A dose of light reading

Health care is a complicated mess.

So much so, that even top CEOs of large health care organizations tell me privately that they feel overmatched by it.

I certainly do. Which is why I read as much as I can about health care.

So starting with this post, I’m going to periodically give you a peek at my reading list. I’ll highlight reports and reportage that I have found either helpful or provocative. I hope you do too.

I’ll start with something fun: New York Times’ reporter Elisabeth Rosenthal’s thorough look at the orthopedic implant industry, centered in Warsaw, Ind., which some economists call a "cartel." Aggressive markups, by both the device makers and the hospitals that implant the devices, have driven some American patients to fly to Europe, where government price controls help them get hip and knee replacements at a fraction of the cost they would pay in the United States. If such medical tourism becomes a trend, it’s bad news for the folks in Warsaw, where three of the world’s five largest implant makers are based.

While Rosenthal focuses on the orthopedic implant makers, another study shows hospitals have lots of air in their orthopedic pricing. An analysis by two UC-Berkeley researchers of Indianapolis-based WellPoint Inc.’s reference-based pricing experiment in California, which I wrote about earlier, shows that hospitals do respond—quite rapidly—when patients are enabled and encouraged to factor price into their decisions. This study has been getting lots of attention by the press and by health policy researchers. If you want one economist’s take on its significance, look here.

If you're a consumer thinking about buying health coverage in Obamacare's exchanges later this year, the Indiana Department of Insurance came out with a helpful document that is full of examples of how the cost of insurance will change for Hoosiers buying coverage next year. The upshot of the department's analysis is this: healthy people will pay (a lot) more, unhealthy people will pay (a lot) less. I would skip to page 13 of the report to read Appendices 2 and 3, which lay out numerous examples of premium increases and decreases and then more examples that factor in Obamacare’s subsidies.

Finally, if you’re really into the numbers, I suggest you read the actuarial memos filed by each of the three health insurers that will be offering exchange plans in central Indiana. These memos explain each insurer’s assumptions about why costs will rise and for whom:

Anthem Blue Cross and Blue Shield actuarial memo.

MDWise Inc. actuarial memo.

Physicians Health Plan of Northern Indiana Inc. actuarial memo.

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Buffett joins opening ceremony for Geico center

Billionaire investor Warren Buffett joined in a ceremony Monday morning opening a new customer service center for the Geico insurance company in suburban Indianapolis.

Gov. Mike Pence also took part in the ribbon-cutting ceremony with Buffett at the center in Carmel. Geico announced plans for the service center in March, saying it could have up to 1,200 workers in the next few years.

Geico is among numerous businesses owned by Buffett's Berkshire Hathaway holding company.

Geico said those working at the Carmel service center would include agents, trainers, supervisors and support staff.

State officials say the office opened in April and has about 250 workers.

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CNO Financial gung-ho on share buybacks

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Print & Online Subscriptions   IBJ Daily & Other eNews Alerts   Trial Subscriptions   Subscription Renewals & Address Changes   Subscription Services Q & A     CNO Financial gung-ho on share buybacks The Carmel-based financial services company said that, during the second quarter, it repurchased $59.4 million of its securities, including 4.4 million common shares for $50 million.

 

