3 September 2009
PAYERS & PROVIDERS
Calendar
September 13-15
California Healthcare Financial Manaement
Association Annual Meeting. Hyatt
Regency Monterey.
Will discuss capital markets and upcoming
challenges for CFOs. Fee: $695; $795 for
non-members.
Register Online:
http://www.hfma-cafallconf.org/
register.lasso
September 24
P4P Stakeholders Meeting, Sheraton
Gateway, Los Angeles.
A forum for California healthcare
stakeholders to discuss pay-for-
performance efforts. Conducted by the
Integrated Healthcare Association.
Fee NA.
Info:
http://www.iha.org/2009P4PSM.htm
October 1-3
Hospital Council of Northern & Central
California 2009 Leadership Summit.
Meritage Hotel, Napa.
Gathering of regional hospital executives
to discuss trends. Keynote Speaker: Author
Tamara J. Erickson. $495; Associate
Members, $595
Register online:
http://www.hospitalcouncil.net/cgi-bin/
default.asp
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editor@payesandproviders.com
with the details of your event, or
call (877) 248-2360, ext. 3.
California Edition
Californians Shirking Regular Care
Growing Debt, Shrinking Coverage Among Culprits
Burdened by mounting medical debt, healthcare is another glaring inadequacy
California residents are foregoing regular in our current system of health
healthcare services at a rising pace, insurance,” says E. Richard Brown,
according to a new study by the UCLA director of the UCLA Center for Health
Center for Health Policy Research. Policy Research and the lead author of
The percentage of Californians who the study. “Current policies either do not
reported no usual source of care rose to offer enough coverage or offer full
nearly 23% in 2007, up from around 15.2% coverage at a cost that is too expensive
in 2003. Those who considered their for many people to bear.”
physicians and safety net clinics as usual The study did not scrutinize out-of-
sources of care also Percentage of Californians with Regular Sources of Care pocket costs
dropped specifically, but did
significantly. Although the 70 examine high-
report suggested that deductible plans – those
changes in the wording of 53 with $1,000 or more annual
the questionnaire may have deductible. According to the
35
skewed the data, other data, just 10.7% of those
factors strongly imply that with employer-based
18
the state’s residents are coverage had high-
under pressure to avoid deductible plans, but only
accessing care. 2001 2003 2005 2007 3.5% had health savings
Medical debt, for accounts to supplement
Doctor’s office
example, is currently held by Clinic
costs. Among privately purchased
13% of Californians under the No Source of care policies, 38.1% were high-
age of 65. Although nearly two- deductible plans, but just 7.3%
thirds report a debt of below $2,000, those had an HSA attached to them.
who have debt are more than twice as likely The data gathered by UCLA
to have a delay in getting care or a particular researchers was compiled in 2007,
medication. Among those with medical before the current severe economic
recession began. The report’s of
indebtedness, two-thirds incurred it even
though they had medical insurance. Nearly researchers concluded that the numbers
9% had debts that exceeded $8,000.
“That even insured people are forced to
Continued on Next Page
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In Brief
CNA Says Health Plans
Reject 21% of Claims
The California Nurses Association said
in a statement Wednesday that more
than 20% of all claims for care
submitted to health plans operating in
the state since 2002 were rejected,
with Cypress-based PacifiCare of
California rejecting 40% of claims
submitted in the first half of this year.
“The reality for patients today is a
daily, cold-hearted rejection of
desperately needed medical care by
the nation's biggest and wealthiest
insurance companies simply because
they don't want to pay for it,” says
CNA President Deborah Burger.
The CNA, which represents about
80,000 nurses statewide and has been
a vocal proponent for a single-payer
health plan, says the claims rejection
data was provided by the California
Department of Managed Health Care.
DMHC spokesperson Lynne
Randolph suggests CNA’s assertions
were misleading.
“It’s important to point out that a
denied claim means that the patient
received the medically necessary
services, but the doctor or hospital was
not paid for that care,” Randolph says.
PacifiCare spokesperson Cheryl
Randolph also asserts that claims
denials should not be equated with
denied care.
