BNET Healthcare

I missed it at the time, but a week ago the WSJ ran an interesting roundtable on healthcare reform with an unusual cast of CEOs — WellPoint’s Angela Braly, the Mayo Clinic’s Denis Cortese, Pfizer’s Jeffrey Kindler, and Novartis‘ Daniel Vasella. Rounding out the discussion was Sen. Max Baucus, who recently released his own 98-page outline for healthcare reform.

The discussion itself definitely started off on an odd foot, as the CEOs not only chose “fighting obesity” and tort reform as their two highest healthcare-reform priorities, they initially left universal coverage off their top-five list altogether, and only added it back once they realized how silly that looked. (As for fighting obesity and tort reform, both strike me as quite secondary to the question of escalating medical costs that are steadily rendering coverage unaffordable even as the care provided fails to make Americans much healthier.) But a few interesting comments emerged in the conversation that followed, which I’ve excerpted here:

Mayo’s Cortese on obesity: It came up in the realm of prevention, but the obesity component so highly resonated with the group that it rose as a point all by itself. The issue of education, the issue of physical exercise, the issue of having physical exercise as part of the school activities all became important components of this discussion, because the estimates of unfunded liabilities that we have into the future, particularly for Medicare, do not include the impact of obesity. No one’s really estimated that just yet.

Novartis’ Vasella on tort reform: The vaccine [business] has completely changed because of litigation. Companies left the industry, and only with the bird flu did people start to ask, why aren’t more companies in the vaccine business? And it turns out that the whole litigation issue around vaccines was a big deterrent for any pharmaceutical company to be in that field, and only when tort reform happened — [when what people could get] was capped and it was made more difficult — that really changed. Now more players are interested than they were before.

Mayo’s Cortese on quality: When we talk about the No. 1 problem with regard to health care, most people would say we’re not getting what we pay for…. So why don’t we begin to measure the elements of quality, and those elements are actually quite measurable. They’re the outcomes that you desire, particularly around a particular disease…. We would propose that you might start with maybe the top five diseases in the country. Those top five diseases probably account for roughly 60% to 70% of all the spending, especially in the Medicare environment.

Safety is another… element. Safety is easy. It should be zeros. The third is service: access for care, patient satisfaction, etc. These are all measurable. So making it an effort to really measure, define and measure value is crucial because we’re going to propose that pay be related to the outcomes of those measurements…. So if we can move Medicare to an environment where they start paying for value, that would begin to drive the system. Medicare is starting to pay based on value, and there are many sources of those value-equation numbers.

Wellpoint’s Braler: [W]e think the regional variation of health-care delivery and the cost associated with that actually helps us in that define and measure category, so we can see that there are places where health care is being delivered with higher value and we ought to strive for the models that produce those results.

Sen. Baucus: I believe strongly that the opportunity is here for us in America to finally have a health-care system that we can really be proud of…. My judgment is that we’ve spent way too much time with patchwork, fixing this part here and that part there, push on the balloon, it bubbles up someplace else, and we just are getting nowhere and we have what we have — namely 40-some million people who don’t have health insurance, 25 million underinsured, a reimbursement system that is out of whack. It rewards volume, not quality. We also are not addressing costs, because costs are going up so much in our country. Costs to individuals, costs to businesses. And also the cost to the federal government with the Medicare trust fund going through the roof….

I know the problem of obesity. I got to tell you, I think that’s tepid. I just don’t think the bully pulpit is going to be enough to sufficiently fight obesity. We’re going to have to have incentives in here. We’re going to have to have teeth in here.

PS: No, it’s not an accident that you don’t see any excerpts from Pfizer’s Jeff Kindler, who didn’t contribute much beyond bromides about the need to invest in healthcare and health professionals, including primary-care doctors.

