest global insurance broker, based on 2009 revenue of $1.7 billion, according to Best’s Review magazine’s annual ranking.

During the afternoon of Feb. 18, Gallagher’s stock (NYSE: AJG | PowerRating) was trading at $31.62 a share, up 0.67% from the previous close.

(By Diana Rosenberg, senior associate editor, BestWeek)

Editor’s Note: Big is not always better. The big brokerage houses employ people. Some people are better equiped than other people. But a small independent can have the brain power and aggressive energy to run circles around the big boys. And they are more nimble.

TPA’s Can (and sometimes do) Control Retention Through Stop Loss Threats

Friday, February 25th, 2011

Self funded employer groups sometimes find themselves held hostage by their TPA via stop loss insurance policies. The intended result is that the employer is unable to find competitive alternatives.  Fear of lost coverage drives the buying decision to the advantage of the incumbent TPA. We have seen this more than once, more so with certain TPA’s operating in Texas.

For example, we assisted a Texas county in evaluating their  self-funded health plan recently. The county had been with the current TPA for many years and had not competitively bid out their cover for some time. Data provided by the TPA was less than good, and pulling data from the TPA was tantamount to asking the Pope for a condom.

The TPA provided the stop loss carrier’s renewal on the TPA’s letterhead, with no supporting documentation. When asked to provide the underwriter’s notes, the TPA refused, stating that they (the TPA) were the underwriters and only they could bind coverage. “This is how we do business” was their response.

We knew this was not true.

Their stop loss “renewal” offer was firm, with no conditions or contingencies despite the TPA’s representations that the case was running “hot” and there were nine (9) potential large claimants. The TPA warned the county that going to bid would jeopardize the stop loss carrier’s renewal with the possible  loss of a firm renewal and potential lasers to be placed on the identified potential large claimants.

“The county is really getting a good deal, just don’t jeopardize it” warned the TPA’s broker.

The TPA gravely warned that any other competing TPA/Stop Loss carrier would most certainly laser some individuals to the detrement of the county. The TPA and the local agent representing them met with each county commissioner individually to warn and caution them. They even provide each a formal letter attesting to their representations.

The TPA provided a claim report indicating the identification of potential large claimants as proof. Certainly this “evidence” was not doctored, or was it? 

Why would the stop loss carrier offer a firm renewal, with no lasers, with very low and fair rates if the case was running “hot?” You would think, and common sense would dictate, that the carrier would rather lose the account than to keep it. After all, aren’t insurance companies in the business to make a profit? Does the Pope abhor condom usage? Is the Moon round?

We were suspicious. When told we could not contract the carrier’s underwriter to discuss the renewal, and to verify it, we picked up the phone and called the stop loss insurance company directly. This company is a well known household name carrier with a fine reputation. We knew some of their underwriters. There was no indication other than our innate suspicions that our call to them would produce information contrary to the representations of the TPA.  Trust but verify should be everyone’s business model. 

Our conversation with the chief underwriter was eye opening. No, there were no indicated large claimants. No one was in large case management. No one in the group attained 50% of the specific level. The renewal called for a modest trend increase and no lasers. Run-in claims had no limit. A great renewal for a good risk it seemed. And, they were willing to negotiate an even better renewal too. (Hmmmmm, lower premium = less commissions?)

Here is a case where an employer was advised by the incumbent vendor  not to bid out their cover as it would jeopardize their covered risk. Documentation was provided to convince the employer that it would be in the best interests for all to maintain the status quo. However, it became apparent that the intent was to hold the county hostage and retain the account for another contract year.

Using documentation provided directly by the stop loss carrier, the county successfully bid out their self funded plan. A change in stop loss carriers provided savings to the plan. The TPA was fired and a new one retained.

Editor’s Note: Unfortunately, this story is not too uncommon. The severity of this one is. Has your group ever been held hostage?

ObamaCare – Does Money Grow On Trees in Arkansas?

Tuesday, February 22nd, 2011


Obama National Forest in Figmentville, Arkansas

Individuals: Subsidies for buying health insurance for individuals will be available for those making between $14,000 and $43,000 (rounded). For two parents and two kids, the relevant household income must be between $30,000 and $88,000.  If nearly $90,000 seems like a rather hefty income to merit federal subsidy (free stuff from big government), this eye-opening sum will grow even more shocking as it rises with inflation.