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Most Read Most E-mailed Recent Comments Snooty Fox restaurant closes after 29 years Weatherman Wright feels wronged, leaving WTHR, report says Meteorologist Buchman leaves WISH-TV, as expected FBI searches City-County Building, makes multiple arrests in Land Bank probe WTHR meteorologist leaving for position in Texas Most Read Most E-mailed Recent Comments Group eyes vacant Illinois Street building for charter school A2SO4 architectural firm reopens after temporary closure Anthem tries new 'narrow network' strategy Chrysler confirms state investment of $374 million IU, Marian set to launch wave of docs Most Read Most E-mailed Recent Comments Jake's creepy obsession with every word I type aside, Carter also makes some giant leaps of stereotype. "Disciple, are you basically saying no one is in control at IMS?" No. Mark Miles is the latest guy in charge. "Whenever something you seemingly do not like occurs, you always start blaming it on things like 'the same self interested fools that have been trying to kill the sport for thirty years.' Who is in control at IMS? I thought it was the George family." Uh, the George family OWNS the track (and ultimately the series). The day-to-day management falls to Mark Miles and his team. "Wasn't one of the whole ideas behind Tony Jr's move to control the sport was to actually control the sport? Amazing, they run the show and they still can't control it. What does that say?" It says Mark Miles is allowing himself to be unduly influenced by Euro-centric road racing enthusiasts without regard for history and the approaches that have failed multiple times. "Sorry, you can keep trying to pass the buck to 'cart' and 'champcar' owners. 17 years since the second split, 8 years of total control after the merger. The buck stops with IMS and the Georges. They allowed Junior to run it, they put Bernard in, they brought Miles as the Sports Marketing Savior. It's theirs." One hallmark of those who are militantly pro-cart and whose only frame of reference post-dates 1979 is knee-jerk defensiveness whenever anything that could even remotely be construed as a slam on two of the series that did, in actual fact, die is uttered anywhere. The issues with which we must deal today have little to do with cart. They have been dead and gone for a long time. My big problem is a giant imbalance in scheduling in favor of non-ovals. I want a true balance. I do not want another futile attempt to try and make a form of racing popular in this country that has never been accepted by the mainstream long term. As long as people like Dan Anderson are going to be allowed to purge ovals to please road racers, and owners hire formula specialists from abroad, and the venue imbalance continues being top heavy with twisties I will continue urging common sense and respect for history. It may not do any good, but someone needs to speak up. There are plenty of great choices to allow ten ovals, five natural terrain road courses and five festivals o' speed. 50/50. That makes IndyCar more unique and versatile than anything else, could be an inspired marketing theme and would attract a great cross section of casual fans. IMHO it is high time for IndyCar to quit screwing around and kowtowing to owners who have a proven history of failure where running a series is concerned. Chris was fine. He is professional and polite- but his presentation -especially during dangerous weather-was nothing special while Angie's broadcasts were engaging and very helpful. The best weather person in Indy is Chuck Loftus -love idea of flat Chuck! Welcome Angie to a great team. Thank you Chris time for something new also. Greg, your comments in regards to renters are absurd. Lumping all renters into the category of 'frat boys' is very ignorant. In addition, you do realize that people can rent houses in Broad Ripple. Why aren't you up in arms about people that decide to rent their house out? Greg, renters can and do have an interest in their communities. The younger generation (read: me) doesn't feel the need to buy a permanent location for the long-term, and we've seen what "property values" are good for. But that doesn't mean we want to live in a pit. Renters want nice furnishings, good parks, proximity to necessities, and safe neighborhoods just like homeowners do. To say that all renters are frat boys is extremely ownist of you. The ignorance on display in some of these posts is astounding! This project is absolutely justified. I would assume from the comments here that several of you rarely, if ever, actually make it to downtown and have very little clue about an urban environment. To "The Burbs": Please, stay there! Or, you might want to actually check out Georgia St. on any Friday night during the summer, whenever there is Pacers game or tournament in town... its hardly the forlorn place you make it out to be. To "Fuzzy": Nevermind..... The circle, even if not the largest public space in the city, is certainly the most high profile. In fact, Monument Circle was recently named one of the great public spaces of the entire country. Anyone who would dismiss the need for this investment is simply out of touch. 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CNO profit jumps 17 percent

CNO Financial Group's profit rose 17 percent in the second quarter, partly on lower expenses and higher investment income.

The Carmel-based insurer and financial services company reported on Monday morning earnings of $77.1 million, or 34 cents a share, for its second quarter—compared with $65.7 million and 24 cents a share in the second quarter of 2012. On average, nine analysts polled by Thomson Reuters expected earnings per share of 26 cents for the quarter.

Net operating income per share was 30 cents in the quarter, a 50-percent rise from 20 cents in the period last year.

Total revenue for CNO grew 1.5 percent to $1.08 billion.

“The vitality and stability of CNO’s business model continues to produce solid results, with sales momentum increasing, and consistent growth in core business premium income and profitability,” CEO Ed Bonach said in a statement. 

Sales, as defined by new annualized premium, rose 5 percent to $102.3 million. 

Bankers Life, CNO’s Chicago-based unit that sells insurance to consumers at or near retirement age, saw a gain of 6 percent in new annualized premium, totaling $63.2 million.

Bankers Life opened nine new sales offices in the first six months of this year, CNO reported.

By contrast, new premium at CNO's Colonial Penn unit rose 1 percent to $15.8 million, “in line with our expectations given our advertising spend this quarter,” the company said.

Colonial Penn life insurance products are heavily touted over television and sold direct to consumers.

CNO shares were up about 2 percent at midmorning amid a broader market decline.