Obama considers healthcare reform “integral” to economic recovery — After naming Melody Barnes, a former chief counsel to Sen. Ted Kennedy, as director of the White House Domestic Policy Council, President-elect Barack Obama said she would be primarily focused on economic-recovery work. But he went on to say: “An integral part of that course will be health care reform, and she will work closely” with his health team, including expected HHS Secretary Tom Daschle. [Source: CQ Healthbeat via kaisernetworks.org]

Bayer HealthCare pays $97.5M in settlement – The Bayer AG unit agreed to pay the U.S. government $97.5 million to settle charges that it ran a “cash for patient” scheme in which it allegedly offered kickbacks to distributors of diabetic supplies to convert their patients to Bayer products from those of its competitors. The scheme allegedly involved 11 suppliers and ran from 1998 to 2007. [Source: Reuters, Modern Healthcare]

St. Vincent Health pays $1.9M settlement — The Erie, Penn., health system agreed to pay the U.S. government $1.9 million to settle a whistle-blower lawsuit that charged St. Vincent Health Center had improperly inflated its costs to boost reimbursements under Medicare’s “outlier” program. That plan is designed to cover the costs of unusually expensive care at hospitals. [Source: Modern Healthcare]

Hospital prices rose 0.5 percent in October — Medical inflation at hospitals stood at 0.5 percent in October, down slightly from 0.6 percent the prior month, according to the Bureau of Labor Statistics. Over the preceding 12 months, hospital prices rose 6.5 percent, compared to 7.7 percent in the prior year. [Source: Modern Healthcare]

Medical debt collectors to see higher volume under healthcare reform — Assuming reform plans expand access to healthcare via mandates to purchase health insurance, medical debt collectors should see their volume of business rise, because more people will see doctors and run up bills, analysts argue. This assumes that individuals still face high deductibles and co-payments. [Source: InsideARM]

The drawbacks of comparative effectiveness research — The NYT’s Andrew Pollack takes a close look at one of the bigger and more significant comparative-effectiveness trials in recent history — the Allhat study that suggested cheap diuretics were as effective in treating high blood pressure as more expensive branded drugs — and why it had such a limited effect on actual medical practice. Sobering stuff for folks like me who still think comparative-effectiveness work needs to play a bigger role in improving healthcare quality and restraining costs. [Source: NYT]

Taiwanese manufacturers open hospitals in China — Instead of building high-tech Western-style hospitals that cater to expatriates and wealthy Chinese, Taiwanese companies — who also turn out to be big manufacturers in China — are opening low-cost facilities that aim to provide quality healthcare to ordinary Chinese. [Source: WSJ]

Housing collapse forces choice between paying mortgage, medical bills — The WSJ profiles individuals who had tapped home-equity loans and similar mortgage-based credit in order to pay big medical bills — sources of cash that have dried up as housing values fall and credit freezes up. [Source: WSJ]

Early signs are good that the incoming administration of President-elect Barack Obama will push major healthcare reform early next year. As that effort gears up, though, expect to see opponents unleash a blizzard of misinformation aimed at delaying or preventing real change — largely because any serious reform will directly jeopardize the business models of powerful hospitals, health-insurance providers and other big players in our complex but dysfunctional healthcare system.

Which is why it’s nice to see that Overtreated author Shannon Brownlee and oncologist Ezekiel Emanuel — who is also the brother of incoming White House Chief of Staff Rahm Emanuel — recently published a helpful debunking of five persistent myths about the need for reform and its possible cost and scope.

Myth #1: America has the best healthcare in the world. Although less prevalent than it used to be, the idea that the U.S. medical system outperforms those in other nations has proven surprisingly stubborn — not least because of a public fascination with costly high-tech equipment and “miracle” drugs that rarely prove anywhere near as effective as advertised. In aggregate, the U.S. spends far more per capita on healthcare than any other country, but fares poorly in major health measures ranging from life expectancy to obesity to cancer and heart-disease survival.

Myth #2: Somebody else is paying for your health insurance. Most people don’t realize that employer-provided health insurance depresses wages — and that the effect is getting worse over time as insurance costs skyrocket.  Over the past five years, insurance premiums have risen four times faster than wages, and businesses are increasingly forcing workers to pay a larger share as a result.

