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Cost Savings in Health Care

March 1 2012
By Bendix Anderson

The following is based on remarks by Joseph Stamm, President and CEO of NYCHSRO/ MedReview, Inc., at “Cost Savings in Health Care,” an event held September 22, 2011 in New York City organized by LaborPress and NYCHSRO/MedReview, Inc.

Many companies that now offer health care as a benefit to workers are considering dropping their health benefits plans.

This disturbing news comes from consultants at McKinsey and Co., which estimates that a third to half of employers are considering dropping health benefits for their employees in 2014. Other analysts are less pessimistic, but not by much: Towers Watson estimates 9% are considering dropping health coverage, and Lockton Benefit Group reports 19% of its mid-market clients will likely drop health coverage for workers.

That’s in part because the cost of health care is about to get much higher with a predicted 8.3% increase in 2014, the year most of the provisions of the new federal health care law take effect. Health costs are predicted to rise 6.2 percent each year thereafter until 2020, according to the actuaries at the Center for Medicare and Medicaid Services, the federal agency that administers Medicare and Medicaid.

But labor unions aren’t helpless against rising costs. Labor leaders should make sure the organizations that pay their workers’ health care claims or the external utilization review agents they use to review those payments are doing everything they can to fight rising costs; to protect health care benefits while maintaining quality of care for their workers. Some cost containment strategies that I believe labor leaders should consider for their benefits plans are:

1. Retrospectively review pre-certified claims

The review of healthcare utilization often begins with the precertification of services over the phone, but it shouldn’t end there. Once a health care service is pre-certified, a number of payors refuse to allow retrospective reviews of those claims. This arbitrary refusal compromises the integrity of any precertification program.

These payors claim that New York State Law does not permit retrospective review. This is not accurate. State law allows for retrospective review of pre-certified claims, provided that the second reviewer uses the same medical criteria used by the initial precertification group. If a benefit fund’s payor refuses to allow claims payment assessment for otherwise approved admissions, it risks incurring inappropriate costs.

2. Review of one-day stays

Even a cursory look at the costs of one-day hospital stays shows the need for careful review, whether or not the stays were pre-certified.

For example, the number of hospitals that charge $10,000 or more for an average one-day stay has more than doubled since 2006, according to NYCHSRO/MedReview’s study of 19,000 one-day hospital stays.

The New York Post in April 2007 and The Daily News in January 2010 ran stories on excessive payments for one and two-day hospital stays. A number of public officials have also expressed deep concerns in reaction to complaints by their constituents.

3. Review of re-admissions to hospital

Unnecessary hospital re-admissions are another potential area for cost containment. Make sure the benefit fund’s utilization review agent reviews payments when patients return to the same hospital within 15 days of discharge to determine if the health care provider:
–    Discharged the patients prematurely
–    Performed elective procedures on patients with unstable medical conditions
–    Delayed procedures because of equipment problems
–    Postponed procedures due to infection

MedReview’s program does not review all hospital re-admissions within 15 days of discharge but instead has a selection process to determine which cases are appropriate for review.  Exceptions which are left off the selection include staged procedures, cases in which the patient left the hospital against medical advice, and cases in which the patient stayed at a hospital operated by a different health care provider.  

4. Review of coding assignments (DRG Reviews)

The diagnosis codes that health care providers assign to cases can have huge implications on the cost of treatment and should be carefully reviewed. Simply inverting a principal diagnosis with a secondary diagnosis or a principal procedure with a secondary procedure can result in significant changes in payment. Words like “with complications” or “preemies” can triple the cost of care.

For example, MedReview reviewed the case of a 49-year old woman who came to the hospital for evaluation of an enlarged thyroid gland. She was taken to the operating room for a thyroidectomy. The primary diagnosis, or PDX, should represent the condition responsible for the admission, which in this case turned out to be the goiter. However, the patient had a past medical history of obstruction sleep apnea. The hospital coded the sleep apnea as the PDX, which had nothing to do with this admission. MedReview pointed out the discrepancy to the hospital, which wrote back that they agreed.
Original hospital DRG: 468, pays $39,193.
Revised DRG: 290, pays $8,911.
Savings: $30,282.

5.  Review of institutional ambulatory utilization

It is not enough to monitor utilization and payment for hospital inpatient services. Benefit funds should also require that their payor review certain inpatient ambulatory care procedures. Such reviews should include:
– Surgical Procedures
– Infusion Therapy
– Laboratory/Pathology
– Radiology
– Durable Medical Equipment
– Physical, Occupational and Speech Therapy

6. Review of the quality of care

Hospitals sometimes cause health problems through neglect. Patients and their health plans should not have to pay for this care. Legislation has been introduced that allows payors to disallow payment caused by hospital neglect. Some conditions that merit detailed scrutiny include:
–    Objects left in after surgery
–    Wrong surgical procedure performed on patient
–    Blood incompatibility
–    Surgery performed on wrong body part
–    Medication error
–    Burns
–    Patient disability associated with the use of restraints or bedrails

Potentially preventable conditions should also be carefully reviewed, including:
–    Acute Lung Edema and Respiratory Failure
–    Pulmonary Embolism
–    Reopening or Revision of Surgical Site
–    Malfunction of Device, Prosthesis, Graft
–    Obstetrical Hemorrhage with Transfusion

7. Be familiar with the new review codes

A new diagnostic coding structure, called ICD-10, will significantly impact hospital payment, starting in 2013. Benefits funds need to be aware of what steps their claims payor is taking to validate the appropriate use of ICD-10.

The new coding structure significantly expands the diagnosis that must be reported. As a result, coding becomes exponentially more complicated and the potential for upcoding will escalate.

In conclusion, health services should be medically necessary and appropriate. These services should be provided in the most cost-effective manner. With all the changes in health care, the task of monitoring medical costs is now more formidable but, at the same time, more critical than ever.

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