“Providers, particularly
specialists, will often bill PacifiCare for
services that fall under capitated
agreements.  While those claims are
denied, they are forwarded to the
appropriate medical group or IPA for
payment, therefore having no impact
on consumers,” she says.
In addition to PacifiCare, the
CNA says that Anthem/Blue Cross of
California, Blue Shield of California
and Kaiser Permanente all denied
28% of claims submitted during the
first half of 2009.
The CNA statement says the data
will be discussed in greater depth at
its annual conference in San Francisco
next week.
Continued on Page 3
NEWS
Source of Care (Continued From Page 1)
could only have risen in the past two
years.
Meanwhile, the insurance industry
blamed rising medical and drug costs for
the burden placed on consumers.
“What we’ve been seeing for a long
time is that costs are skyrocketing, and
healthcare premiums reflect that increase.
We need our policymakers to address that
cost,” says Nicole Kasabian Evans,
Grossman To Leave Sherman Oaks
Prime Healthcare Spins on Psych Unit’s Reopening
As had been expected for close to a year, the
renown Grossman Burn Center will leave
Sherman Oaks Hospital next spring and
relocate across the San Fernando Valley at
West Hills Hospital & Medical Center.
Rumors of Grossman’s departure had
been circulating since its
contract with Sherman Oaks
owner Prime Healthcare
Services expired at the end of
2008. Grossman had been
affiliated with Sherman Oaks
since 1969. It is the largest burn
center in the western U.S. and
Sherman Oaks Hospital
just one of three operating in
Los Angeles County.
While prestigious, burn centers are often
money losers, something that Prime’s
relentless focus on the bottom line likely
would not tolerate.
“While I respect what Prime has been
doing, our model and their model of care was
not a good fit,” says Peter Grossman, M.D.,
the burn center’s co-director.
West Hills, which is owned by the for-
profit HCA, Inc. is currently undergoing a $60
million expansion. The burn unit will occupy
up to 38 beds at its new locale, Grossman
says. Some burn services could be offered at
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Expert Healthcare Communications
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2009 by Payers & Providers Publishing, LLC
Page 2
spokesperson for the California Association
of Health Plans.
Evans adds that her organization
supports AB 1422, a bill that would tax
Medi-Cal managed care plans for two years
to try and maintain some enrollment in
Healthy Families. The program may have
more than 500,000 children disenrolled
between now and the middle of 2010 due
to severe budget cuts.
West Hills as early as November, with the
center to officially open in April, he adds.
Meanwhile, Prime announced last week
it opened a new cardiac catheter laboratory at
Sherman Oaks and reopened a gerontological
psychiatric unit at it closed just days after it
acquired the facility in late 2005.
However, Prime claimed in a
press release the previous owner
of the hospital had shuttered the
19-bed unit.
Prime paid $200,000 to a
charitable fund in March 2006 to
settle a lawsuit filed by the
California Attorney General’s
office over the closure. As part of an
agreement Prime made with the AG’s office to
acquire the 153-bed facility from Sherman
Oaks Health System and Management, it had
Continued on Next Page
Clarification
In the August 6 issue of Payers & Providers, it was
reported that Childrens Hospital Los Angeles had
cut the workforce on its reconstruction project to
122. Although that figure was accurate in the
springtime, the workforce had been increased to
200 at the time the article had been published.
■Newsletters
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In Brief
Molina Launches
Public Shuttle In Long
Beach
Health plans often offer
transportation for its members to
make medical appointments.
Molina Healthcare is going one
better, offering a shuttle for the
general public.
Molina, which operates one of
the state’s largest Medi-Cal
managed care plans, will launch
on Sept. 8 a 15-stop shuttle that
will run through much of its home
base of Long Beach. Among the
stops: clinics, grocery stores,
farmers’ markets, churches, Pacific
Hospital of Long Beach and the
Molina Medical Group building on
Artesia Boulevard. The free hourly
service will be provided between
8:30 a.m. and 4:30 p.m. on
weekdays.
Molina is absorbing the cost of
the shuttle, which consists of a
single vehicle and a driver. Plan
officials say it’s needed to
encourage healthier living.