Myth #3: We would save a lot if we could cut the administrative waste of private insurance. This notion has been an article of faith in the progressive movement for years, but Brownlee and Emanuel argue that even if administrative costs are higher at private insurers than in government programs like Medicare, lowering them wouldn’t save enough money to expand coverage to the uninsured — and that this “health dividend” would be a one-time event, because administrative costs have relatively little to do with medical-cost inflation.

Myth #4: Healthcare reform is going to cost a bundle. Done right, reform would reduce overuse of expensive healthcare technology and cut back on preventable medical error — probably two of the greatest cost drivers in the entire system. Emphasizing evidence-based medicine and making better use of IT systems such as electronic medical records are the best bets for changing what these writers call “the spectacularly wasteful and expensive way doctors and hospitals deliver care.” Comprehensive reform could conceivable save as much as $1.4 trillion over ten years while extending coverage to the uninsured.

Myth #5: Americans aren’t ready for a major overhaul of the health-care system. In fact, the healthcare system’s limitations are growing more obvious as rising premiums and cost-shifting render insurance coverage unaffordable for increasing numbers employers and individuals. A recent survey in the New England Journal of Medicine found that 40 percent of Americans give the U.S. system a poor rating, and 70 percent believe it needs major changes or a complete overhaul.

As Brownlee and Emanuel conclude:

Now is not the time to think small, to cover a few million Americans and leave the bigger job of controlling costs and improving quality for another day. We can’t afford not to reform the delivery system as soon as possible. At 17 percent of gross domestic product, health care is the biggest single sector of the economy, and it’s consuming a larger and larger proportion every year. According to CBO projections, health care will account for 25 percent of GDP by 2025 and 49 percent by 2082. That’s simply unsustainable. Any plan that reforms health care has to do more than simply cover the uninsured. The nation’s health and wealth depend on it.

Image of Myth Busters Jamie Hyneman and Adam Savage via Flickr user Rob Lee, CC 2.0

One of the reasons healthcare costs keep rising astronomically is the fact that hospitals find it impossible to disengage from the medical arms race that’s gripped the industry. Shiny and expensive new technology exerts a powerful influence on patients and doctors alike, drawing them to medical centers who can tout their state-of-the-art facilities — whether or not those new cath labs or MRI scanners really do much to improve the quality of care.

At least, that’s the abstract way of thinking about it. In a rare confession from the upper echelon of the medical-center establishment, Beth Israel Deaconess Medical Center CEO Paul Levy recently wrote at The Health Care Blog about his losing battle to stave off the purchase of a million-dollar Da Vinci surgical robot made by Intuitive Surgical:

Many months ago, I wrote about the da Vinci Robot Surgical System and expressed doubts about whether there was evidence to support the clinical efficacy of this equipment, as opposed to the marketing efficacy of the company selling it. Well, the time has come to graciously say, “Uncle!”

Without making any representations about the relative clinical value of this robotic system versus manual laparoscopic surgery, I am writing to let you know we have decided to buy one for our hospital.

Why? Well, in simple terms, because virtually all the academic medical centers and many community hospitals in the Boston area have bought one. Patients who are otherwise loyal to our hospital and our doctors are transferring their surgical treatments to other places.

Prospective residents who are trying to decide where to have their surgical training look upon our lack of the robot as a deficit in our education program. Prospective physician recruits feel likewise. And, these factors are now spreading beyond urology into the field of gynecological surgery. So as a matter of good business planning, concern for the quality of our training program, and to continue to attract and retain the best possible doctors, the decision was made for us.

And thus another attempt to hold the line against unproven but futuristic-sounding medical technology bites the dust. When even a hospital CEO has to bow to economic reality — divorced though it may be from medical evidence — any hope of reining in skyrocketing medical costs has to look faint indeed, barring a radical restructuring of the healthcare industry.