Medicaid: As of 2014 all state Medicaid programs will be required to cover most people who earn up to 133% of the federal poverty level. Individuals who earn less than $14,000 will qualify, and a family earning $29,000 or less would get free health care too. It is estimated Texas Medicaid roles will increase 73%

A total of 84,000,000 Americans are expected to be enrolled in Free Health Care, i.e, Medicaid by 2014. 

Employers: As of 2014, employers with fifty or more full time employees will face the possibility of a  punishment fine if they dont provide health insurance. Moreover, if their employees enroll on their own in a qualified insurance plan and are eligible for a subsidy (See Individuals Above), then the employer if fined $167 per employee per month for each employee. Bizarrely, it does not matter how many employees receive federal assistance, the punishment is applied against the employer for every full time employee after the first thirty; so an employer of fifty (50) employees could be hit with a $40,000 punishment tax

Companies with more than fifty employees who do offer health insurance can still be punished if one or more of their employees chooses to enroll in a federally subsidized plan (See Individuals Above). Punishment tax can be as high as $250 per month for each employee receiving a federal premium credit. If an employer wants to hire a $24,000 receptionist, for example, the health insurance policy now makes the receptionist 63% more expensive.

Editor’s Note: Source – “The Truth About ObamaCare”, Sally C. Pipes.

South Texas Health Co-Op Adopts Cost Plus Model

Friday, February 18th, 2011

The Board of Directors of the South Texas Health Coop (STHC), a risk pool established in 1998 to provide Texas educators with comprehensive health care benefits, have moved to  adopt a cost plus model for reimbursing medical care facilities effective March 1, 2011. Estimated cost savings, based on historical claim data, is expected to be significant.

Cost savings to the plan will be utilized to implement benefit improvements in the near term.

The STHC has maintained comprehensive health care benefits since 1998 with minimal cost increases due to unique riskmanagement techniques employed by out-of-the-box strategies. 

The STHC recognized in 1998 that health care providers, in partnership with PPO networks, negotiated pricing that in many cases were not market driven. The STHC began to directly contract with interested physicians and facility managers early on, with the intended effect of lowering health care costs for their members.

Rio Hondo Independent School District and the La Feria Independent School District are members of the STHC. Their participation in a cost plus reimbursement approach augments several other large employer groups in the Lower Rio Grande Valley to contain health care costs.

Medicare is experimenting with the cost plus reimbursement model with selected rural hospitals. The Medicare model is cost plus 1%. (

Amfels, (  the second largest employer in Brownsville, Texas, will begin to pay health care facilities on a cost plus approach March 1, 2011. Tropical Texas MHMR with over 500 employees headquartered in Brownsville changed their health plan to a cost plus approach last year, with significant savings reported to date.

The cost plus model employs published data hospitals and health care facilities submit to the Federal Government attesting to their costs. Using this data, each claim is audited line by line. Each line item charge is converted to the hospital’s cost basis as reported to CMS, and a 12%  profit margin is added to the charge.

Utilizing the cost plus 12% margin approach, savings over typical PPO contracts are significant. For example, a recent hospital bill of $425,000 in billed charges was repriced through a national PPO rental network down to $250,000. After auditing the bill, cost plus 12% reimbursement brought the claim down to $115,000.

Balance billing issues are assigned to an outsourced fiduciary of the plan and the patient, i.e. the insured, is held harmless.

Editor’s Note: When we asked Molly Mulebriar , ace health care expert, why more employers dont implement the cost plus approach, her response was “because they have no cajones.”

Hospitals Avoid Commercial PPO Networks For Their Own Employees

Thursday, February 17th, 2011

Analysis Shows Hospitals Can Double Revenue From Their Own Employee Health Plans

“The study finds that hospitals employing this “direct contracting” model for their own employee health plans average about $2,500 in revenue per employee per year, compared to about $1,250 for those who employ the “outsourced PPO” model.”

SOURCE: CoreSource

LAKE FOREST, IL–(Marketwire – August 18, 2010) –  Hospitals and health systems can double revenue from their own employee health plans by implementing the right benefit strategies, according to research released today by CoreSource, one of the nation’s leading administrators of employee benefit plans for self-funded hospitals, health systems and other employers.

“When deciding how to offer medical benefits to their employees, hospitals and health systems embark on a complex process because they serve as both a health plan sponsor and a provider of healthcare services. For a hospital, offering an employee health plan and managing its costs require the institution to balance the need to grow patient volume and revenue with the need to control labor costs,” said Rob Corrigan, Vice President of Product Management and Planning, CoreSource.