“Studies have even shown a key
factor behind the childhood
obesity epidemic in the city’s
minority neighborhoods can be
traced to a disparity in services—
primarily a lack of access to fresh
foods because of a shortage of full-
service supermarkets,” says J.
Mario Molina, M.D., chief
executive officer of Molina
Healthcare. “By introducing the
shuttle service into the
neighborhood we can help
residents live healthier lives.”
A 2007 study by Occidential
College in Los Angeles revealed
that some low-income
neighborhoods in Los Angeles have
fewer than 20 grocery stores
serving nearly a half-million
people, making it difficult for them
to obtain fresh produce and other
healthy foodstuffs.
NEWS
Grossman (Continued from Page 2)
agreed to keep the unit open for six months
pending an evaluation of the ongoing need
for its services.
“Prime was sued for violating (that
term),” says Scott Gerber, a spokesperson
for the California Department of Justice.
Prime’s Aug. 25 release announced “the
Gero-Psych. Department opened in the
same unit where the previous operator of
Sherman Oaks Hospital, had closed down
the
unit.”
It was unclear whether the statement
was made in error by Prime, whose officials
did not respond to repeated requests for
comment. The Victorville-based hospital
operator beefed up its public relations staff
in recent years but recently shed its outside
PR counsel, according to sources close to
the company.
Prime has been the subject of legal and
media scrutiny over the way it operates its
hospitals, primarily by canceling contracts
with insurers to beef up billings through
patients who come through the emergency
room. That and other practices have led
Peaks, Valleys In IHA Quality Survey
Gaps Exist Between Bay Area, Southern California
Recently released quality data from the
Integrated Healthcare Association on more
than 200 physician organizations statewide
show significant regional differences in
quality of care, most notably between the
Bay Area and Southern California.
The average composite score for
providers in California was 68.63 points out
of 100. In the Bay Area, the average score
was 76.78. In Los Angeles, it was 64.95,
while in the Inland Empire it was 62.10. The
scores in Orange County and San Diego
were slightly above the statewide average.
Data was gleaned from the IHA’s pay-
for-performance program, which includes
medical groups and eight health plans
throughout California.
An official with the Oakland-based IHA
and attribute the differences primarily to the
way medical groups are structured in each
region.
“What has happened in Northern
California is that there has been a lot of
consolidation,” says Dolores Yanagihara,
director of the IHA’s pay-for-performance
program. “The groups that have struggled
have merged with the Sutter Healths and
2009 by Payers & Providers Publishing, LLC
Page 3
some critics to say Prime has provided
substandard care.
In 2007, Attorney General Jerry Brown
rejected Prime’s attempt to acquire Anaheim
Memorial Medical Center, claiming it would
not be in the community’s best interests. It
has since been acquired by another hospital
operator.
Despite the controversies surrounding
Prime, its decision to reopen the
gerontological psych unit was greeted as
good news for the San Fernando Valley,
home to a rapidly aging population.
According to the UCLA Center for Health
Policy Research, the Valley is home to nearly
200,000 seniors – more than just three of
California’s 58 counties.
“There are a lot of retirees in the area,
and they need all the services they can get,”
says Sandy Goldfarb of the California
Alliance of Retired Americans.
Gerber declined comment on Prime’s
closure claim, but was nonetheless pleased
with the outcome. “It is good news that they
reopened the unit,” he says.
the Hill Physician Groups, and that makes a
big difference.” By contrast, there are more
than 90 medical groups in the Los Angeles
area alone. Many are not closely aligned with
a hospital, making coordinated care more
challenging.
“North versus south has been an age-old
issue…but I don’t know if anyone has yet beat
it down to a real definitive answer,” says Don
Crane, President of the California Association
of Physician Groups. Crane says CAPG has
tried to improve performance of its member
through its own quality initiatives.
There have been some dramatic strides
made by providers in California overall. The
percentage using electronic prescribing
systems has grown from from about 5% in
2003 to more than 30% in 2008.
However, while progress has been made
in recent years in delivering both preventative
and chronic care, providers on average score
below the 75th percentile of HEDIS in 15 of 19
categories.
Data on specific medical groups will be
posted on the California Office of the Patient
Advocate’s website sometime next month,
Yanagihara says.