Image via Flickr user army.mil, CC 2.0

As the movement for healthcare reform gathers momentum, Senate Finance Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) have introduced a “discussion draft” of legislation that would link a small portion of Medicare’s hospital payments to the quality of care provided by each facility. Starting in FY 2012, acute-care hospitals that met standardized performance goals would receive a one percent bonus, which would gradually increase to two percent by FY 2016. Hospitals that did poorly on these measures would be paid less to keep the program revenue-neutral.

According to Baucus and Grassley:

The quality measures will be chosen from a list that has been agreed upon by relevant stakeholder organizations, such as the National Quality Forum, as representing the best practices in inpatient hospital care. Initially, the program would measure performance in the treatment of heart attacks, heart failure, pneumonia, and surgical care. It would also measure overall patient satisfaction of hospital care.

None of this is revolutionary. Baucus and Grassley, who are said to be interested in attaching the bill to larger healthcare reform or Medicare legislation, rolled out a similar measure in 2005. CMS recently concluded a three-year demonstration of a similar program with hospitals in the Premier Healthcare Alliance. And the Medicare Payment Advisory Commission (MedPAC) strongly recommended a value-based purchasing program for hospitals in its 2008 report to Congress. Considering the influence of Baucus and Grassley on the legislative process, it seems likely that this proposal — or something like it — will be included in any health-care reform package that has a chance of passage.

The question is how much good it will do. The data from the CMS demonstration project showed that the participating hospitals did improve their quality scores. But it’s unclear what role self-selection had in the outcome, and the publication of their results on a Medicare website might have induced some institutions to buff up their images by focusing on the selected quality indicators.

Hospitals are already aware that they have a lot riding on upgrading their quality improvement efforts and implementing health IT systems. In fact, a new white paper from the Joint Commission on Healthcare Organizations (JCAHO) urges hospitals to “align performance and payment systems to meeting quality and efficiency-related goals” and to “make the business case and sustainable funding to support the widespread adoption of health information technology.”

But in recent testimony by MedPAC Executive Director Mark Miller before the Senate Finance Committee, he made it clear that “fundamental change” was needed to save the Medical Hospital Trust Fund, which is expected to go broke in 2019. While Baucus and Grassley are among those who believe that higher quality will lead to lower costs, Miller talked about the huge variations in Medicare costs across the country, and he noted there’s no relation between the level of spending and healthcare quality. The solution does include the tying of payment to quality, rather than volume, he said, but many other areas also need to be considered.

For example, he noted, price distortions result from Medicare’s reimbursement system, which favors procedures over primary care. This has also helped produce an oversupply of specialists and a reduction in the number of doctors entering primary care, both of which drive up costs.

Also, the lack of advanced clinical information systems in most hospitals and doctors’ offices, he noted, make it difficult for Medicare to obtain the quality data it needs to do value-based purchasing. Also, he said, “Crucial information on clinical effectiveness and standards of care either may not exist or may not have wide acceptance.” As a result, it’s hard to determine what care is appropriate. He also cited the problem of poor care coordination, noting that this is as likely to be an issue in Medicare Advantage plans as in traditional fee for service Medicare.

In light of all this, Baucus’ and Grassley’s proposal is a step in the right direction — but it’s not the cure for what’s ailing Medicare.

McKesson agrees to $350M drug-cost settlement — The major drug and medical-supplies distributor said it will pay $350 million to settle allegations that it conspired to inflate the cost of drugs for consumers and health-insurance providers. McKesson still faces similar lawsuits brought by federal, state and local agencies. [Source: Modern Healthcare]

Health-insurance sector could see consolidation — Rising medical costs and shrinking profits among health-insurance companies could force consolidation among the industry’s weaker players. Analysts suggest Health Net and Coventry Health Care could become prime acquisition targets. (See our earlier take on Coventry’s finances and acquisition prospects.) [Source: American Medical News]

