by Dave Chase
Further, BUCA administrators often charge $30 to $60 PEPM to pay bills using this see-nothing, know-nothing method. Pretty good gig if you can get it. Large insurance carriers typically auto-adjudicate 90 percent or more of all claims.78 Dendy’s firm recently intervened on behalf of a Fortune 100 company on a hospital bill for well over $2 million. Even he was shocked to learn that the claims administrator was ready to pay on the basis of the single-page UB.
It’s no surprise that claims administrators often have clauses in their agreements with employers that would only fly in health care. What’s surprising is that so many employers are willing to sign them. For example, contracts stipulate that claims data is proprietary and owned by the carrier, meaning you don’t get to see your own claims data. Sometimes they’ll use HIPAA privacy as a smokescreen prevent you from having your data analyzed by an outside party, an issue HIPAA effectively accommodates.
Second, claims administrators will insist on extremely limited claim audit clauses. One large company I’m aware of with more than two million claims per year had an audit clause that gave it the right to audit just 200 claims of the administrator’s choosing and only on the carrier’s premises. That’s 0.01 percent of all claims for what is often a company’s first or second largest expense after payroll.
Limited audit clauses often reflect an agreement between insurance carriers and health care providers. The insurance carrier will sign a PPO agreement with a hospital that, absurdly, doesn’t allow the carrier itself to audit claims. The alleged reason is that it’s all part of the give and take in negotiations, in which the carrier “demands” a certain discount in exchange for not auditing the claims they pay from that hospital.79
This dynamic is why transparent medical markets featuring direct relationships between employers and hospitals have arisen (See Chapter 15 to learn more). By directly contracting with a health care provider, employers can secure significant savings. More direct, streamlined payment makes it valuable for high-value health care providers as well.
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* There are certainly some excellent brokers that do their best for employers, but the overwhelming majority have undisclosed conflicts of interest that favor of insurance carriers. In this book, the term benefits consultant or advisor refers to people who provide a broader range of services and expertise than simply signing up clients on behalf of a carrier. Many of them bring a more sophisticated brand of professionalism to their clients. See Chapter 11 for a more complete treatment of this critical subject.
Case Study
City of Milwaukee
John Torinus
Because the economic pain of out-of-control medical costs is so high and Federal Government reforms are so slow, school districts, counties, and municipalities are moving on their own to find savings across the four major platforms for containing health care spending: self-insurance, consumer-driven incentives and disincentives, on-site proactive primary care, and value-based purchasing.
The City of Milwaukee, Wisconsin, with 6,500 employees is one spectacular example. The city has held its health care costs flat for the last five years, stopping its previous hyper-inflationary trend of eight to 9 percent annual increases. Milwaukee spent $139 million on health care in 2011 before switching over to a self-insured plan in 2012. Costs dropped to $102 million in 2012 and have stayed at about that level ever since—even in the face of 6 percent annual inflation for nationally employer plans over the same period.
If the old trend had continued, health costs for 2016 would have been about $200 million, double what they actually were. Instead, the cost savings have had many additional positive ramifications: raises for county employees, no layoffs, flat employee premium contributions, better health outcomes for employees and their families, improved productivity, lower absenteeism, and less pressure to raise taxes.
Michael Brady, benefits manager, led this intelligent management approach in close collaboration with the mayor, city council, and unions. As with other enlightened group plans, there are many moving parts. Here’s a sampling.
•Twelve percent of costs are paid by employees, but these have stayed flat because employees are making better decisions about family health and care purchases.
•An onsite wellness center and workplace clinic, headed by nurse practitioners, have sharply reduced hospital admissions. Onsite physical therapy was added last year. These services are free for employees and spouses.
•Relatively low deductibles (now $750 per single employee and $1,500 per family) were installed to create a consumer-friendly environment.
•Coinsurance was set at 10 percent for members who use UnitedHealthcare’s Premium Provider program, which uses only doctors designated as top doctors by UnitedHealthcare. Coinsurance is 30 percent for providers outside that group. This tiered approach, aimed at improving health outcomes, is a form of value-based purchasing.
•Participants in the city’s wellness program can earn $250 in a health account. Good progress has been made on hypertension and smoking (now 12 percent vs. U.S. average of 14 percent), but, as with other employers, there’s not been as much traction on obesity. There have been some improvements on chronic disease management of diabetes.*
•A $200 ER copay has cut nonurgent ER visits by 300 per year.
•An intense program to reduce injuries, started in 2008, has resulted in a 70 percent drop in injury hours off work. The program has saved $10 million per year compared to the previous trend line.
•Milwaukee now spends about $15,000 per employee per year, well below the national average and not too far off the $13,000 at the best private companies.
Government entities are not known for bold innovation, so this track record is an eye-opener, especially in a unionized environment. The results, said Brady, are nothing short of amazing “considering changes in the city’s workforce demographics and the challenging environmental hazards that city employees regularly face.”