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House GOP seeks delay in health care provisions

U.S. House Republicans pressed ahead Wednesday on delaying key components of President Barack Obama's signature health care law, emboldened by the administration's concession that requiring companies to provide coverage for their workers next year may be too complicated.

The House has scheduled votes later Wednesday to delay the law's individual and employer mandates, the 38th time the GOP majority has tried to eliminate, defund or scale back the program since Republicans took control of the House in January 2011.

The votes were a chance to score political points and highlight public skepticism over the law. The legislation is going nowhere in the Democratic-controlled Senate and the administration said emphatically Tuesday the president would veto the measures.

Republicans seized on the administration's abrupt decision earlier this month to delay for one year, until after the 2014 elections, the requirement that businesses with 50 or more employees provide health coverage for their workers or pay a penalty.

Republicans insisted that the president couldn't unilaterally decide to enforce only portions of the law. They planned votes on one bill that would essentially codify the administration's plan as well as a second bill that provides a similar grace period for individual Americans.

"If the president believes the employer mandate is too much for the employer community, how about basic fairness for American families and individuals?" House Speaker John Boehner, R-Ohio, told reporters at a news conference.

Democrats insisted it was all political theater and another attempt by the GOP to undermine the law.

Rep. Joe Crowley, D-N.Y., said Republicans weren't simply trying to delay the requirements. "It is their intention to destroy the Affordable Care Act ... to do away with it, to annihilate it entirely," Crowley said.

He said the "the definition of insanity ... is doing something 38 times and still getting the same results."

The goal of the health care law was to provide coverage to nearly 50 million Americans without health insurance in a massive overhaul of the current system. In a surprise move earlier this month, the Obama administration announced a one-year delay in the employer mandate.

"We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively," Treasury Assistant Secretary Mark Mazur said in a blog post. "We have listened to your feedback and we are taking action."

Republicans seized on that decision as new evidence that the law is unworkable and should be repealed. The GOP also accused a Democratic president of favoring businesses over average Americans, who will still be required to carry health insurance starting next Jan. 1 or risk fines.

The House will vote on two bills: one by Rep. Tim Griffin, R-Ark., to implement the president's one-year delay in the employer mandate, and another by Rep. Todd Young, R-Ind., to delay the individual mandate. Although Griffin's bill would implement a policy the Obama administration has already announced, it's part of a broader GOP attack on the health care law with the goal of repeal.

The White House said in a statement vowing a veto that "it's time for the Congress to stop fighting old political battles and join the president" in boosting the economy and helping the middle class.

In the days leading up to the vote, the National Republican Congressional Committee, which helps elect GOP candidates, has issued a flurry of news releases calling on Democratic incumbents to vote for a delay in the individual mandate and posing the question "Big business got a break from Obamacare, but what about families?"

"It was a shocking admission of defeat when the Obama administration delayed the disastrous law's employer mandate," the NRCC said in one release directed at Rep. Elizabeth Esty, D-Conn. "Though big business may be delayed from the onerous effects of Obamacare, middle-class families across Connecticut won't."

Stepping up the pressure, the House Ways and Means Committee held a hearing on the administration's delay of the employer mandate, questioning J. Mark Iwry, a Treasury Department official and top adviser on health policy.

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Health tech startup aiming for fences

Flying under the radar for much of its existence, local health tech startup hc1.com Inc. now thinks it’s ready to soar.

The company, spun out last year from Zionsville-based Bostech Corp., is on pace to generate annual revenue of $10 million by year's end. And it thinks business could triple next year.

That’s because hc1 is branching out from its focus on medical lab customers, and is now talking to radiology groups and institutional pharmacies. Signing up entire hospital systems is its ultimate goal.

Bostic

CEO Brad Bostic, who is better known for co-founding local search firm ChaCha Search Inc., said hc1’s software is key for giving doctors and health care executives the real-time data they need to meet the new demand in health care: better care at lower cost.

“You’re able to do a much better job focusing your resources,” said Bostic, 38, while drawing diagrams on a large whiteboard in his office on West 96th Street in Zionsville.

Focusing resources may well be the name of the game for health care providers in the future. They will be treating more patients as aging baby boomers require more health care and as Obamacare expands the number of non-seniors with health insurance.

At the same time, both public and private health plans are pushing health care providers into new kinds of contracts that reward them financially only when they keep patients healthier, reducing the amount of health care services they need.