Medicare Advantage plans boost cost and complexity, but not care quality — Privatized plans that serve nearly a quarter of all Medicare recipients cost considerably more than traditional Medicare but do little to coordinate care or improve patient outcomes, new studies suggest. The data may bolster efforts in Congress to rein in these Medicare Advantage programs, which are key to the business of major health-insurance providers such as Humana. [Source: Modern Healthcare]

Healthcare sector nears 10-year record for layoffs — Recent data from the Bureau of Labor Statistics suggests that healthcare employers may idle more people in mass layoffs this year than at any time over the past decade. Layoffs have already accounted for more than 38,000 new unemployment filings this year. [Source: Modern Healthcare]

Indiana’s Clarian Health acquires two-hospital system — Clarian Health, a six-hospital system in Indiana, will take on two additional hospitals when it formally acquires Cardinal Health System on Jan. 1. Clarian is also negotiating to take over the 280-bed Bloomington Hospital, perhaps as soon as 2010. [Source: Modern Healthcare]

Angioplasty overused in stable heart-attack victims — A new study suggests that angioplasty, whose use has more than doubled since the early 1990s, is no more effective than drug treatment and lifestyle changes in patients with stable heart disease. The technique, in which catheter-deployed stents or balloons are used to open clogged arteries, is now a $10 billion industry and a major source of competitive advantage in the hospital industry. [Source: Kansas City Star]

Pittsburgh medical center lowers transplant standards — The University of Pittsburgh Medical Center, once a leader in transplant medicine, has seen that business shrink as other hospitals jumped into the lucrative market. So UPMC did what any right-thinking business might do and lowered its standards in order to double its volume of liver transplants. UPMC now uses more organs from older and sicker donors, treats more high-risk patients and increased its use of live donors. [Source: WSJ Health Blog]

Michigan medical society plans health IT exchange — The new network aims to connect 15,000 doctors across the state, offering them access to online applications for e-prescribing, laboratory results and patient registries. It is the first such health-IT network to be sponsored by a state medical society, and will be free to the society’s doctors. [Source: American Medical News]

Aetna CEO Ron Williams looked remarkably bullish last week as he outlined the company’s prospects at a Reuters conference. Aetna is gaining market share while its competitors retrench, Williams said, despite the grim economy and the possibility that Washington may radically transform the health-insurance industry sometime next year.

For instance,  Williams said his company — the third-largest health insurer in the U.S. — expects to gain 800,000 members in the first quarter of 2009. He cited enrollment expansions with other huge companies as a big part of Aetna’s success — noting, for instance, that Aetna will gain 250,000 new members at Bank of America. (It wasn’t clear if that gain is part of the expected first-quarter growth or not.)

On one level, a lot of this sounds pretty familiar. Aetna has been doing pretty well for at least the last year or so, certainly relative to its beleaguered rivals, largely thanks to its prowess at locking down huge accounts.

That would still leave Aetna in the unenviable position of winning share in a shrinking market were it not for some hints that the health plan may be starting to build an interesting competitive advantage. Williams, for instance, credited the expansion of Aetna’s contract with BofA to its “strategy to integrate its products and data” (that’s a Reuters paraphrase, by the way, not an actual Williams quote).

Of course, that could mean almost anything, and it seems obvious that the Reuters scribe had no idea what Williams was really getting at. I can’t be too sure myself, but I’d hazard a guess that Aetna’s recent push into expanded disease management and wellness aimed at helping its healthier members avoid illness, buttressed by an IT strategy that appears to let the insurer draw health conclusions from claims data, are a big part of it.

If so, then Aetna may actually be on the path to transforming its own business, morphing from a transaction-processing model to one in which it plays a much more active role helping its members to embrace disease prevention and navigate the medical system. It’s all still a little blue-sky to me at the moment, but it’s potentially pretty exciting, as I’ve long argued that today’s health plans are going to have to change radically if they hope to survive both a demanding business environment and the prospect of federal reform that could sharply curtail their business options. If Aetna is in fact headed this direction, then more power to them.