These changes have taken place at the same time that the nation as a whole has experienced much more disappointing progress from federal reforms, e.g., much higher deductibles for plans sold on ACA exchanges, double-digit premium rises for employers in many states, and a cost to the Federal Government of about $5,000 per subsidized plan member per year.
Clearly, most of the meaningful reform of the economic chaos from health care in this country is coming from self-insured employers, like the City of Milwaukee.
John Torinus is chairman of Serigraph Inc., a Wisconsin-based graphics parts manufacturer, and author of “The Company That Solved Health Care.”
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* While workplace wellness programs typically have no or negative ROI (see Chapter 8), approaches that use solid clinical evidence to address costly chronic illness and procedures without encouraging overtreatment are sometimes lumped into the same category as typical workplace wellness programs. However, they are highly different in goals, execution, and results.
Chapter 7
Criminal Fraud Is Much Bigger Than You Think
Most of us think of fraud in health care as the domain of a few bad doctors, similar to what exists in virtually any human enterprise. In reality, it adds up to a staggering $300 billion annually, roughly 10 percent of all spending.80 It is also remarkably straightforward to stop, but only if claims administrators—those actually able to stop it—do so. Yet most lack the financial incentives to do so, only making basic attempts after-the-fact that are like trying to stop fraud with a musket in an era of unmanned drones.
More alarming is that significant fraudulent gains may go to foreign actors. The world’s cybercrime hotspots are all outside the United States, according to Time.81 Infoworld82 explained why hackers want your health care data. Among other reasons, it has a much longer shelf-life than other targets like credit cards, which become useless once a consumer gets a new card. However, medical and insurance information has value for years.
If fraud weren’t bad enough,
the fact that it is leaving the U.S. economy makes it even more of an economic drain. Stopping fraud would be like providing the American economy with an annual recurring $300 Billion economic stimulus. Over two-plus years, that stimulus would be equivalent to the massive stimulus at the beginning of the 2008 financial crisis.
Health Insurance Carriers Are Acting Rationally
There are two key drivers of insurance carrier economics that are relevant to understanding criminal fraud (These issues were covered more thoroughly in Chapter 3).
1. Anything that drives health care spending upward, even paying fraudulent claims, economically benefits insurance carriers and claims administrators.
2. The ACA’s Medical Loss Ratio cap requires that 80 to 85 percent of premium dollars go to care, not marketing and overhead. Because fraud prevention isn’t considered care, this reduces economic incentives to invest in it. Technology and other solutions that prevent fraud are just another expense that eats into this government-mandated margin cap.
Even if an employer is self-insured, there is a spillover effect as insurance carriers are generally motivated to invest in technologies and services that fuel revenue increases rather than reduce spending. In other words, there isn’t a strong enough motivation to root out waste and fraud.
It’s important to highlight how only-in-health-care dynamics open the door to large-scale fraud in the first place. Pay and chase programs (covered in Chapter 3) are like paying a napping guard extra money to chase a criminal who just cleaned out the bank vault. According to private conversations with industry insiders, claims administrators are doing little to stop fraudulent claims. Instead, after allowing fraudulent claims to be paid, they chase after the thieves, receiving 30 to 40 percent of what they recover.
The Data Problem
More fraud creates more upward premium pressure that economically benefits insurance carriers, but takes from everyone else. The root of this is the U.S. health care system’s current claims methodology that is fraught with disconnection and a lack of transparency and control between employers, patients, providers, and insurers. In contrast, the financial industry has been using preventive methodologies for decades, giving the consumers both security assurances and control over their credit, resulting in much lower credit card fraud rates—just 0.07 percent of total volume.83 This means the cost of health care fraud is 14,285 percent higher than credit card fraud.
The comparably large and equally complex health care industry has generally avoided adopting similar prevention methodologies, erroneously citing a billing and payment system that is too complex for it to work. As a result, employers have resorted to taking a reactive and largely ineffective approach to recovering money after claims have been paid. This “pay and chase” method delivers a dismal average return rate of only 2 to 4 percent—enough to say something is being done, but a drop in the bucket compared to the full magnitude of the problem.84
When it comes to auditing claims to identify fraud, insurance carriers have historically relied on sampling methodologies to determine whether or not the claims process is sufficiently secure. Health care claims reviews are done independently on a per-visit basis and are largely a paper-driven process. This allows fraud and waste to fall through the cracks because there is so much disparate data and no standard format for how it is analyzed and processed.
Separately, the industry has pushed to auto-adjudicating claims as quickly as possible, a good thing if not for the lack of correspondingly robust implementation of fraud (and waste and abuse) detection and prevention technologies and processes. “The current claims process is predicated on rapid processing of health care transactions with little real emphasis on the legitimacy and accuracy of the claims themselves,” states Scott Haas, Senior Vice President of Wells Fargo Insurance Services USA, Inc. “The Department of Labor claim processing regulations emphasize the time frame in which claim payers must either pay or deny claims. The regulations assume payers are actually diligent in assessing whether or not the claims require any form of audit or scrutiny.”