A comprehensive analysis of the employee benefit strategies of nearly 70 CoreSource hospital and health system clients from across the country shows that a hospital using its domestic network of healthcare providers can increase its revenue, on average, by more than $1,200 per employee per year compared to a hospital that outsources its network to a commercial PPO contracting with all health system providers.

The study finds that hospitals employing this “direct contracting” model for their own employee health plans average about $2,500 in revenue per employee per year, compared to about $1,250 for those who employ the “outsourced PPO” model. The findings are contained in the CoreSource white paper, “Hospitals and Healthcare Systems: An Inside Look at Group Health Plan Strategies To Control Costs and Provide Access to Healthcare.”

According to the CoreSource study, hospitals generally use one of five benefit strategies when offering a self-funded PPO to their employees. The study also found that self-funded hospitals and health systems have, on average, six percent higher health benefit costs per employee than other CoreSource clients.

“The primary driver of the higher benefit costs for hospitals and health systems is their demographics,” Corrigan said. “Our analysis shows that hospitals and health systems typically employ more women, employees older than 40 and individuals with chronic conditions than other self-funded groups. These sectors of the population use healthcare services more often than other groups of individuals.”

The analysis also demonstrates how important employee compliance is for cost control. Compliance with preventive testing and disease management for employees of hospitals is better than for other self-funded employers, according to the research, while the average length of stay is 28 percent lower than other groups. “Without this level of compliance, it is fair to reason that hospital and health systems benefit plan costs would be even higher,” he said.

Understanding how different benefit strategies work is important for any hospital or healthcare system seeking to control costs and boost revenue, but it is critical for a hospital that wishes to become designated an Accountable Care Organization (ACO), a new payment and healthcare delivery system created by healthcare reform legislation.

“An ACO is designed to drive healthcare quality while stepping away from the traditional fee-for-service payment approach. A hospital using a domestic network or contracting directly with providers will have operational mechanisms in place that will help the institution make the transition. A hospital that outsources its network may not have the mechanisms readily available to make the shift easily,” Corrigan said.

Hospitals must look at their employee population, market conditions, reimbursement levels and relationships with physicians, and weigh many other factors before determining how to proceed with their benefit strategy. “Information gleaned from the analysis can help guide them in determining the right plan design for their institution,” Corrigan said. “Regardless of the strategy selected, a hospital must monitor cost and utilization trends so that it maintains the desired balance between competing financial objectives and positive relationships with employees, doctors and other stakeholders.” 

For more information on CoreSource and hospital and health system benefit administration, visit this website.

About CoreSource
CoreSource is one of the nation’s leading TPAs, delivering integrated, customized employee benefit solutions to self-funded employers. CoreSource utilizes cutting-edge products and services designed to facilitate effective cost-containment strategies. CoreSource is a subsidiary of Trustmark Mutual Holding Company and has nine sales and customer service offices across the country. Trustmark has assets of more than $1.7 billion and, through CoreSource and other subsidiaries, administers more than $2.5 billion in health and life benefits annually. For more information, visit

Cindy Gallaher
(847) 283-4065
Email Contact

Is Government Seizure of 401k Plan Assets Real? Socialism Is Alive & Well In Washington

Thursday, February 17th, 2011

In February, the White House released its “Annual Report on the Middle Class” containing new regulations favored by Big Labor including a bailout of critically underfunded union pension plans through “retirement security” options.

The radical solution most favored by Big Labor is the seizure of private 401(k) plans for government disbursement — which lets them off the hook for their collapsing retirement scheme.  And, of course, the Obama administration is eager to accommodate their buddies.

Vice President Joe Biden floated the idea, called “Guaranteed Retirement Accounts” (GRAs), in the February “Middle Class” report. 

In conjunction with the report’s release, the Obama administration jointly issued through the Departments of Labor and Treasury a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options” in the form of a notice to the public of proposed issuance of rules and regulations. (pdf)

House Republican Leader John Boehner (Ohio) and a group of House Republicans are mounting an effort to fight back. 

The American people have become painfully aware over the past year that elections sometimes have calamitous consequences.  Republicans lack the votes (for now) to reign in the Obama administration’s myriad nationalization plans for everything from health care to the automobile industry.

Now the backdoor bulls-eye is on your 401(k) plan and the trillions of dollars the government would control through seizure, regulation and federal disbursement of mandatory retirement accounts.

Boehner and the group are sounding the alarm, warning bureaucrats to keep their hands off of America’s private retirement plans. 

Just when you thought it was safe to come up for air after the government takeover of health care.

