Telemedicine: a Step in the Right Direction

Large employers and insurers such as Blue Cross & Blue Shield, United Healthcare and Aetna are offering telemedicine as a way to lower overall healthcare costs.  Specifically, physician visits are cheaper thus reducing the total costs for new and refill prescriptions, if applicable.  Supporters also see it as a way to fight the impending doctor shortage.  Some, however, are concerned about the trend.

Opponents say getting medical advice over a computer or telephone is appropriate only when patients already know their doctor.  Others are concerned that lower co-payments, and other incentives, will spur consumers to see doctors or nurses online just too save money.  The argument is that people will choose the more economical option, even if it is not the option they want.  Employers, however, will reap the most benefit.

Employees appreciate the low cost, convenience and efficiency.  Online consultations can run as low as $10 compared to $100 for a face-to-face visit.  The global telemedicine business is projected to almost triple to $27 billion in 2016, according to BBC Research.  Virtual care is a form of communication whose time has come and can be instrumental in lowering costs.

One major obstacle remains.  Many state medical boards make it difficult for doctors to practice telemedicine, especially interstate care, by requiring a prior doctor-patient relationship, sometimes involving a prior medical exam.  The situation in these states is getting worse, not better.  In 2010, the Texas Medical Board effectively created a rule which blocks a physician from treating new patients via telemedicine.

The only exception is if the patient has been referred by another physician who evaluated him or her in person.  The Texas Medical Board insists on licensing doctors in their state so that if something goes bad, a patient is injured, they have means to help.  From my point of view, this is a fair argument provided it is true.  Some medical boards are reducing restrictions, in mostly rural states, such as Nevada and New Mexico easing the licensing process.

The most common problems treated online are routine sinus and bladder infections, pinkeye, upper respiratory illness and minor skin rashes.  The patient completes a questionnaire (takes about 15 minutes) then connects with a physician via webcam, Internet connection and microphone.  The physician then sends an electronic prescription to the pharmacy that can be picked up in minutes. NowClinic and Virtuwell are just two companies that currently offer this type of service to employers.

Telemedicine is not intended to replace the intimacy of a patient-doctor relationship instead the intent is to supplement it through efficiency and lower costs.  Every self-insured employer should be taking a serious look into telemedicine for both its employees and bottom line.

Health Insurers and the classic “Bait and Switch”

Of all the deceptive practices employed by health insurers, affecting both patients and plan sponsors, out-of-network coverage or lack there of may stand high above the rest.  In 2009, health insurers were accused of manipulating data which ultimately resulted in overpayments [patient] amounting too several hundred million dollars.

The insurers settled and agreed to set up an objective database of doctors’ fees that patients and plan sponsors could rely upon.  However, the settlement didn’t require insurers to use it.  Instead of using the new $95 million database, all of which was paid for by insurers, they pulled the classic bait and switch.  Insurers began determining out-of-network reimbursement rates based upon Medicare rates.

In most instances, a policy mimicking Medicare rates reduces reimbursement more drastically than the initial rates regulators were trying to increase.  Doctors receive lower payments for services rendered and patients have significantly higher out-of-pockets costs.  I don’t defend insurers’ exorbitantly low out-of-network rates, but can you can see the hypocrisy from regulators in so far as Obamacare?

Today, most health plans have one level of benefits for care rendered by an in-network provider and a lower benefit for services from an out-of-network provider.  Insurance carriers encourage use of in-network providers because doing so helps control claim costs.

In-network providers have contracted with the insurance companies to provide medical care at reduced prices.  In exchange, the insurance companies direct patients to the in-network providers.  The arrangement increases business for the providers and decreases claims cost for the insurance company.

Treatment out-of-network is a different story.  Out-of-network providers have no agreement or incentive to reduce prices and control cost.  At times, however, they may provide a level of care or service that a particular patient needs or wants.  Patients seeking care out-of-network need to be aware of the way their benefits will be calculated.  There is more to it than the out-of-network deductible and co-insurance.

