Steve Kelly Responds To Ken Page

….”Many Plan Sponsors view the lack of transparency within PPO contract(s) as a hindrance to Plan management.” …….”Respectfully, I would suggest that Mr. Page’s Memo is a step backward and an attempt to preserve a delivery model that was not effective in the past and won’t be in the future. ” – Steve Kelly

CT and CTA with Contrast Composite Average Charge Average Cost Average Medicare
Mercy – Anderson Hospital Cincinnati, OH $1,680.00 $167.00 $598.00
TriHealth – Good Samaritan Hospital Cincinnati, OH $1,283.00 $205.00 $595.00
St. Elizabeth Health Center – Youngstown, OH $1,753.00 $179.00 $571.00
Source: American Hospital Directory

ELAP Services’ CEO, Steve Kelly, Responds to Ken Page, HealthSpan CEO, Memo of 11/20/12 (Letter to HealthSpan customers brokers and TPAs_Nov 2012)
MyHealthGuide Source: Steve Kelly, President, ELAP Services, LLC, 12/7/2012, www.elapservices.com
Editor’s Note: In its 12/3/2012 edition, this Newsletter published “HealthSpan Warns Self-Funded Plans Paying Claims Based on a Percentage of Medicare” by Ken Page, CEO & President, HealthSpan. 

At ELAP Services, LLC, we have consulted to self-funded health plans since 2003 and have been actively involved in fixed reimbursement (i.e. Medicare plus and other metrics) since 11/1/2007.  Our clients are one hundred and thirty (130) self-funded plans across the nation and include service companies, manufacturers, public entities (including school districts) and private universities. Essentially, all segments of American industry both public and private.

Based on our experience over the last five plus years, I would like to respond to Ken Page’s Memo of 11/20/12.
The Plan Sponsors (employers) we work with recognize their duty to prudently manage the assets that have been entrusted to them. Many Plan Sponsors view the lack of transparency within PPO contract(s) as a hindrance to Plan management. They note that there is more than one contract in play; one between the Plan and PPO and one between the PPO and Provider. The PPO-Provider contract is shielded from their view. These employers are not insurance companies and this is not a managed care debate. The issue of health care costs is crucial to the employer’s ability to hire, to grow and to continue to serve as a viable economic force in the community. A self funded employer has taken on the responsibility to manage their own Plan and to accept the financial risk in doing so.

So the decision to eliminate the PPO structure is not one that employers enter into lightly. Employers seek high-quality care, but they also require a rational reimbursement structure. Here is a summary of a common procedure (CT Scan) in the Ohio market:

 

CT and CTA with Contrast Composite Average
Charge
Average
Cost
Average
Medicare
Mercy – Anderson Hospital Cincinnati, OH $1,680.00 $167.00 $598.00
TriHealth – Good Samaritan Hospital Cincinnati, OH $1,283.00 $205.00 $595.00
St. Elizabeth Health Center – Youngstown, OH $1,753.00 $179.00 $571.00
Source: American Hospital Directory

 

PPO discounts are often ineffective in establishing how much it actually costs to deliver healthcare. In the example above, a discount of 50 % off charges would be a windfall for the provider. This is the system that, in many transactions, constitutes a stacked deck against the employer and their employees. Our employer clients have adopted a system of reimbursement that recognizes the providers actual cost to deliver the service and allows a fair margin above that cost. Mr. Page and his three systems warn sternly against this approach. But this is not complicated: employers that pay “discounts” off grossly inflated charges will not be able to effectively provide health care to their employees and their families. A day in the hospital does not cost $20,000 and a CT scan is not $1,600. A discount off inflated charges is no discount at all. Looking at Mr. Page’s Memo, I have the following additional comments:

  • If 100% of the hospitals in the Health Span region are in – network, what is “preferred” about the arrangement? Employers have a right to be concerned about a network that is provider owned and includes 100% of hospitals. Where is the competition?
  • Mr. Page cites the Greater Cincinnati area as one in which a “Preferred” arrangement can offer “price predictability”. That predictability is exactly what employers seek with Medicare plus pricing. Mr. Page, ironically, cites DRG’s (Medicare) and case rates as the basis for predictability. So Medicare based pricing is acceptable, and effective, in Cincinnati but not acceptable elsewhere?
  • There is something seriously out of whack when a non-profit entity, enjoying tax favored status in the community, publicly states they will pursue employees for amounts up to billed charges. In the CT example, that could be ten times the cost of the service.

Our opinion is that the best avenue to progress in health care is for employers and providers to work out direct contractual relationships that respect the rights of the employer, the employee (also a payer of health care) and the provider. The key ingredients are transparency and competition, often missing in the PPO process. That direct contracting process is occurring across the country between employers and health care providers large and small. While a PPO can serve as a valuable aid to a self funded plan, there are many areas where the PPO process, rather than promote cost efficiency, has served as an incentive to egregious charges for routine services and supplies. See the CT scan example above.

On behalf of our employer clients across the nation, we welcome any productive dialogue with health care providers that might improve quality and lower cost. These are exciting times in the self funded industry. There are many intelligent products and services coming to the marketplace. The Affordable Care Act will spur collaboration between employers and providers and self funded employers can drive that change.

Respectfully, I would suggest that Mr. Page’s Memo is a step backward and an attempt to preserve a delivery model that was not effective in the past and won’t be in the future. Employers have rights, as well, and we are committed to building dialogue and collaboration between employers and providers based on transparency and fair reimbursement.
Sincerely,
Steve Kelly President, ELAP Services, LLC Email: skelly@elapservices.com


About ELAP Services LLC

ELAP Services LLC (ELAP) works with self funded employer groups to understand and control employee health care costs. ELAP assists in plan design and jointly establishes limits for payment of medical claims that correlate to the providers’ cost of services.
ELAP works with the clients’ stop loss carrier to ensure cohesion between the plan document and stop loss policy, with a special focus on catastrophic claims management. In doing so, ELAP supports the plan sponsor’s fiduciary duty to prudently manage plan assets, make appropriate coverage determinations and manage appeals in a manner compliant with the Employment Retirement Income Security Act (ERISA).  Visit www.elapservices.com.

Editor’s Note: See previous posting here http://blog.riskmanagers.us/?p=9849

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