Valley Baptist “Mystery Partner” Disclosed

Thursday, February 17th, 2011

Partnership Valley Baptist and Vanguard Feb 16 2011          

Valley Baptist Hospital Announces Addition of Mystery Partner – Cites Cash Flow Needs

Wednesday, February 16th, 2011
February 16, 2011 1:00 AM
By FERNANDO DEL VALLE/Valley Morning Star

HARLINGEN — Valley Baptist Health System will merge with a company that will inject money into the hospitals here and in Brownsville, to shoulder changes that result from national health care reform, and budget cuts, the company’s CEO James Eastham said Tuesday.
The partner, a healthcare organization whose name officials would not disclose Tuesday, citing a confidentiality agreement, will own a percentage of the company, Eastham said.
“We’re not being sold,” Eastham said. “It’s kind of a merger. We’re forming a joint venture.”
Valley Baptist Health System, which operates Valley Baptist Medical Center-Harlingen, with 2,345 employees, and Valley Baptist Medical Center-Brownsville, with 907 workers, may not have a “50-50” share of the new company, Eastham said.
“We haven’t (determined) what we’ll own and what percentage they’ll own,” Eastham said.
The confidentiality agreement prohibited Eastham from disclosing the amount of money the partner will infuse into the hospitals, he said.
“They’re putting in capital. It’s still to be determined,” he said.
The partner’s capital will be used to pay debt incurred since the 1990s as the result of improvements and the purchase of the Brownsville hospital, Eastham said.
As a result of the partnership, the hospitals will  become part of the new merged company and will pay property and sales taxes but not income taxes, hospital spokeswoman Teri Retana said. Local taxing entities will determine the amount of property taxes to be paid.
“As earnings are distributed from the new partnership, Valley Baptist will not pay income taxes on its earnings, and our partner will pay taxes on theirs,” she said.
Valley Baptist Health System will retain its not-for-profit status, she said.
According to a press release, Valley Baptist does not expect to lay off workers or reduce salaries, and current management will remain.
It also stated that the merger will be concluded by the end of the summer.
“We’re preparing for healthcare reform and state and federal budget cuts,” Eastham said. “We want to be a strong equity partner that’s well capitalized for physicians, for the four-year medical school, for the whole community.”
Valley Baptist considered other healthcare organizations before choosing “the partner we believe best matches our systems’ mission, culture and financial objectives,” the press release said.
The hospitals will use new capital to improve services, Eastham said.
“What will change is that sufficient capital dollars will be infused into the organization to continue our investment in the latest technology, perpetuate the mission and ensure the financial strength of the organizations for generations to come,” the press release said.
The merger will also infuse capital into the Valley Baptist Foundation, the press release said.

Editor’s Note: The most obvious way to maximize revenue is to increase the Charge Master rates and negotiate additional revenue from PPO networks. Maybe Valley Baptist officials should follow Hermann Memorial’s lead in negotiating “discounts” – see posting below.

How Good Are BCBS Discounts at Hermann Memorial Hospital?

Tuesday, February 15th, 2011

Molly Mulebriar, ace reporterette and forensic  bulldog, reports that touted BCBS PPO discounts may not be all that they seem to be. “It could be a mirage” Mulebriar stated, “or deceptive trade practice, or neither.”

Mulebriar, in her continued quest for the truth, recently learned of a January 2011 hospital admission of a renouned celebrity from South Texas. Apparently, the patient was in need of emergency treatment, and sought help at Hermann Memorial in Houston. The condition warranted an overnight stay in the intensive care unit. The patient was insured by BCBSTX.

BCBSTX lists Hermann Memorial Hospital as an in-network hospital.  Under PPO contracts, in-network providers agree to discount their fees for service. At least that is the theory.

But in this case, there was no discount at all. One could assume that BCBSTX brokered an agreement with Hermann Memorial that allows BCBS to list this hospital as an in-network provider, and nothing else.  A good marketing ploy to be sure, but not so good to the financial health of the patient it seems.

Mulebriar has learned that officials within the Hermann Memorial system told the patient that there was no BCBS discount available on this particular claim. Officials spent 38 minutes on the phone with BCBS representatives to inquire, confirm that no discounts were available. Yet, when Mulebriar called the BCBS service office to inquire if Hermann Memorial was in-network, she was told “Yes, and of course we have negotiated steep discounts with the hospital.”

As evidence, Mulebriar offers the following documents :  Memorial Hermann Northwest

Mulebriar writes “What is amazing is the hype surrounding PPO discounts and the savings that are to the benefit of the consumer. This patient purchased a product with an inherent promise that health care costs would be negotiated and discounted. The patient sought treatment at a directed facility based on representations made regarding costs, only to find that no discounts were negotiated at all. This is sad.”