Insurance policies have clauses and exclusions against treatment that is not medically necessary. There are also provisions that the carrier only allows the Usual, Customary, and Reasonable (UCR) charge for a service provided.  Over the last few years, many carriers have begun to define their allowable charge or UCR limit as the amount negotiated with in-network providers.  The difference can be substantial.  For instance, if the retail price of a surgery is $4000, the discounted amount could be $2500, a $1500 discount.

When his son, Ethan, was a baby, doctors said he had a rare liver disease.  The family, which was in a health maintenance organization, had to appeal three times to get approval for the out-of-network surgery that saved the boy, now 10.  So Mr. Glaser was overjoyed two years ago when his employer switched to a PPO that promised out-of-network coverage.  Including premiums and deductibles, he and his employer paid about $14, 600 a year for family coverage.  But he discovered that at 150% of Medicare rates, it still fell far short.  In the case of a $275 liver check up, for example, the balance due was $175. (NY Times 4/24/2012)

Jennifer C. Jaff said she maintained out-of-network coverage with $14,000 in annual premiums because she has Crohn’s disease and is at high risk of colon cancer, which killed three of her grandparents.  Last year, after a terrible experience with an in-network doctor, she said, she returned to a top specialist who had performed her colonoscopy and upper endoscopy.   Even with 250% Medicare rates as the benchmark Ms. Jaff owed $3,137 of a $4,200 doctor’s bill.  (NY Times 4/24/2012)

If in-network benefits were paid at 80%, the patient would owe $500 for the surgery (20% of $2500).  A patient receiving care out-of-network would not receive the benefit of the discount.  Out-of-network benefits may be paid at 60%.  The patient’s responsibility is 40% of the UCR amount of $2500 or $1000, plus the difference between retail and the UCR amount ($4000 – $2500) or another $1500.  The total owed by the patient would be $2500 on a $4000 surgery.

To avoid surprises, it is important that your employees understand how out-of-network benefits are calculated.  Some providers will agree to write off all or part of the balance.  A financial agreement before receiving services is critical.  After services are rendered, many providers are not willing to discuss discounts.

PBMs: Traditional vs Fiduciary Repricing Report (Actual)

Express Scripts – Incumbent PBM
Total Retail Retail
Brand Generic

RX COUNT 7,257 2,769 4,488
AWP $809,015.64 $513,092.61 $295,923.03
INGREDIENT COST $587,723.37 $429,827.37 $157,896.00
DISPENSE FEE $8,799.05 $4,065.80 $4,733.25
GROSS COST $596,522.42 $433,893.17 $162,629.25
MEMBER COPAY $50,959.29 $29,030.77 $21,928.52
PLAN COST $545,563.13 $404,862.40 $140,700.73
AVG. DISCOUNT 27.00% 16.00% 47.00%
TransparentRx, LLC
Total Retail Retail
Brand Generic

RX COUNT 7,257 2,769 4,488
AWP $809,015.64 $513,092.61 $295,923.03
INGREDIENT COST $517,006.90 $432,483.51 $84,523.38
DISPENSE FEE $17,672.50 $6,712.50 $10,960.00
GROSS COST $534,679.40 439.196.01 $95,483.38
MEMBER COPAY $50,959.29 $29,030.77 $21,928.52
PLAN COST $483,720.11 $410,165.24 $73,554.86
AVG. DISCOUNT 36.00% 16.00% 71.00%
SPREAD SAVINGS $61,843.02 Identified spread (the difference between the PBM pharmacy contract and the PBM plan contract) typically retained by the PBM.
REBATES $18,142.50 The average expected Rebate is $2.00 to $3.00 per claim.
GENERIC UTILIZATION RATE 62.00% $34,000.00 Estimated savings on four targeted Generic/Therapeutic Switches.
MAIL-ORDER DISPENSING RATE 25.00% $29,000.00 Estimated savings when 35% of Rx’s dispensed via retail change to our mail-order program.
TOTAL SAVINGS $142,985.52 – $36,461.31 PEPM* = $106,524.21
*PEPM or per employee per month fee.

