UnitedHealth Hopes to Grow Non-Health Insurance Business

July 26, 2010

Yet another major health plan hopes to grow revenues and profits through a new mix of products and services beyond the core medical insurance business.

UnitedHealth Group (Minnetonka, MN) said it hopes to expand its healthcare services businesses – adding that these non-health insurance lines could eventually account for 30% to 40% of company operating earnings, up from 20% today. 

United also announced the formation of an “emerging businesses group” led by Rick Jelinek, most recently CEO of United’s Medicaid business.  Jack Larsen takes over Medicaid, while Tom Paul becomes CEO of United’s Medicare business. 

I have to admit, Jelinek has landed a cool job — pulling together new product ideas from across the enterprise, identifying new business opportunities resulting from reform, and leading a kind-of entrepreneurial research and development arm. 

Extended coverage appears in the July 26 issue of Carl Mercurio’s Health Plan Market Trends Letter.


Meaningful Use Perspectives and Resources

July 23, 2010

July 15, 2010 by John Moore  

Everyone seems to have an opinion, or at least has written something, about the final Meaningful Use (MU) Rules that were released on July 13th.  Of the multitude of posts and articles out there on the net, there the top three to get you started are:

  1. ONC Chief, David Blumenthal’s article in the New England Journal of Medicine that was published on the same day wherein Blumenthal provides a clear abstract of the rules (the actual rules are 864 pgs in length and not a bad read if you have the time) in a easy to read and understand format.
  2. Next, head over to the Dell website for a post by their own Dr. Kevin Fickenscher who gives an excellent background on the broader HITECH Act, the origination of the MU rules as well as taking a look at companion rules for Certification of EHRs and the new Privacy & Security rules that were also recently released.
  3. Last, but certainly not least is a visit to John Halamka’s site where he provides a freely available, with no need to provide attribution, deck of slides that gives the big picture view of the final MU rules.

With such great resources out on the net, we at Chilmark Research see little need to write an in-depth review of these rules. That being said, we will provide some quick points of analysis.

1) Clearly, HHS listened to the market and the 2,000 comments it received and has relaxed the final MU rules significantly.  If any provider or hospital is still complaining, well they may be the type to complain no matter what.  These rules, while still challenging for some, are certainly doable.  Time to stop talking and get down to work.

2) Thankfully, probably to the chagrin of payers, the requirements to conduct administrative functions (eligibility checking and claims processing) from within the EHR has been removed.  This has always been a fairly silly requirement as today, much of this process is already done electronically through the Patient Management (PM) system. So no need to duplicate it within the EHR, besides which it would have been tough for many an EHR company to build out this functionality in such a relatively short timeframe.

3) The consumer engagement sections of the MU rules also saw some relaxation, but it was reasonable.  What may prove more interesting here is the new requirement within the certification rules for EHRs that they provide health education resources for consumers within the context of their platform.  This may prove to be a real money maker for the likes of health content providers such as A.D.A.M, Healthwise, WebMD, among others.

4) While understandable that there was some pull-back on health information exchange as we saw in the draft MU rules, we were quite surprised that it was completely eliminated in the final rules for Stage 1.  HHS claims that this was done due to the lack of maturity in the HIE market.  Well, yes and no.  There indeed may not be a lot of multi-stakeholder, publicly-led HIEs today that are actively exchanging data, whether regional or state level, but there is a robust market for private HIEs.  It is unfortunate that HHS pulled back on this one for “information sharing for care coordination” was one of the primary precepts of the original HITECH legislation.  Sure, will likely see something within Stage 2, but that does not get clinicians familiar with the concept today.

5) What really caught us by surprise is a reference in the MU rules (pg 39 to be exact) wherein HHS states that they will not discuss the future direction of Stage 3 at all.  Nothing. Nada.  Does this portend a complete pull-back from Stage 3?  Hard to say, but it is clear that HHS wants to see how well Stages 1 & 2 go over in the market before it makes any further demands on providers and the EHR vendors that serve them.

6) Along with the release of MU rules, HHS also released the final rules for EHR certification.  While having not delved into these deeply, yet, the whole concept of “certification” is fraught with challenges, primary among them, technology lock-in.  It is here where Chilmark believes we will see the greatest challenges to indeed create an environment that fosters innovation, providing clinicians with tools they will readily wish to use while at the same time providing some level of certification. Frankly, we do not believe it can be done. Congress really wrapped an albatross around the neck of HHS when they wrote that into the legislation.

What were they thinking?

5 Dumbest Acts in Managed Care

July 22, 2010

Newsflash: Leslie Margolin, president of WellPoint’s Blue Cross of California — the company that single-handedly saved the cause of healthcare reform by trying to hike premium rates at the most politically inopportune time — has resigned after two and a half years on the job.  WellPoint says the resignation had nothing to do with the rate dispute.  But it got me thinking about some of the stupid things managed care executives have done over the past 13 years (my tenure covering the industry).  Here are my top five dumbest acts in managed care.