Does Memorial Hermann Have a Contract With BCBS? What Are The Terms?

Thursday, February 10th, 2011
Molly Mulebriar, Award Winning Investigative Reporterette
  Molly Mulebriar, ace reporterette and acknowledged forensic auditor, informs us that an unexpected visit at Memorial Hermann Hospital in Houston several weeks ago has produced a new twist to her on-going investigation of PPO contracts.
 Does BCBS have a contract with Hermann Memorial? If so, what kind of deal did both parties negotiate?
You will be surprised at the answers. 
Mulebriar has promised to file a full report next week.

“Visionary Partnership” – A Fading Line Between Non-Profits and For-Profits Medical Schemes?

Wednesday, February 9th, 2011


Staff Writer

Published 08 February 2011 08:48 PM

More on this story

Texas Health Resources and a group of cardiologists announced Tuesday that they had entered a joint venture to open a dedicated heart hospital in Arlington.

The partnership is an example of not-for-profit hospital companies forming for-profit ventures with physicians.

Texas Health Resources, which receives a tax exemption as a not-for-profit company, has a majority ownership in the venture. Financial details were not disclosed.

“Any profits received by Texas Health go toward its nonprofit mission,” said Megan Brooks, spokeswoman for Texas Health.

The health care law signed in March places a moratorium on new physician-owned hospitals, such as the Texas Health Heart & Vascular Hospital Arlington. It also restricts expanding existing facilities.

Proponents of the ban say physicians, who have some control over patient admissions, could direct patients to their own hospital or boost revenue with unnecessary care.

The law placed a Dec. 31, 2010, deadline on new physician-owned hospitals. Texas Health’s heart hospital opened in November in a refurbished building on the campus of Texas Health Arlington Memorial Hospital.

“We worked hard to meet the deadline,” Brooks said.

In addition to extra revenue, Texas Health may benefit from improved quality scores that soon may be tied to reimbursement rates.

The U.S. Centers for Medicare and Medicaid Services now measures readmission rates of heart failure patients. Having a dedicated heart hospital next to a general acute-care hospital can be beneficial.

Take Baylor Health Care System’s arrangement in Dallas, for example. Its Baylor Heart and Vascular hospital is located on the campus of Baylor University Medical Center Dallas.

When patients come in with heart problems, Baylor sends the sicker patients to Baylor Medical Center Dallas. Those with more typical heart failure go to the specialty heart hospital.

This setup has helped Baylor’s heart hospital lead the nation with the lowest readmission rate for heart patients.

Patients who visit the emergency room of Texas Health Arlington hospital with heart problems will be transferred to the heart hospital for specialized care.

Kirk King, president of Texas Health Arlington hospital, called the venture a “visionary partnership” that will make it the “hospital system of choice for heart and vascular care in North Texas.”

PPO Discounts – Kind of Confusing Gertrude!

Monday, February 7th, 2011


A large South Texas school district is in a quandry. Confusion reigns. The courts are involved. Everyone has an opinion, and none are compatible.

PPO “A” had the case first. An independent out-of-state auditing firm was hired (Audit Firm #1) to audit claims and determined that the overall provider PPO discount was 41%.

PPO “B” subsequently gained the account. Another out-of-state independent auditing firm (Audit Firm #2) was retained to audit the claims and determined that the overall provider PPO discount was 37%, a “loss” to the district.

PPO “A” regained the account. After the first year a report was generated by the TPA showing that the overall provider PPO discount was almost 59%. This represents a gain in discounts from when PPO “A” first had the account of +18%.

Local newspapers printed the story. Readers were mislead. In actuality, this district’s claims over a three year period went up over 56% despite increasing “discounts.”

In a three year period, PPO “A” increased their PPO discounts from 41% to almost 59%, a gain of 18%. Yet the district’s health costs increased.

Did PPO providers agree to reduce their fees by 18%?  If so, then they gave up almost $13,000,000 in annual fees for this school district. (Audit company #2 estimated that for each 1% PPO discount = $700,000 in savings).

In reviewing information gained from the Texas Open Records Act, a contending PPO guaranteed a minimum of an overall PPO discount of 62% and even put their administration fees at risk should the benchmark of 62% not be reached.  They even included out-of-network claims in their guarantee offer. Yet, this carrier was not successful in gaining the account. Using the formula provided by Audit Company #2, this contract would have saved the district over $ 17,000,000 over PPO “B”‘s contract less than two years before.