In this time of economic crisis, you might think that hospitals were no longer engaged in multimillion dollar building projects. But you would be wrong.

Methodist Mansfield Medical Center, located in a Dallas/Fort Worth suburb, recently launched a $34 million construction project, including a 36-bed medical/surgical unit, an expanded emergency department, and a doubling in the size of its intensive care unit. And Florida Hospital in Orlando is about to open a new $255 million building that holds space for 440 patient rooms and a very large emergency department. The building will also house a dozen cardiac cath labs.

The hospital construction market, which has been booming for the past several years, has not slowed down despite the meltdown of Wall Street and the residential housing market. “October building starts for hospitals were about the same as September, and not much different from August, which was better than June and July,” says Jim Haughey, chief economist at Norcross, GA-based Reed Construction Data, a subsidiary of Reed Business Information. In contrast, he says, other commercial projects like office buildings, hotels, and retail stores “took a real plunge in October, partly because of cash flow problems, and partly because of a reevaluation of how much space they needed.”

It has been widely reported that hospitals have less capital to sink into new facilities because of stock investment losses. But Haughey says that’s a fairly minor source of funds for hospital construction and renovation. Even bond issues—which haven’t been impacted by the crisis too much yet—aren’t the major source of hospital financing, he says. “The bulk of the money comes from the fees they collect every day,” some of which hospitals set aside for capital investments.

Nor are hospitals dependent on bank lending, he says, even if they’re not-for-profit and can’t raise money on the stock market. “When they start a project, they generally have the financing lined up, and they don’t need 7-day notes from Goldman Sachs.” If they have sold bonds, they’re usually 20-year notes, and the interest rate on those hasn’t varied much since the crisis began, he points out.

Nevertheless, a new report from the American Hospital Association shows that hospitals are seeing a big drop in profits, and the majority are also experiencing declines in admissions and elective procedures. That, coupled with a 15 percent increase in borrowing costs, may finally bring the construction binge to a halt sometime in the next year. Already, the AHA report notes, 56 percent of hospitals that responded to the association’s survey are considering postponement of or putting off planned renovations and expansions.

Justice Department probes Medtronic spinal implant — The DOJ is looking into allegations that Medtronic improperly marketed a spinal implant designed to speed blone growth. Parallel whistleblower lawsuits contend the company paid doctors to use the device, called Infuse.[ Source: WSJ Health Blog]

AARP orders investigation of UnitedHealthcare plans — AARP, the senior lobby, said it hired an independent investigator to look into its sales of limited-benefit health plans marketed by UnitedHealth Group. Congressional investigators say the plans were improperly marketed as providing comprehensive coverage. [Source: NYT]

AHA: Hospitals swung into the red in Q3 — The American Hospital Association said hospitals posted negative profit margins — i.e., losses — of 1.6 percent in the third quarter. That’s in sharp contrast to the positive 6.1 percent margin hospitals enjoyed at the same time last year. [Source: Modern Healthcare]

Moody’s downgrades healthcare industry — Moody’s Investor Service lowered the 12-18 month outlook for the healthcare industry to negative from stable. The rating agency sees delays in serious and expensive procedures and rising numbers of uninsured individuals posing a serious financial risk to the industry. [Source: Chicago Tribune]

Blues plans reduce costs, improve patient outcomes — A quality-improvement program run by the BlueCross BlueShield Association reduced hospital readmission rates for bypass-surgery and angioplasty patients while lowering costs, the association said. The data came from a study of claims for 41,000 patients covered by 24 Blues plans. [Source: Modern Healthcare]

Congress investigates FDA for shoddy med-device oversight — Two Democratic congressmen — John Dingell of Michigan and Bart Stupak of Tennessee — said they will investigate the FDA office that oversees medical devices over concerns that may have approved devices without a thorough review. The congressmen said they have evidence that FDA experts were “ordered, intimidated and coerced” to issue positive reports in violation of the law. [Source: Modern Healthcare]