Get your Hand out of my Pocket!

Alecia Beth Moore made an insightful comment during a recent interview.  You may know Alecia better by her stage name Pink, the pop music star.  Alecia recently gave birth to her first child and like most new parents is very protective of her first born. Asked if she would like her child to become a pop star she stated very succinctly, “I just want her to be talented because the world is cruel too those whom lack talent.”  
I’ll take this one step further and say those who lack information and/or knowledge are at the mercy of the world.  This is true in all walks of life and the pharmacy benefit management industry is no exception.  In the past few days several events have occurred where a lack of knowledge would have deemed me as a patsy.

On Wednesday September 26, 2012 I picked up a rental vehicle from the Cleveland airport.  The original reservation called for a mid-size automobile.  Since I was driving approximately 100 miles to our warehouse, I wanted to keep gasoline costs reasonably low.  Hence the request for a small automobile.  Those of you whom travel quite a bit I’m sure appreciate the Hertz Gold and Avis Preferred services.  As I approached the space where my vehicle was parked I noticed that it was not a Chevy Cruze but instead a SUV!
My first thought was, “wow a complimentary upgrade.”  Then it dawned upon me that no one is renting these vehicles due to the high cost of gasoline.  A few years ago I couldn’t get a free upgrade even if I got on my knees and begged for it.  Now Avis is giving away free SUV upgrades. I, with a smug, walked to the customer service counter and kindly requested a compact or mid-size automobile.  This saved our company $100 in unnecessary travel cost during the four day rental.
This past Sunday, September 30, 2012, I spent with friends at a local bar watching the football games.  All went as planned including my having to pay for the tab.  Because most of my friends are single women, this isn’t a big deal.  All that changed when the bartender handed me the bill.  I knew he was a shady character from the outset and like many people in a business transaction will dupe you if the door is left open.

I had been watching the bartender all evening and noticed he was pouring drinks for customers different from what they originally ordered.  I’m assuming his logic was they’ve been drinking all day so no one will notice the difference between Smirnoff and Grey Goose.  So, I’ll charge you for the Grey Goose and pocket the difference. Nonetheless, my bill was a lot higher than it should have been and included a tip! I told him exactly what I owed -and why- saving myself $75 in the process. 

Lastly, I purchased an 8 x 4 cork board from for $145.00.  I was able to find this product after one of my employees couldn’t find it for less than $250.  I was anticipating delivery last week.  Our mail-order pharmacy warehouse has a strict policy of not opening the door for anyone unless we know beforehand to expect you.  It is a safety precaution designed to protect our employees.  The delivery company tried unsuccessfully twice to deliver the cork board. 
It turns out the delivery company was an independent driver without any brand or corporate markings on his vehicle.  As a result, our employees never opened the door and the driver didn’t leave a notice.  Also, they were looking for FedEx or UPS to deliver the product.  The delivery company finally called this week to say in order to redeliver the product we would incur an additional charge of $75!  Sorry, but we’re not paying it. They agreed to deliver at no cost due to the fact we were able to point out the driver didn’t bother to leave a notice.  You would think those systems were already in place. 

I saved more than $400 (on four transactions) in one week by just being diligent and not allowing companies to take advantage of us.  Imagine what could happen when tens of thousands of pharmacy claims are at stake.  You’d be surprised how similar deceptive practices are executed when prescription drug benefit claims are involved. For many companies, during each and every single pharmacy claim, a similar scenario plays out where their PBM “partner” is hiding significant cash flow. 

Traditional PBMs are able to hide cash flow through formulay steering, differential pricing and rebates (or lack thereof), for example.  The traditional PBM is taking advantage of your lack of information and is skimming off the top albeit legally.  Find a PBM willing to sign as a fiduciary.  Get the information or hire someone who has it then tell your traditional PBM, Get Your Hands Out Of My Pockets!