So here is a summary: PPO “A” had the account first, and saved the district on average 41% in claims. PPO “B” gained the account and saved the district an average of 37% in claims. PPO “A” regains the account and now has an overall PPO discount of almost 59%, up from 41%, for a gain in savings to the district of +18%. Yet a contending PPO network guaranteed their discounts to be 62% or better, and did not gain the business although it was supposed that the savings to the district would exceed $17,000,000.

Kind of confusing, isn’t it?

Editor’s Note: Fuzzy math reigns supreme in South Texas these days. Forget the discounts – they mean nothing.

Electronic Health Records – A Health Care Professional’s View

Monday, February 7th, 2011

             Allscripts CEO Glen Tullman: An argument for Wikileaks in US healthcare

In 2008, Allscripts CEO Glen Tullman told Alex Nussbaurm of that physicians should take out loans to invest in his EHR product “to ensure that doctors have some skin in the game.” What did you expect? How much charm does it take to sell federally subsidized products when everyone knows that they’re mandated anyway?

Yesterday, Nicole Lewis posted “Health IT’s Future Without David Blumenthal” – a glowing and arguably deserved tribute to Dr. David Blumenthal who is leaving the ONC;jsessionid=0OLOEMENGCENJQE1GHRSKH4ATMY32JVN?articleID=229201216&pgno=1&queryText=&isPrev=

From where I’m sitting, it’s clear that Tullman used Lewis and InformationWeek to score more points with Washington and Wall Street, while continuing to marginalize the interests of those who actually take out loans to purchase his product: “David shepherded ONC through a very critical time . . . the creation, definition, and implementation of meaningful use, which really is a way to ensure that physicians actually use electronic records to improve care, but also that taxpayers get good value for their investment.” What about the doctor’s investment and more importantly, if a doctor is busy clicking on links to qualify for meaningful use dollars, who is accountable to the patients?

I don’t know about you, but it’s not difficult for me to recognize that like other HIT stakeholders whose careers are propped up by easy mandates rather than finicky satisfied customers, Tullman indeed has solid free-market reasons to play to investors and politicians while fearing his customers. They’re pissed at the man.

HCPlexus recently partnered with Thompson Reuters to conduct a nationwide survey of almost 3,000 physicians concerning their opinions of the quality of health care in the near future considering the Patient Protection and Affordable Care Act (PPACA), Electronic Medical Records, and their effects on physicians and their patients. (See “5-page Executive Summary”)—2011-Thomson-Reuters-HCPlexus-National-P

“Sixty-five percent of respondents believe that the quality of health care in the country will deteriorate in the near term. Many cited political reasons, anger directed at insurance companies, and critiques of the reform act – some articulating the strong feelings they have regarding the negative effects they expect from the PPACA.”

At this crucial time when Republicans are already threatening to cut off remaining HITECH funding, whose job will it be to break the news to HHS Secretary Kathleen Sebelius that the EHR savings she was counting on to fund a major portion of healthcare reform are only as valuable as CEO Tullman’s politically-correct fantasy? Pop! From what Nicole Lewis writes, my bet is that the Secretary won’t take the news well: “[Sebelius] reiterated that the successful adoption and use of HIT is fundamental to virtually every other important goal in the reform of the nation’s health care system.” Such pressure from the top down will make it even more difficult for HIT stakeholders, including insurers and politicians, to disown the most egregious. crowd-pleasin’, bi-partisan blunder in medical history since blood-letting was declared Best Practice by popular demand.

According to the HCPlexus-Reuters survey results, one in four physicians think EHRs will actually cause more harm than help in spite of Dr. Blumenthal’s best efforts. I wonder if the escalating bad press about EHRs helped Blumenthal decide to return to his academic position at Harvard. Of course, the controversy over HITECH is nothing new. There have been signs for years that EHRs, including Allscripts products, will neither improve care nor provide taxpayers (our grandchildren) a good value for their investment.

If Tullman was unaware of the highly critical HCPlexus-Reuters study when he assured InformationWeek that his subsidized product has value in the marketplace, he must have been aware of the disappointing news concerning two other recent studies performed by Public Library of Sciences (PLoS) and Stanford which also confirm that EHRs do not improve care. So imagine what it’s like to be one of Tullman’s new, naïve and trusting customers who are expected to use the product for something it’s not designed to do.

