Today's Datapoint

58% … of Medicare Part D prescription drugs plans in 2012 have tier structures with five or more tiers, up from 41% last year, 30% in 210, and 27% in 2009, according to Avalere Health LLC.

United States Files $150 Million Complaint Against Medical Imaging Company

January 6, 2012

United States Files $150 Million Complaint Against Medical Imaging Company and Dr. Gwendolyn Washington for Kickbacks for Medicare Test Referrals and Inadequate Supervision of Radiology Tests; Fourteen Physician Groups Disgorge $1.56 Million in Kickbacks

DETROIT – The government has filed suit seeking $150 million in damages and penalties under the False Claims Act against Universal Imaging, Inc. and its current and former owners, Phillip J. Young and Mark Lauhoff, United States Attorney Barbara L. McQuade announced today. The complaint alleges that Universal and the owners, who are not medical professionals, conducted a medical radiology business in violation of numerous Medicare rules relating to adequate supervision of diagnostic tests and generated 90% or more of their business by paying kickbacks to physicians. Also named in the complaint is Gwendolyn Washington, a primary care physician who received kickbacks for referrals from Universal and as a result ordered dangerously high levels of tests involving injection of radioactive material into patients.

The complaint alleges that although Universal was required under Michigan law to be organized as a non-profit corporation to ensure the health and safety of patients, it surreptitiously continued to operate as a for-profit corporation by transferring its equipment to a for-profit entity, MRI Leasing LLC, with the same owners. Universal then made “lease” payments to that for-profit entity for Universal’s equipment, profiting the owners in circumvention of the laws relating to Michigan non-profits.

U.S. Attorney McQuade also announced settlements totaling $1.56 million with fourteen physicians or physician groups who were paid for their referrals by Universal. The settling physicians include Dr. David Schaefer; Drs. Vladimir and Albert Klemptner; Dr. Corey Haber; Drs. John and Andrew Zazaian; Partners in Internal Medicine, PLLC; Drs. Eric Straka, Sara Hashemian and Peter Paul; Drs. Gregory Stevens and Teresa Wargovich-Stevens; Dr. Steven Hartz; Dr. David Leszkowitz; Dr. Alexander Vertkin; Dr. Keith Pierce; Dr. Corrine Adler; Dr. Namir Stephan; Dr. Carmen Bogdan; and Dr. James B. Hayner.

"Doctors should be aware that we are scrutinizing records and detecting fraud and kickbacks," McQuade said. "We hope that our aggressive enforcement will deter doctors from cheating the taxpayers and endangering patients.

McQuade praised radiologist Dr. Richard Chesbrough and his wife Kim Chesbrough, who formerly worked at Universal and who filed a qui tam whistleblower suit under the False Claims Act bringing many of the facts in the case to the government’s attention. “We urge other physicians with knowledge of these inappropriate relationships to come forward, either by calling our office and asking to speak to the criminal or civil health care fraud coordinators, or through the qui tam whistleblower mechanism,” she said.

U.S. Attorney McQuade added, “A great example of the coordination between our civil and criminal enforcement efforts is the case of United States v. Dr. Gwendolyn Washington. Dr. Washington was sentenced in November, 2011 to 120 months imprisonment on charges of public corruption, health care fraud, and conspiring to illegally distribute prescription drugs.”

The case is being handled by Assistant United States Attorney Joan Hartman of the U.S. Attorney's Office for the Eastern District of Michigan and was investigated by Special Agent Steve Rinaldi of the Office of Inspector General of the Department of Health and Human Services.

Express Scripts-Walgreen Pricing Dispute Affects Plan Members’ Pharmacy Options

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.