Payers & Providers
Vol. 1, Issue 4
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Editorial Board
Steven T. Valentine, President,
The Camden Group
Ross Goldberg, Chairman of the
Board, Los Robles Hospital &
Medical Center
Jim Lott, Executive Vice President,
Hospital Association of Southern
California
Elaine Batchlor, M.D., Chief
Medical Officer, L.A. Care Health
Plan
Keith Richman, M.D., Executive
Vice President, Lakeside
Community Healthcare
Publisher
Ron Shinkman
publisher@payersandproviders.com
OPINION
Reform’s Cost Reduction Conundrum
Entrepreneurial Medicine Distorts Prices – and the Debate
The healthcare reform debate has
contained truths (the need to expand
coverage); half-truths (the public option
and cooperatives equated with socialized
medicine); and untruths (death panels).
However, its success will ultimately rely
on one ultimate truth: cost reduction.
There have been endless arguments as
to whether the U.S. provides the
finest healthcare in the world.
But there is little argument that
it is the most gilded, costing
about twice as much on average
as Europe and Canada. Studies
from organizations such as the
RAND Corp. conclude that
about 30% of our healthcare
dollars are misallocated.
The answer to that is the old
saw that Americans don’t stand
in line for care like Europeans
and Canadians do. But
Canadians and most non-Eastern
By
European nations enjoy longer life
Keith
expectancies than Americans. If you
Richman, reform.
out-live your opponent while
M.D.
arguing who has access to the most
care, the argument becomes moot.
What drives the enormous cost of
healthcare in the U.S.? It is not only our
aging of the population and an endless
embrace of new technologies, but it is also
the practice of medicine in an
entrepreneurial and often self-interested
vein that distorts costs.
McAllen, Tex. is the archetype. In June,
The New Yorker magazine reported that
McAllen’s Medicare costs are double the
national average, while its quality of care
is below average. Over-utilization of
expensive tertiary and quaternary care is
rampant: McAllen-area surgeons were
more likely to operate on someone with
gallstones than counsel them on changes
in their diet, or perform a cardiac
catheterization on a patient with minor
chest pains and no family history of heart
attacks.
Despite serving a population in
woeful need of basic primary and
preventative care, McAllen’s provider
community is resistant to change.
According to a recent report in the New
York Times, the region’s physicians and
2009 by Payers & Providers Publishing, LLC
Page 4
hospital operators have contributed $1.42
million to members of Congress since 2007,
either to preserve the status quo, or get rules
relaxed on physician ownership of hospitals.
In essence, a town of 100,000 is dictating
many of the ground rules of healthcare reform
for a nation of 300 million.
Outliers such as McAllen are going to
have to provide care more
rationally, mimicking closely
aligned hospital/physician
organization such as the Mayo
Clinic, whose costs are below the
national average while quality
remains high. Organizations such
as Mayo were shaped generations
ago, when healthcare was a
much simpler and less market-
oriented business, but the
concept of a comprehensive
integrated healthcare system
delivering cost-effective high
quality care remains an important
component for the future success of
The influence on providers to
spend less on care, while maintaining
quality, may have to come from
outside sources, such as independent
organizations whose mission is to test the
efficacy of medical procedures. They would
act as the Consumers Union of healthcare,
systematically providing evidence-based data
to the medical community on what works,
what doesn’t, and what is the best
combination of cost and outcomes. These
agencies would have to be independent and
not-for-profit so as to guarantee no undue
influence from outsiders.
Whatever shape reform ultimately takes,
minding the bottom line will be crucial. But
getting everyone to keep an eye on it in lieu
of their own interests will be a challenge onto
itself.
Dr. Keith Richman is the executive vice president of
Lakeside Community Healthcare in Glendale. He is
a member of the Payers & Providers Editorial Board.
Op-ed submissions of up to 550 words
are welcomed. Please e-mail proposals
to editor@payersandproviders.com, or
call (877) 248-2360, ext. 3.
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Responsibilities include, but are not limited to: Ensuring
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and federal regulatory agencies and NCQA standards;
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and subcontractors; improving and/or standardizing
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overseeing interpretation and translation services and
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