It’s my opinion that Tullman’s apparently incorrigible business ethics have no place in the land of the free, and that more transparency in healthcare would help protect the nation from such politically-connected tyrants. Tullman, a long-time Chicago friend of Barack Obama and a Wall Street sweetheart, would still be just another domesticated CEO if it weren’t for the bi-partisan mandate for electronic health records that help Allscripts, Obama and Wall Street more than clueless patients.

If you want to seriously cut costs in US healthcare as well as cut our grandchildren’s taxes, demand transparency from not just the doctors and patients, but from stakeholders as well. Protected communications between good ol’ boys in healthcare are hardly diplomatic cables about military secrets and ALWAYS increase the cost of healthcare.

So when do you want to get the website started? I’m here to serve wherever you need me.

D. Kellus Pruitt –

Tale of Two PPO Network’s Shell (Discount) Game

Sunday, February 6th, 2011

           A large Texas public school district attempts to determine which PPO network has the best “discounts” for their multi-million dollar self-funded health plan. Two independent auditing firms are hired for that purpose, over a period of three years.

Audit firm #1 represents that PPO “A” exhibited an average overall PPO discounts of 41%. Audit firm #2 confirms this figure. Audit firm #2 represents that PPO “B” exhibited an average overall discount of 37%, or less than what PPO “A” can deliver. A significant differential of 4%.

Yet, neither of the three local hospitals will confirm or deny these representations.

Suppose than an independent study reveals that neither PPO “A” or “B” have a market dominance over the other. And, a careful review of actual hospital specific PPO contracts between both networks reveals little or no difference in overall discounts. For all intents and purposes, the “discounts” are the same.

But the difference is how the “discounts” are accounted for. Are all of the discounts passed on to the consumer? The answer many have found is elusive.

Take a $100,000 billed charge for a hospital stay. PPO “A” and PPO “B” both negotiate a 41% discount. But PPO “B” negotiates a “provider re-pricing fee” which they acquire from the discount. Here is how that works:

PPO “A” – $100,000 billed charge less $41,000 = $59,000 paid to hospital by self-funded plan

PPO “B” – $100,000 billed charge less $37,000 = $63,000 paid to hospital by self-funded plan. Hospital pays PPO “B” $4,000 re-pricing fee, bringing the hospital’s net reimbursement down to $59,000.

Net result is that both PPO “A” and “B” pay the hospital the same, or $59,000. So the “discount” is exactly the same.

The $4,000 difference is an administrative expense hidden in the claim side of the ledger.

Editor’s Note: Many insurance consultants evaluate PPO networks without looking at and comparing actual provider specific PPO contracts. You cannot evaluate PPO contracts without seeing them. A claim re-pricing exercise is useless. We know of one consultant who asked competing PPO’s to reprice 13 sample hospital claims on a 7,000+ member school district – he did not review provider specific contracts and the hospitals involved would not confirm or deny the consultant’s work product.

On-Site Medical Clinic Costs PSJA ISD $14.45 PEPM – Saves Money

Friday, February 4th, 2011

On-site medical clinics are not new. The concept is simple: employees can seek cost effective primary care services at their place of work, saving time and money.

A review of this power point presentation  – PSJA_Annual_Review_2008-2009 – of the PSJA Independent School District’s on-site medical clinic shows that the all inclusive costs of operating the clinic approximates $14.45 per employee per month.

PSJA ISD is a large south Texas school district with over 5,500 employees.

Other similar size districts in South Texas do not have on-site medical clinics due primarily, we believe, to local politics. It may be that area physicians worry about lost revenue and kickbacks from referrals. Hospitals, whose bread and butter are lucrative referrals from willing physicians with admitting privilages have a vested interest in controlling the politics surrounding on-site medical clinics for political subdivisions.

Hospitals claim they can run and operate on-site clinics cheaper than anyone else. They charge much less than independent operators but make up for the low ball rates by referrals to their own facilities.

The PSJA ISD clinic cost is one of the lowest we have seen in the industry. We have seen PEPM rates as high as $65.

Based on the information on the powerpoint the average office visit encounter was $52.68 which correlates to Medicare – 30%. Prescription drugs averaged $45.56 per encounter.

What is not shown on the power point presentation is savings realized through selective referrals if any. If this is structured properly, the savings to the PSJA self-funded plan on the referral side would far surpass the actual savings on primary care services.

Editor’s Note: If PSJA would restructure their PPO plan to an EPO with direct contracts procured through a competitive bid process, they could reduce their overall medical spend by +40%. However, that would be a giant political step indeed.

From Molly Mulebriar – “What a novel idea! Getting local health care providers to compete for the business rather than insurance companies.”