Pennsylvania lawmakers oppose Blues merger — Republicans in the Pennsylvia Senate criticized the proposed merger of Independence Blue Cross and Highmark. Should the state insurance commissioner approve the combination, lawmakers want him to impose strict conditions on the merged company to limit its market power. [Source: Philadelphia Inquirer via Fierce Healthcare]

Senate bill would link hospital Medicare payments to quality of care — Senators Max Baucus and Chuck Grassley released a draft bill that would pay hospitals based on how well their Medicare patients fared. Currently, Medicare typically pays a flat fee per medical procedure performed, regardless of outcome. [Source: kaisernetwork.org via Fierce Healthcare]

PwC survey: Majorities favor healthcare reform — Large majorities of those recently surveyed by PricewaterhouseCoopers said they expect healthcare reform during President-elect Barack Obama’s first term. A full 59 percent believe the government would do a better job managing and paying for healthcare than private health-insurance companies.[Source: Health Business Blog]

Daschle’s healthcare-reform blueprint differs from Obama’s — Former Senate majority leader Tom Daschle, reportedly Obama’s pick to head the Department of Health and Human Services, favors a more ambitious healthcare reform than does the president-elect. Most notably, Daschle would create a Federal Health Board modeled on the Federal Reserve in order to insulate healthcare policy from politics. [Source: WSJ Health Blog]

Slow reimbursements lead doctors to avoid Medicaid patients — Lengthy delays in notoriously slow Medicaid reimbursements directly affect doctors’ willingness to take on new Medicaid patients. [Source: Health Affairs]

Detroit hospital launches $60M turnaround plan — Detroit’s Beaumont Hospitals, which employes 18,000 workers, said it will save $60 million as part of a turnaround plan involving layoffs, pay cuts for executives and doctors, and a hold on most construction projects. [Source: Detroit Free Press]

Waxman unseats Dingell on House committee responsible for healthcare – Dark-horse congressman Henry Waxman of California defeated John Dingell of Michigan to assume the chairmanship of the powerful House Energy and Commerce Committee. Waxman is a vocal critic of drug, health-insurance and medical-device companies, and is expected to play an important role in moving an anticipated healthcare reform bill through Congress. [Source: WSJ Health Blog, WSJ Health Blog]

Average health-plan deductible hits $1,000 — The median deductible for PPO insurance plans soared to $1,000 this year, up from $500 for the past several years, a Mercer consulting report stated. Raising deductibles is an easy way for employers to save money without seeming to trim healthcare benefits. [Source: WSJ Health Blog]

Provena Health names Guy Wiebking CEO — A six-hospital system in Illinois, Provena Health, named Guy Wiebking as its new CEO. Steven Hunter, who’d served as CEO since April 2007, departed suddenly and without explanation from the company. [Source: Modern Healthcare]

Pennsylvania cost-containment council gets reprieve – Gov. Ed Rendell said the Pennsylvania Health Care Cost Containment Council will remain open through June 30. The PHC4, which studies healthcare quality and costs, had previously been slated to close down at the end of this month. [Source: Philadelphia Inquirer via kaisernetwork.org]

Small-company healthcare focus: Stingier benefits, higher premiums — Small companies are far less likely than larger ones to offer healthcare benefits, a Kaiser Family Foundation survey found. Worse, small employers appear likely to get whacked with larger premium increases than their big-company counterparts as insurers struggle to recoup lost investment and premium income. [Source: Kaiser Family Foundation, WSJ]

When the Clinton health plan died in 1994, the health-insurance industry’s fingerprints were all over the murder weapon. Now that rumblings of comprehensive healthcare reform are starting to take on critical mass in the incoming Obama administration and Congress, the insurance industry has apparently reconsidered its adamant objection to a major health-system overhaul — and flinched, at least a little.

