Express-Scripts to Acquire Medco

July 21, 2011

Now this is what I call a merger.  Pharmacy benefit manager Express-Scripts announced it will acquire rival Medco Health Solutions for $29 billion in cash and stock.  We’ll discuss the many implications in this week’s issue of Health Plan Market TrendsBut this is exactly the kind of deal I’ve been expecting in the managed care sector for some time — like organizations consolidating to squeeze out cost efficiencies and shore up margins.  Look for major health plans to do the same.


BCBS-MA Global Capitation Program Shows Modest Cost Savings, Improved Quality

July 19, 2011

There’s good news and bad news for the Blue Cross Blue Shield of Massachusetts Alternative Quality Contract global capitation program.  A study published this month in the New England Journal Of Medicine finds the program resulted in healthcare cost savings of about 1.9% and improved quality.  However, the study says, “The savings associated with the intervention do not imply that total payments made by BCBS declined.”  After factoring in quality bonuses, shared savings and investment, payouts by BCBS-MA actually rose.  Notes the study:

The AQC was associated with modestly lower medical spending and improved quality in the first year after implementation. The savings derived largely from shifting outpatient care to providers who charged lower fees and were seen primarily among high-risk enrollees….The improvements in quality are probably due to a combination of substantial financial incentives and BCBS data support. AQC quality bonuses are much higher than those in most pay-for-performance programs in the United States, since they apply to the entire global budget rather than to physician services alone or PCP services alone.

U.S. Healthcare Spending — Diminishing Returns

July 18, 2011

Consider the Evidence on trends in U.S. healthcare spending versus other nations (hat tip Infectious Greed):

Our gain in life expectancy per additional health spending is much smaller than in other countries, particularly after the early 1980s when we reached expenditures of about $2,500 per person (in 2005 dollars) and life expectancy of around 74-75 years.

Being on Medicaid is Way Better than Being Uninsured

July 12, 2011

From a National Bureau of Economic Research study:

In 2008, a group of uninsured low-income adults in Oregon was selected by lottery to be given the chance to apply for Medicaid….In the year after random assignment, the treatment group selected by the lottery was about 25 percentage points more likely to have insurance than the control group that was not selected. We find that in this first year, the treatment group had substantively and statistically significantly higher health care utilization (including primary and preventive care as well as hospitalizations), lower out-of-pocket medical expenditures and medical debt (including fewer bills sent to collection), and better self-reported physical and mental health than the control group.

On West Penn Allegheny Revenues, Loses

July 11, 2011

Two bits of financial information about West Penn Allegheny Health System, which is being acquired by Highmark. 

1. WPAHS lost $146 million in the fiscal three years ended June 30, 2010 and an additional $20 million in the fiscal nine months ended March 31, 2011.

2. WPAHS gets about 24% of its revenues from Highmark.

Medicaid Studies Cause Controversy

July 11, 2011

A controversial Commonwealth Fund study suggests that for-profit Medicaid plans spend less on care, have higher administrative costs and deliver lower quality than not-for-profits.  Medicaid Health Plans of America calls the study “flawed” and argues that it draws universal conclusions about plan ownership from limited data.  But study author Michael McCue of Virginia Commonwealth University says he has been clear about the study’s limitations — especially concerning the quality data — adding it would be difficult to make a connection between higher administrative costs and lower quality.

A separate study from the U.S. General Accounting Office shows that 12% of primary care physicians aren’t accepting any new Medicaid patients, 43% are accepting some new patients, and 45% are accepting all new patients.  It also says physicians are as likely to accept a new uninsured patient as a new Medicaid patient.  Interestingly, practice capacity isn’t an issue, but rather Medicaid pay and administrative hassles.

While Medicaid patients do have problems getting access to physicians, the study shows that the vast majority of physicians see Medicaid patients and that’s good news, according to Katherine Iritani, who headed up the research for GAO.  To those who suggest the study illustrates Medicaid is a broken program — and by extension Obamacare is a bad idea for steering people into Medicaid — Iritani says, “That’s reading a lot more into these results than we would.”


Reform and Health Plan Membership

July 8, 2011

Here’s a slide from a recent WellPoint presentation showing projected membership by type of healthcare coverage pre and post reform.  While the biggest gains are in government programs like Medicaid and Medicare, the analysis also suggests the commercial market will expand.

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