If Health Reform is Overturned

Wednesday, February 2nd, 2011

                             By Joe Paduda

We know that much of the opposition to the Accountable Care Act is feeling pretty good right now, as they should after the Florida judge’s rejection of the Act.

What we don’t know is what will happen if they are successful in overturning health reform.

What will our country’s health system look like in five years if there isn’t reform?

Impact on insurers
Without reform of the insurance underwriting and rating laws, insurers will seek to be even more selective about the policies they write – their right, and I’d argue an obligation on the part of the for-profit health plans. As stock companies, their first obligation is to their owners – and that obligation requires them to generate profits and growth. That is not a value judgment – it is a statement of fact.

Health plans just don’t want the ‘risk’ that someone will have a claim. I’d expect healthplans will also continue to ‘churn’ their books – to try to dump policies that have been in place for more than three years, as that is about when claims start to pile up.

The number of viable healthplans will continue to shrink. As a mature industry, the healthplan business has been steadily consolidating – if anything that will accelerate. And no, the free market will not increase ‘choice’; we already have a free market for commercial plans (and Medicare Advantage and Part D) and in most areas there are at most two plans to choose from.

Smaller healthplans will find it increasingly hard to compete, as the big plans get ever-better discounts from providers, who have to make up the lost revenue by cost-shifting to the smaller plans with less clout. As their costs go up, so will their rates, until they either wither away or get bought out by the big plans.

PPO plans will get ‘nichier and nichier’. Their higher medical costs will push members towards HMO-type plans, making it harder for employers with widely-spread workers to get affordable coverage unless they buy insurance from one of the big plans that operates in all the areas the employer has bodies. Inevitably, some workers will be left with poor coverage…

Impact on individuals and families
Bureaucrats at insurance companies
will still be making decisions about what doctors you can see and how much they’ll pay and what they’ll cover and what they won’t. You’ll have to ask permission for services, and hope and pray they get paid. Those same bureaucrats will tell you they’re interested in keeping you healthy, but that’s only till they can churn you out of their book.

There will continue to be a hodgepodge of state-specific insurance mandates, rules, regulations, and enforcement mechanisms, as well as benefit designs and limitations

But the big problem is this – it will get harder and harder for individuals and employers to get insurance coverage.

Here’s one all-too-common scenario. The breadwinner loses her/his job, and with it health insurance coverage. They find a new job, but that company doesn’t offer benefits as they are too expensive. So, Ms/Mr Breadwinner, responsible person that s/he is, tries to buy an individual policy. There are several insurers that write those policies, so the applications go in – followed by requests for medical records, documents, and attestations signed by their physicians. Oops, one of the family has a mild case of asthma, and dad takes cholesterol medication, and mom saw a counselor a few years ago after her dad died.

Three insurers decline to offer a proposal, and the one that does will exclude any cardiovascular coverage for dad, any pulmonary issues for junior, and mom won’t be covered for any psychiatric or anxiety or related issues. And, oh, the policy is 50% more expensive than the original quote. Leaving Mr/Ms Breadwinner to decide if they want to come up with $22,000 a year for less-than-full coverage and their HSA deductible (in 2009 dollars)…

Unfortunately there isn’t any governmental assistance, so the Breadwinners, who make $75k a year, are looking at spending almost a third of their gross income on health insurance – insurance that doesn’t cover their most likely health problems.

Think this is hyperbole? You’re wrong. This is happening every day in every community, and if health reform is overturned, it is going to happen more and more often.

What does this mean for you?

Here’s hoping those seeking to overturn reform have a solution in mind that will actually work. And when you consider their ‘solutions’, remember that no insurer will cover your pre-existing condition unless they are forced to. Or your parents’ or your kids’ or your friends’.

Big Government Loses – ObamaCare Declared Un-Constitutional

Tuesday, February 1st, 2011

         Yesterday a Federal Judge ruled in favor of 26 states that ObamaCare is unconstitutional. A stay has yet to be announced. Therefore, until a stay is executed, no one has any legal need to comply with the onerous ObamaCare health bill.

Pundits all agree that this issue will eventually end up at the Supreme Court and the decision will be upheld 5-4. The Supreme Court could be hearing this case in as little as 60 days, however it is expected the Justice Department will seek to delay the inevitable.


   Submitted by JS of Chicago

From the Florida Court’s Opinion ruling against the Constitutionality of Health reform…..It is difficult to imagine that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place. If Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain for it would be “difficult to perceive any limitation on federal power” [Lopez, supra, 514 U.S. at 564], and we would have a Constitution in name only.