The big news on this front came yesterday, when the two giant health-insurance trade associations — America’s Health-Insurance Plans and the BlueCross BlueShield Association — said their members could accept a reform plan that banned the key business practice of medical underwriting, under which insurers limit or deny coverage to individuals with pre-existing medical conditions (i.e., people who would otherwise cost insurers too much). The price: Washington would also have to require all Americans to buy insurance with the much-chattered-about “individual mandate.” (See the AHIP statement and the BCBSA statement.)

There’s no denying the significance of this concession, even if both organizations have hinted for some time that they’d be willing to broker a deal once momentum for reform started building. That’s because medical underwriting is, in many respects, the foundation of the modern health-insurance industry — one of the primary tools health plans use to keep medical costs down and profits up. For some insurers, in fact, medical underwriting seems to represent the bulk of their business plan –  and when it fails, so do they.

The quid pro quo here makes a certain amount of sense, even if it’s still not the best deal for insurers. Expanding the customer base by requiring everyone to buy insurance is a fairly attractive proposition for health plans that have been shedding their most profitable members at a brisk rate for the past year or two. It’s also necessary on an actuarial basis to bring in healthier (read: lower-cost) individuals to balance out the risk of insuring a sicker population.

The deal almost certainly isn’t the sort of arrangement companies like UnitedHealth Group and WellPoint would agree to were times better. What it suggests, in fact, is that the big insurers — already battered by the whirlwind that’s raged through their business for the past year — seem to understand that they’re holding a weak hand. It’s as if they’re actually starting to understand that their existing business model is fundamentally broken, and that to carry on as they have is to risk radical downsizing or extinction.

There are plenty of unanswered questions in this deal, making it much more a starting point for negotiations than the finish line. Some, of course, are more serious than others. The NYT, for instance, makes a big deal out of the fact that President-elect Barack Obama opposed an individual mandate during his campaign, while I’ve long suspected his opposition was more a tactical matter of electoral politics than a bedrock position — largely because expanding coverage without an individual mandate or something like it makes little sense. (The insurers actually have a point when they argue that without it, many people will sign up for insurance only when they’re sick, eliminating the pooling of risk insurance is all about and driving up costs for everyone.)

But here are some other big issues that we’ll be hearing a lot more about in coming days and weeks:

• Enforcement of the mandate. No one yet has come up with combination of carrots and sticks that’s isnt’ either wholly inadequate (the Massachusetts model) or politically toxic.
• Premium costs. The insurers pointedly did not agree to “community rating,” in which all individuals in a defined insurance pool pay the same premium. (Group insurance offered by employers typically works this way.) Community rating means that healthy people subsidize the costs of the sick, whereas in today’s individual market, insurers typically charge more to people who are older, sicker, living unhealthy lifestyles and similar factors. Community rating means premiums are higher on average, but the alternative means that insurers may well offer plans to sick people that they simply can’t afford.
• Government-run  insurance. Plans sketched out by Obama and Sen. Max Baucus envision setting up a government-run health plan — a kind of mini-Medicare — that individuals could choose instead of private plans if they chose. Although federal employees can already opt for such a plan in their health program (known technically as the Federal Employees Health Benefits plan), insurers hate the idea of competing directly against the government, with some reportedly calling it a dealbreaker for comprehensive reform.

And that’s just for starters. Like I said, there will be plenty of fireworks as this process gets underway, so pop some popcorn and get ready.

Addendum: Maybe it’s just me, but I also found it amusing to see that BCBSA and AHIP members together claim to cover more than 302 million Americans. That’s actually quite a trick, since the Census Bureau puts the U.S. population at roughly 306 million, roughly 46 million Americans are uninsured, and an additional 40 million or so are covered by Medicare. I sure hope the insurers’ internal accounting is more accurate than their PR bluster.

Update: D’oh! There’s overlap in the membership of the two organizations — many Blues plans are represented in AHIP, and BCBSA may well include the Blue arms of companies like WellPoint. Apologies for the error.

Image via Flickr user thrig, CC 2.0