By Jonathan Block, Editor
December 26, 2011 Volume 21 Issue 45

A pricing dispute between pharmacy benefit manager (PBM) Express Scripts, Inc. and drugstore chain Walgreen Co. means that on Jan. 1, people covered by several larger insurers, including WellPoint, Inc., will not be able to have their prescriptions filled at Walgreens stores. One industry consultant who closely watches the PBM space says the change could cause some confusion among plan members, while another says the change might have an impact only in rural areas where pharmacy options are fewer.
“It’s unusual for the negotiations between PBMs and retailers to be aggressive,” says George Van Antwerp, general manager of pharmacy solutions at Silverlink Communications. “The idea of a big pharmacy not being an option for a big PBM’s clients hasn’t been a scenario before.”
He tells HPW that it will be imperative for health plans to notify their members about the changes, help them understand why it’s happening and identify alternatives for getting prescriptions filled.

The impact of Walgreens’ departure from Express Scripts’ network depends on where plan members live, says Randy Vogenberg, a principal at the Institute for Integrated Healthcare. In most urban areas, there are plenty of alternatives to Walgreens, he tells HPW. But in suburban and rural areas, members could face greater inconvenience, especially if Walgreens is the dominant pharmacy. He adds that it appears Walgreens is “taking a stand against middleman PBMs, which they’ve done before, and bet on what they can do best for the long run while assuming PBMs will not last in their current model.”

But the dispute could have unintended consequences for Express Scripts by potentially upsetting a favorable Dept. of Justice review of its planned acquisition of Medco Health Services, Inc., Vogenberg says, noting that AT&T recently abandoned its bid to acquire fellow wireless provider T-Mobile USA, Inc. because of opposition.
Disagreement Affects WellPoint Members

WellPoint, the nation’s second largest carrier by medical enrollment, uses Express Scripts to administer prescription drug plans for members and to negotiate with retail pharmacies. The health plan operator has been preparing for the loss of Walgreens as a network pharmacy by sending at least one letter to members who have had a prescription filled at a Walgreens within the last 120 days, WellPoint spokesperson Lori McLaughlin tells HPW.

Medicare, Medicaid and commercial members have received letters and live agent phone calls, while members with multiple Walgreens prescriptions will receive an additional phone call from a live person. Members also will be unable to get prescriptions filled at Duane Reade, OptionCare, or Happy Harry’s pharmacies as well come Jan. 1 because of pricing issues.
“We would prefer that Walgreens remain in the pharmacy provider network used by our members,” WellPoint said in a prepared statement. “Even without Walgreens, there will continue to be more than 56,000 retail pharmacies nationwide to serve our members.”

Blue Cross Blue Shield of Massachusetts (BCBSMA) has notified its members about the loss of Walgreens, and explained that other network pharmacies are often an average of a half mile from a Walgreens pharmacy.

“Walgreens is demanding price increases that are much higher than what other pharmacies within our retail pharmacy network have agreed to for 2012, which would raise our members’ pharmacy costs over time,” BCBSMA spokesperson Jenna McPhee tells HPW. “Pharmacy costs account for approximately 15% of each premium dollar….We fully support Express Scripts’ commitment to keeping prescription drugs more affordable for our members.”

Highmark Drops Walgreens, Target

At least one other health plan operator will be dropping Walgreens from its participating-pharmacy list, but for reasons independent of the contract disagreement. Starting next year, Pittsburgh-based Highmark Inc. will begin a two-year transition to remove Walgreens and Target Corp. stores from its network in an effort to eliminate redundancy and save money for members, says Gary Golebiewski, director of pharmacy operations for the insurer, which is the largest in the region with 2.5 million members.

He says that Target and especially Walgreens have a small presence — only 35 stores — in the greater Pittsburgh area. Just 7% of Highmark’s pharmacy claims are from Walgreens, and only 2% are from Target. The exclusion of the two chains means members will have access to 52,000 pharmacies nationwide instead of 61,000.

With the smaller network, Highmark will be able to negotiate deeper discounts with pharmacies that remain in it, Golebiewski says. In response to client demand, the insurer will be offering plans with an even narrower pharmacy network that will have 28,000 participating pharmacies nationwide, but in return will provide for even deeper savings, he adds.
Dispensing, Reimbursement Prices Are at Issue

Express Scripts has said that beginning Jan. 1, after the end of a three-year contract, Walgreens will no longer be a participating provider in its pharmacy network. The withdrawal stems from a disagreement over dispensing and drug reimbursement rates.