Such antiquated processes, disparate data, and unintended regulatory consequences creates a macro-situation ripe with subjective interpretation of claims and claims data, often making the eventual reconciliation of plan coverage and payment too late. Often, this also leads to legitimate claims being denied erroneously, further adding to the frustration of everyone involved in the claims paying process. It’s a costly failure for everyone.
Connecting the Data Points
Fraud only becomes visible when you connect all of the care participants and events. Here are two real-life examples I’ve seen.
•A woman undergoing multiple hysterectomies
•A man getting multiple circumcisions from different providers in a single week
Technically, these cases each meet all of the basic claims review and adjudication criteria (e.g., all of the fields are filled out and don’t have dates where numbers should be or numbers where text should be). Therefore, they pass the sufficiency test and the claims are paid. However, it’s obvious that both are fraud.
The problems from not connecting the dots can be less obvious than multiple instances of one-in-a-lifetime procedures. One example is a case where four doctors provided the same service to the same patient during the same procedure. When each provider’s claim is viewed independently, the claim meets sufficiency criteria and thus passes the paid claims review test. But the total amount they’re charging far exceeds the total allowable amount for the contract.
Big data and technologies similar to those used for services like Visa Fraud Protection make it possible to identify, predict, and minimize fraud through advanced analytics for detecting fraud and validating claim accuracy and consistency.
Payment integrity technology is available that can analyze disparate claims data at the employer, patient, provider, and insurance carrier levels, simultaneously across all health care systems. Such technology-based systems can connect a patient’s behavior with the relevant physician behavior. For example, a patient who has had a hysterectomy in the past and suddenly has pregnancy-related claims should be flagged. By contrast, the financial services industry has used similar behavior patterns both at the retailer and consumer levels to identify purchases that do not fit the consumer’s normal behavior since the earliest days of credit cards.
Payment integrity solutions break the reactive “pay and chase” approach with innovative solutions that could nearly eliminate fraud, making it unnecessary for employers to chase after already spent money. These types of solutions will play a critical role in reducing the exorbitant amounts of money lost to fraud and waste in the health care system every year.
Chapter 8
Are Workplace Wellness Programs Hazardous to Your Health?
One area of widespread spending that typically has little benefit—and no cost savings—is workplace wellness programs. To start, they’re usually sold on mathematically impossible ROIs and undisclosed commission models that enormously benefit brokers. This has caused Al Lewis, former workplace wellness industry proponent turned leading critic, to offer a $2 million reward to anyone who can prove that the industry has reduced employers’ medical claims costs enough to cover its $8 billion annual cost.85 So far, his money is safe.
By way of background, Lewis was a workplace wellness industry insider, called one of the founding fathers of disease management.86 Now, he’s CEO of Quizzify, a provider of employee health literacy programs, and author of several best-selling books on measuring the outcomes of employee health improvement programs, especially workplace wellness programs (check out Surviving Workplace Wellness and Why Nobody Believes the Numbers).
Promoters place workplace wellness programs among the most important advances in medical history, equivalent in impact to vaccines and antibiotics (their words).87 Detractors call it a “scam.” An entire website, www.theysaidwhat.net, is devoted to exposing its many alleged lies and misdeeds.
Obviously, it c
an’t be both a significant advance and total scam. It’s critical to know which though, because there is a very specific distinction between workplace wellness programs and everything else in this book. Whereas everything else is an unfortunate byproduct of insuring your employees in today’s status quo market, these programs are a totally optional undertaking.
Workplace wellness program fees typically cost employers $100 to $150 per employee per year. Plus a similar amount in employee incentives to encourage usage. Plus lost work time to participate in screening programs and complete health risk assessments. Plus administrative time to ensure compliance with relevant laws and regulations. Add these up and you start to see that the total costs are much more than just vendor fees. All this to generate great employee dissatisfaction, judging by the fact that a 2016 Slate article entitled “Workplace Wellness is a Sham” generated more shares than any other Slate article on either health care or the workplace that year.88
Lewis advocates a much simpler approach to preventive care, regular screenings based on well-established clinical guidelines developed by the U.S. Preventive Services Task Force (USPSTF), an independent, volunteer panel of national experts in prevention and evidence-based medicine.89 To balance the harms of overscreening, misdiagnosis, and overtreatment against the benefits of early detection, the USPSTF guidelines recommend far fewer blood screenings, far less frequently than most vendors advocate. These guidelines are easily accessible through the Choosing Wisely initiative, a partnership between the American Board of Internal Medicine Foundation and Consumer Reports that seeks to advance a national dialogue on avoiding wasteful or unnecessary medical tests, treatments, and procedures.90