The wide adoption of electronic medical record systems, spurred by incentives and penalties contained in the 2009 stimulus act, was supposed to help all health care players talk to one another. But hc1’s pitch is that few EMR systems or medical billing systems can easily produce a dashboard of key data that allows health care executives to manage their operations.

Hc1 is already being used in more than 500 health care facilities, and pulls data from more than 200 million health care transactions each year. It charges its customers a monthly fee for each person who accesses its software, which is run from cloud-based computers.

Hc1’s customers include Alere Toxicology, one of the nation’s largest operators of medical labs, and Tennessee-based HCA Inc., the nation’s largest chain of for-profit hospitals.

The company has more than 70 employees now and expects to reach 120 by the end of 2014. Bostic is optimistic in part because he bills hc1 as the first product to provide customer-relationship management specifically for health care customers. He estimates the total U.S. market for such tools at $8 billion annually.

And he thinks hc1 has a good amount of firepower to grab a bigger and bigger share of that market. The company has raised $14 million from angel investors.

“Now it’s starting to catch fire as this killer app for health care,” Bostic said.

Hc1 is working with Indianapolis-based Northwest Radiology Network to start its foray into imaging services. Northwest employs 50 physicians who read X-rays, CT scans and MRIs for 18 hospitals.

Linda Wilgus, Northwest Radiology’s chief financial officer, said she expects hc1 to give her information she needs to schedule physicians, so turnaround times on reading images don’t lengthen out, and on each physician’s speed and productivity at reading scans.

Hc1 is also setting up a system that will check all the orders Northwest Radiology receives for scans from physicians against appropriateness guidelines published by the American College of Radiology. If a doctor orders an MRI when a cheaper CT scan would work just as well, Wilgus will get a message on her computer, allowing her to call the ordering physician to see if he or she considered the lower-cost option.

Identifying unnecessary, duplicative or just overly intensive scans will help hospitals reduce their expenses for treating patients. It also could reduce Northwest Radiology’s reimbursements, but Wilgus is convinced that providing such quality-boosting and money-saving measures will be vital for Northwest Radiology to maintain the contracts it has with its many hospital partners.

“Data is going to be key to get to the changes we’re going to need to have the health system of the future,” she said.

Hc1 is able to make these data available for Wilgus by capturing all the orders and scheduling messages that Northwest Radiology’s computer systems already receive.

An ordering physician’s office alerts Northwest Radiology that it has requested a scan. Then it sends a scheduling message when it has settled on a time with the patient.

When the scan is conducted, most scanners send a message to Northwest Radiology when the scan begins and when it is finished. Finally, they send a note to tell Northwest Radiology’s physicians there is an image waiting for them to read and interpret.

The same kind of “e-prescribing” systems are already widely used in medical labs and pharmacies, which is why hc1 is targeting those companies, too. By adding long-term-care and home-health providers, Bostic thinks hc1 can produce comprehensive profiles of each patient a health system is caring for.

“All that data is just being squandered right now,” Bostic said.

Before implementing hc1’s software, Wilgus could get some data about physicians’ productivity, turnaround times and frequency of inappropriate tests. But it all came months in arrears, and it often took significant work to pull data from the many different computer systems used by various hospitals and combine it in one database.

“Today, I have to manage my practice in the rearview mirror,” Wilgus said.

Bostic is now in discussions with Florida-based Strategic Radiology Group, a national chain of radiology practices Northwest Radiology is part of, about deploying hc1 in all 16 of its practices across the country.

Another hc1.com customer is St. Vincent Seton Specialty Hospital, a subsidiary of Indianapolis-based St. Vincent Health. The long-term-care hospital worked with hc1 to develop its software, and it now uses it to track whether physicians are ordering too many lab tests.

Troy Reiff, the executive director of St. Vincent Seton, has his hc1.com dashboard set to report two things to him: any physician who is ordering more tests than his peer physicians are, and any patients whose lab results have been normal four times in a row.

If a physician is ordering more tests than is normal, Reiff said he tries to have a discussion with the doctor to understand the circumstances of his patient to see if all those tests are justified.

And if a patient’s test results are normal four times in a row, Reiff asks physicians to stop testing the patient so frequently. Reiff said it’s common for a patient to be tested frequently when he or she first arrives. But then those tests are repeated frequently—and unnecessarily—for the next several weeks while the patient recovers.

“They were being done even the day of discharge, even though they were normal four, five, six days prior to discharge,” Reiff said.

Reiff said he couldn’t get the same kind of information from St. Vincent’s other computer systems, unless he employed a team of people to pull the data, combine it into one database, then analyze it. And even then, it would be too old to affect patients currently in the hospital.