While Express Scripts was trying to negotiate a lower dispensing rate with Walgreens, the drugstore chain wanted an increase in that rate, according to Express Scripts spokesperson Thom Gross, who notes, “It’s Walgreens who is dropping us.” He tells HPW that if the PBM had accepted Walgreens terms, its dispensing costs would have been 20% higher than its average book of business with its other network pharmacies.

Gross says that asking for a fee reduction is a normal part of PBM contract negotiations, and most pharmacies expect it. He adds that the reduction is in response to drug-price inflation.

“We want to negotiate a rate that is fair…and protect clients from rising prices. We welcome them back to negotiations at rates that are competitive to other pharmacies in our network,” he says. He notes that Walgreens also asked to change terms and definitions in the contract that would have had the effect of redefining what brand and generics are, “and would have added costs to our clients.”

Walgreens first made known its intentions of dropping out of Express Scripts’ network back in June when it issued a news release stating its reasons for the breakdown in contract negotiations.

Among the reasons the drugstore chain cited were an Express Scripts proposal to cut reimbursement rates to “unacceptable levels” below the industry average cost” and the PBM’s rejection of Walgreens’ request to be informed if Express Scripts intends to transfer a prescription drug plan to a different pharmacy network and provide patients with access to Walgreens pharmacies.

During a first-quarter 2012 earnings call Dec. 21, Walgreens CEO Gregory Wasson said his company reached out to Express Scripts the prior week, but to no avail.

“Unfortunately, the response we got back was not very meaningful, and more importantly, the response was suggested to kick the can down the road past Jan. 1.”

“We deserve a fair and acceptable reimbursement compensation for the services we provide, and that’s what this issue is about with Express Scripts so we wouldn’t accept anything different from any [other] PBM,” Wasson added.

Give CMS a Gold Star for Stars Transparency

By James Gutman - January 6, 2012

Whatever else Medicare Advantage plans think about CMS, they will have to give the agency credit for one thing — being increasingly transparent about its regulatory initiatives. Just as it did in the past two years with scoring criteria for MA plans' Quality Improvement Projects and Chronic Care Improvement Programs, CMS late last month laid out what it is planning to do on star ratings for 2013 and beyond. And the reason observers say there are no "bombshells" in the contemplated stars changes is precisely because the potential new star measures and retirement of old measures represent just a continuation of what CMS had been saying before about such aspects as putting more emphasis on outcomes.

This was not always the case in the past two years. MA consultants still recoil in horror when they think of what happened on the 2011 bids that MA plans submitted in June 2010. As plan after plan was told to make rush changes in their bids because they did not meet criteria that CMS had not disclosed before the bids were due, their executives and consultants steamed about not being told in advance about the formulas CMS would be using to evaluate the bids. But for the bids MA plans had to submit for 2012 by June 2011, CMS did furnish in advance the specific standards for evaluating whether bids would be suitable, and the process from all accounts went much smoother.

It appears that the Dec. 20 memo on star-ratings changes follows the same mold. The unprecedented amount of advance notice covers not only likely new measures for star ratings, complete with the methodology that would be used for them, but also star measures that CMS is considering "retiring." The agency even gave considerable details on measures it was considering for the future and that it is still up in the air about.

Is this as much progress as it seems? Or does CMS still need to go a lot further before earning kudos for being transparent?

Growth in U.S. Health Spending Remains Slow in 2010

DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
Room 352-G
200 Independence Avenue, SW
Washington, DC 20201
Office of Media Affairs
MEDICARE NEWS

FOR IMMEDIATE RELEASE Contact: CMS Media Relations Group
Monday, January 09, 2012 (202) 690-6145

Growth in U.S. Health Spending Remains Slow in 2010
Health spending growth at historic lows for second consecutive year

U.S. health care spending experienced historically low rates of growth in 2009 and 2010 according to the annual report of national health expenditures (NHE) published in the January issue of the journal Health Affairs.

