July 2012 Archives

July 23, 2012

Most Favored Nation Clauses Banned by Michigan Insurance Commissioner

Kevin Clinton, the Michigan Insurance Commissioner, issued an order on July 18, 2012 that bans insurance companies from enforcing most favored nation clauses in health insurance contracts unless they are first submitted to him for approval. The order is effective February 1, 2013.

As defined by the order, a most favored nation clause is one that grants a contracting insurer an option to:

1. Prohibit a provider from contracting with another party for a lower rate
2. Guarantee it pays the lowest rates to providers
3. Require a provider to terminate or renegotiate contracts for lower rates with other insurers
4. Require a provider to disclose their contractual payments or rates agreed to with other parties

In 2010, the Michigan attorney general and the U.S. Department of Justice filed a lawsuit against Blue Cross Blue Shield of Michigan ("Blue Cross") for pressuring 22 of Michigan's 131 hospitals to sign illegal "most favored nation-plus" contracts. Those 22 hospitals, representing 45 percent of all acute-care beds in Michigan, were allegedly forced to sign contracts that require the hospitals to charge competing health insurers rates that were more than 20 percent higher than the rates charged to Blue Cross.

Aetna, Inc. filed a federal lawsuit against Blue Cross last December accusing them of unfair contract practices in connection with its most favored nation contracts. Aetna is seeking damages and an order by the court to invalidate Blue Cross's most favored nation-plus contracts.

Blue Cross officials argue that their most favored nation contracts are negotiated in order to keep premiums at the lowest level possible. Blue Cross's vice president and general counsel, Jeffrey Rumley, stated that the action taken by the state of Michigan is a "fair, formal regulatory review of both existing and new contracts." Rick Murdock, executive director of the Michigan Association of Health plans, said that this order will help create a more level playing field for health insurers in Michigan.

The order gives insurers 6 months to seek approval from Michigan's Insurance Commissioner to use the most favored nation contracts.

As a result of this action, the insurance landscape in Michigan will be transformed following the February 1, 2013 effective date of the Order as providers no longer will be subject to demands for most favored pricing by payors (except in those cases expressly approved by the Commissioner).

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July 13, 2012

Accountable Care Delivery Systems Proliferate


--Federal Government

On July 9th, the U.S. Department of Health and Human Services added 89 new accountable care organizations to its list of entities which have been approved to participate in the Medicare Shared Savings Program. Nine of the 89 new ACOs are in New York State and eight of the nine are physician-owned organizations. This brings the national total of ACOs to 154, covering over 2.4 million Medicare patients.

As participants in the Medicare Shared Savings Program, ACOs will need to demonstrate that they can improve the quality of care provided to a defined population of Medicare beneficiaries while at the same time, doing so at a lower cost to the government. If successful, the ACO will be entitled to share in the cost-savings that result.

In order to demonstrate that the ACO is providing better care, it will report its performance on 33 quality measures relating to care coordination and patient safety; use of appropriate preventive health services; improved care for at-risk populations; and patient and caregiver experience of care.

In announcing the 89 new ACOs that were selected to participate in the Medicare Shared Savings Program, the Centers for Medicare & Medicaid Services explained that participation in an ACO is purely voluntary for providers; that beneficiaries served by ACOs will continue to have free choice about the care they receive and from whom they seek care, without regard to whether a particular provider or supplier is participating in an ACO; and that "studies have shown that better care often costs less, because coordinated care helps to ensure that the patient receives the right care at the right time, partly because patients avoid unnecessary duplication of services and dangerous medical errors."

--New York State Government

In a related development, the New York State Legislature recently passed legislation intended to "promote and regulate the use of ACOs to deliver an array of health care services for the purpose of improving the quality, coordination and accountability of services provided to patients in New York." The legislation authorizes the Commissioner of Health to establish criteria for certificates of authority, quality standards for ACOs, reporting requirements, etc. Such regulations are to be consistent, "to the extent practical", with CMS regulations for accountable care organizations under the Medicare program. In passing this legislation, the Legislature found that "the development of accountable care organizations will reduce health care costs, promote effective allocation of health care resources, and enhance the quality and accessibility of health care." Governor Cuomo is expected to sign this legislation shortly.

--Private Payors

Many private insurance companies are embracing the same concepts that underscore the Medicare and New York State ACO initiatives and in so doing, are encouraging their participating providers to join them in adopting new payment methodologies that will reduce costs while improving quality of care. For example, UnitedHealthcare, one of the nation's largest managed care organizations, has posted the following statement on its website:

"UnitedHealthcare is evaluating a variety of value-based contracting strategies to increase quality, reduce medical costs, improve patient outcomes and share risk as well as responsibility for controlling medical cost trend.

UnitedHealthcare considers Accountable Care Organizations (ACOs) to be an important element of its value-based contracting strategy. The goal of value-based contracting is to move the delivery system toward increased collaboration between the health care community and greater emphasis on shared risk accountability for improved outcomes. The transformation of industry-wide payment models is evolving and will require a variety of strategies to suit the needs and diversity of consumers and health care providers in individual communities across the country. UnitedHealthcare is currently pursuing a variety of value-based contracting models from performance based contracting incentives to full capitation."

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July 11, 2012

CY 2013 Medicare Physician Fee Schedule Proposed Rule

Proposed changes to policies and payment rates for services paid under the Medicare Physician Fee Schedule (MPFS) for 2013 were released on July 6. The Centers for Medicare & Medicaid Services (CMS) released the proposed rules and the public is free to comment on the changes throughout a 60-day period that ends September 4, 2012.
In its press release, CMS highlighted the fact that the proposed rules would increase payment to family physicians by 7 percent. This boost is part of the administration's goal to improve primary doctor care, which they hope will ultimately lower the cost of long term health care.

Among the other proposed changes is a CY 2013 conversion factor of $24.7124, which represents a 27.4 percent decline from CY 2012 unless Congress takes action to avert the cut. Congress has acted to avert these cuts every year since CY 2003. An expansion of the Multiple Procedure Payment Reduction (MPPR) has also been expanded in the proposed rule to include certain aspects of cardiovascular and ophthalmic codes, and also group practices' advanced imaging procedures furnished to the same patient in the same session. CMS also proposed using a sliding scale based on the Prime rate in order to estimate interest costs as a part of Practice Expense methodology. This is expected to decrease Medicare payments to capital-intensive specialties such as radiology.

A number of other physician programs are also affected. The proposed rule will appear in the July 30, 2012, Federal Register and a final rule with responses to commentary will follow on or about November 1, 2012.

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