“Your EMR systems are not capable of extracting the lab system data and analyzing it like hc1.com is,” he said.•

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Get ready to see for-profit religious hospitals

I have to say it: the not-for-profit label worn by Indianapolis' hospitals is meaningless for just about everyone but the IRS.

Fact is, the executives leading those organizations are as profit-focused as any car dealer or street corner food vendor. If anything, they're coveting black ink more than ever.

That much was clear last month when St. Vincent Health, at the behest of its parent organization, St. Louis-based Ascension Health Alliance, laid off about 865 people.

St. Vincent’s cuts were just a small part of 4,700 jobs eliminated nationwide by Ascension, according to an executive who was laid off at St. Mary Medical Center, an Ascension subsidiary in Evansville.

Ascension, the nation’s largest chain of Catholic hospitals, wants to boost profits from its operations substantially. Any business would.

But Ascension faces extra pressure to focus on cutting costs, because both government health plans and private health insurers are holding the line on reimbursement rates. And Ascension, like all hospitals, needs to keep its profit margins healthy to satisfy its public bondholders.

Ascension’s hospital operations turned a profit of 3.7 percent in its most recently reported financial year, up from 2.7 percent the year before. That’s good but not great for a hospital system.

The 4,700 jobs eliminated represent just 4 percent of Ascension’s total work force of 122,000 people, but the cuts still could give a sizable boost to Ascension’s profit margin. A 4 percent cut to salaries and benefits would have saved Ascension about $325 million in its most recently reported fiscal year, which ended June 30, 2012. Its profit margin would have jumped up to 5.7 percent.

Profit-focused management is hardly unique to St. Vincent and Ascension. Indiana University Health, for example, tried to boost its profit margins over the past decade with aggressive building and marketing campaigns. It even, for a time, started new hospitals using for-profit structures and investment capital from physicians.

Some find this business-minded approach to medicine morally reprehensible. Hospitals, however, see themselves as using business practices to help them advance a worthwhile cause—human health. In this view, profits are not the purpose of the organization, but rather a necessary ingredient for sustaining that mission over the long-term.

“No margin, no mission” is the phrase often used by health care executives, particularly those leading religious, not-for-profit hospitals.

With exactly this mindset, Ascension launched in 2011 the Ascension Health Care Network as a for-profit joint venture with Oak Hill Capital Partners, a Wall Street private equity firm. The network’s goal is to use some of Oak Hill’s $30 billion asset chest to acquire struggling Catholic hospitals in order to keep them alive.

“Of course, the reason this issue is on the table at all is that there are Catholic hospitals across the country that are facing the question of whether they are going to be able to continue to survive, to thrive in the long run,” explained Leo Brideau, CEO of the Ascension Health Care Network. He noted that “in many cases we’re talking about whether they will even survive over the next five years or so.”

Brideau made those comments during a March 2012 conference at Seton Hall University in New Jersey. The proceedings of that conference were published this year as a book titled, “Is a For-Profit Structure a Viable Alternative for Catholic Health Care Ministry?” You can read the book here.

Ascension’s executives clearly think they can meld their Catholic mission and a for-profit status.

“The point is, ‘for-profit’ describes our tax status; it doesn’t describe our purpose. Our purpose is continuing the healing ministry of Jesus—that is our purpose,” Brideau said. “And so, whether not-for-profit or for-profit, we use our capital in very much the same ways; but in either case we have to provide a return on investment to our bondholders and to our shareholders.”

One thing Brideau did not address in his speech was whether a for-profit structure would affect the amount of free care provided. A 2006 analysis by the Congressional Budget Office, using data from Indiana and four other states, not-for-profit hospitals provide a tick more uncompensated care than their for-profit peers—4.7 percent of their operating expenses, compared with 4.2 percent at for-profit hospitals.

That said, I suspect we'll see other not-for-profit hospitals, perhaps even some here in Indianapolis, turn to a for-profit strategy to deal with financial pressures. Sensing exactly that kind of trend, the Catholic Health Association passed a rule in 2011 that allowed Catholic hospitals to keep their membership after converting to a for-profit organization, pending a study of the issue by a task force. And that's certainly what Ascension's Brideau expects.

“I believe that there is no question that for-profit tax status can be entirely consistent with maintaining the Catholic health ministry," he said. "In fact, I would argue that in today’s world it is necessary, beyond simply being appropriate.”

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