Analysts at the Centers for Medicare & Medicaid Services (CMS) report in the article that the increase in spending for 2009 represents the lowest rate of increase in the entire 51 year history of the NHE. The low rate of growth, the data show, reflects lower utilization in health care than in previous years. The report notes that U.S. health care spending grew only 3.9 percent in 2010, reaching $2.6 trillion or $8,402 per person, just 0.1 percentage point faster than in 2009.

In 2010, as health spending growth remained low, growth in U.S. economy as reflected in gross domestic product (GDP) (4.2 percent) rebounded. As such in 2010, the health spending share of the overall economy was unchanged at 17.9 percent. In the past, this share has increased, rising over time from 5.2 percent in 1960.

“We have worked hard since the passage of the Affordable Care Act in 2010 to lower health care cost growth,” said Marilyn Tavenner, acting CMS administrator. “We believe that the tools in health reform will help keep health care cost growth low while improving the value of care for consumers.”

Key findings from the new report include:

• Household health care spending equaled $725.5 billion in 2010 and represented 28 percent of total health spending, slightly lower than its 29 percent share in 2007. Growth in total private health insurance premiums slowed in 2010 to 2.4 percent from 2.6 percent in 2009, continuing a slowdown that began in 2003. Despite this deceleration, for the first time in seven years, the growth in premiums exceeded the growth in insurer spending on health care benefits, with the net cost of insurance increasing by 8.4 percent or $11.3 billion in 2010. Out-of-pocket spending by consumers increased 1.8 percent in 2010, accelerating from 0.2-percent growth in 2009.

• Retail prescription drug spending (10 percent of total health care spending) grew only 1.2 percent to $259.1 billion in 2010, a substantial slowdown from 5.1-percent growth in 2009 and the slowest rate of growth for prescription drug spending recorded in the NHE.

• The federal government financed 29 percent of the nation’s health care spending in 2010, an increase of six percentage points from its share in 2007 of 23 percent, and reached $742.7 billion. Part of that increase came from enhanced Federal matching funds for State Medicaid programs under the American Recovery & Reinvestment Act which expired in 2011. Medicare spending grew 5.0 percent in 2010, a deceleration from growth of 7.0 percent in 2009.

• Medicaid spending increased 7.2 percent in 2010, slowing from 8.9-percent growth in 2009.

• The state and local government share of total health spending declined from 18 percent in 2007 to 16 percent in 2010 and totaled $421.1 billion, in part due to the temporary assistance in the Recovery Act.

• Hospital spending, which accounted for roughly 30 percent of total health care spending, grew 4.9 percent to $814.0 billion in 2010, compared to growth of 6.4 percent in 2009.

• Growth in private health insurance spending for hospital services, which in 2010 accounted for 35 percent of all hospital care, slowed considerably in 2010.

• Physician and clinical services spending, which accounted for 20 percent of total health care spending, grew 2.5 percent to reach $515.5 billion in 2010, slowing from 3.3-percent growth in 2009.

• Private businesses financed $534.5 billion, or 21 percent of total health spending in 2010, down from a 23-percent share in 2007.

The NHE report, prepared annually by the Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary, summarizes recent trends in health care spending based on the most current data sources. Available historically since 1960, the NHE represents the official estimates of total health care spending in the United States and measures annual health spending by the types of goods and services delivered (hospital care, physician services, retail prescription drugs, etc.), by the programs and payers that pay for that care (private health insurance, Medicare, Medicaid, etc.), and by the sponsors who are ultimately responsible for financing that care (private business, households, and governments).

Information in this report can be accessed at the following web location:
http://www.cms.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp#TopOfPage

Today's Datapoint

14.5% … of the population in Washington state (at least 1 million people) now lack health coverage, according to the state’s Insurance Commissioner Mike Kreidler (D), who called it “a grim milestone.”

Quote of the Day

“If we can make [insurance exchanges] easy to use, one-stop shopping we will get greater enrollment. If Medicaid and the exchanges are harmonized, [enrollees] will be able to enter the system with a single application. But these systems are going to have to work flawlessly and at scale.”
— John Kaelin, vice president for health reform at UnitedHealth Group, told AIS’s Health Plan Week.