1. UnitedHealth Stock Options Backdating Scandal: William McGuire, M.D., chairman and chief executive of UnitedHealth — who is widely considered the driving force behind the company’s rapid and successful rise to prominence — resigned in 2006 in the wake of a stock options backdating scandal that rocked the company.  An independent report commissioned by United’s board said that 1 million options granted to McGuire were probably backdated, along with millions of other options granted to thousands of employees.  The scandal made McGuire — whose options were worth about $1 billion — another poster boy for executive hubris and corporate greed.

2. Vogt Speech: Remember John O. Vogt, M.D.?  He was the Kaiser utilization management specialist who in 1995 made perhaps the dumbest speech in the history of managed care, stating that he and a colleague — while drinking bourbon and whiskey on a flight to Los Angeles — came up with a plan to reduce Kaiser’s medical costs in Texas by 30%.  Two years later, the speech surfaced as evidence in a wrongful death lawsuit in which the family of a Texas man claimed his death from a heart attack was related to the cost-cutting initiative.  Kaiser settled the suit for $5.4 million and subsequently exited the Texas market.  Vogt apologized for the speech, stating it “was an attempt at livening up a very dry subject…Many times during the presentation, I made facetious comments and attempts at humor that were not true statements.”

3. Colby and the WellPoint “Code of Conduct:”  David Colby — riding high as WellPoint chief financial officer and heir apparent to the CEO post — was forced to resign in 2007 for unspecified violations of the company’s code of conduct.  It later came to light that Colby was being sued by various women, who according the Associated Press depicted him as “a world-class, love-’em-and-leave-’em sort of guy who romanced dozens of women around the country simultaneously, made them extravagant promises and then went back on his word with all the compassion of a health insurance company denying a claim.  One woman says Colby got her pregnant and harangued her via text message (“ABORT!!”) to terminate the pregnancy. He also allegedly…proposed to at least 12 women since 2005.”  It’s hard to tell what’s true and what isn’t in these salacious claims, but as a general rule this type of behavior is bound to get you in trouble.

4. Tonik on The Daily Show:  Hard to imagine why WellPoint’s Blue Cross of California agreed to participate in an Ed Helms report in 2005 on Comedy Central’s The Daily Show about Tonik — a health plan aimed at young and uninsured individuals.  After all, the segment includes exchanges such as the following: 

WellPoint executive: “It’s not their parents’ health insurance plan.” 

Helms: “Their stupid health insurance covered everything.”

But then again, considering that Tonik went on to be one of WellPoint’s top-selling products, maybe this wasn’t such as dumb move after all.

5. WellPoint Trys to Raise Premiums in California up to 39%:  Finally, as mentioned above, WellPoint’s attempt to push through hefty rate hikes for individuals in California created a political firestorm that gave Obama’s faltering healthcare reform effort the boost it needed for final passage.  Rep. Michael Burgess (R-TX) summed things up in Congressional hearings on the proposed hikes when he asked WellPoint chief executive Angela Braly, “You had to know this was going to be trouble….Did you make a judgment as to whether this was the best time to do this?”

BCBS-NC Cutbacks, Diversification – The Shape of Things to Come

July 20, 2010

Blue Cross Blue Shield of North Carolina chief executive Brad Wilson issued a memo to employees last week titled “Our urgent need to change.”  He was referring to his company, but his thoughts apply to all health plans.

BCBS-NC will cut costs, diversify into new businesses and squeeze providers to remain “competitive and relevant.”  I expect similar soul-searching from other plans as the forces of healthcare reform, a hostile Administration, and a deteriorating commercial risk business hammer industry profits. 

“We are going to be a leaner, more focused company,” Wilson said.  Leaner?  Yes.  More focused?  No.  In fact, the company is committing to further diversification.  Semantics aside, other plans will follow this prescription.

 Extended coverage appears in the July 19 issue of Carl Mercurio’s Health Plan Market Trends Letter.

Jensen Likes CVS Caremark

July 15, 2010

Bret Jensen, chief investment strategist for Simplified Asset Management, cites three catalysts that he believes should drive CVS Caremark stock higher.  Take special note of number three.

  1. The public fight with Walgreens concluded with an agreement that should not affect other negotiations with PBM customers
  2. This defensive play should hold up well if/when economic growth decelerates which is highly likely
  3. The New CEO is not tied to the PBM business which could mean spinoff or divestiture if division continues to hold back rest of company at some point in the future

McDonald Initiates with Buys for WellPoint, Health Net, Triple-S

July 13, 2010

 Equity analyst Carl McDonald (who recently made the move from Oppenheimer to Citigroup) has initiated coverage on the managed care sector with “buy” ratings for Health Net, Triple-S and WellPoint – three companies with lots of cash and room for margin improvement.  He has rated as “hold” Aetna, Cigna, Coventry and UnitedHealth.  McDonald agrees that 2010 will be a very good year for plan profits.  But the problem isn’t 2010; it’s every year after.  Extended coverage appears in the July 12 issue of Carl Mercurio’s Health Plan Market Trends Letter.

Health Plans Rate Low as Trusted Source of Information

July 9, 2010

From Deloitte’s 2010 Global Survey of Health Care Consumers:

Consumers in all countries identify academic medical centers and medical societies/associations (physicians) as their most trusted sources of information on the effectiveness and safety of treatments….Other sources of information such as government, health insurers, pharmacies, life sciences companies, independent health websites and other hospitals are consistently rated lower across the countries surveyed.

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