Including Information Technology Costs In MLR Could Affect IT Spending, Quality
Reproduced with permission from:
Health Plan & Provider Report,16 HPPR 668 (June 9, 2010).
Copyright 2010 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com
Source: BNA Healthcare – June 9, 2010
By: Sara Hansard
Click here to download PDF
A major issue regulators will have to grapple with in determining how to account for health insurers’ costs is what kind of health information technology should be considered medical costs.
The Patient Protection and Affordable Care Act (PPACA, Pub. L. No. 111-148) requires that starting in 2011 insurers of large group plans spend at least 85 percent of the premiums they collect on expenses that are defined as clinical services and activities that improve health care quality. Insurers of small group plans and individuals must spend at least 80 percent of premiums on those expenses.
Insurers argue that many information technology costs should be included in those definitions as they have a significant impact on patient quality, while consumer groups want more limits on what is included in the medical loss ratio (MLR) to keep costs down. How broadly regulators define information technologies that improve health care quality will have a major impact on what insurers can spend on technology.
“The legislation specifically states that activities that improve health care quality should be counted towards the new MLR standard,” Robert Zirkelbach, spokesman for America’s Health Insurance Plans, told BNA. AHIP represents about 1,300 health insurers covering more than 200 million Americans.
“There is a broad consensus that there are certain IT initiatives that do improve the quality and safety of patient care,” Zirkelbach said. Those include investments in developing electronic personal health records and costs associated with an industry upgrade currently under way to new ICD-10 (International Classification of Diseases, 10th Revision) computer coding systems, he said. Electronic medical records allow patient histories to be viewed by all medical providers, while upgrading to the new computer coding system will allow for more accurate diagnoses and tracking of patient care, he said.
If such expenses are not considered as part of the medical loss ratio, “it discourages investment in those type of activities,” Zirkelbach said. That would hurt the drive to improve care and reduce costs, “which is the opposite of what health care reform is trying to accomplish,” he said.
AHIP argues that the administration has given support to developing health information technology as a means of improving care and reducing costs. In its May 14 comment letter to the Department of Health and Human Services on medical loss ratio regulations, AHIP noted that the fiscal 2011 budget request includes $110 million to strengthen health IT policy, coordination, and research activities, and that the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5), includes $22 billion to modernize health information technology systems.
Regulators Want IT to Improve Care.
Regulators understand the need to include in the medical loss ratio information technology that improves the quality of patient care, even if the technology is not directly related to patient visits.
“We don’t want to lose some of the strategic initiatives that have actually yielded a lot better health outcomes that may not be directly related to a provider-patient visit, but have actually produced healthy results,” Health and Human Services Secretary Kathleen Sebelius said at a May 27 news conference.
In an apparent reference to Pittsburgh-based Highmark Blue Cross and Blue Shield’s implementation of health information technologies, Sebelius cited as an example an insurer that “has had a major effort to lower hospital-acquired infections, and actually has had significant success, about a 30 percent decrease, which not only saves dollars but saves lives.”
Highmark’s program to reduce hospital-acquired infections relied on information technology applications, Brett Lieberman, a spokesman for the Blue Cross and Blue Shield Association, told BNA.
Managing Operations Not Medical Cost.
Regulators are likely to prohibit IT costs associated with managing operations from being included in the medical loss ratio, Ron Wince, co-founder, president, and chief executive officer of health IT consulting firm Guidon Performance Solutions, told BNA.
“If it’s a patient-centric solution,” such as “wellness portals,” that allow patients to maintain personal health care records and get recommendations from primary care clinicians, “that will be part of the 80 to 85 percent” medical loss ratio, Wince said. But “what they do to manage their business they won’t get credit for,” he added.
Things such as installing call center software could serve patients better, Wince said. “But if it doesn’t specifically contribute to the patient’s wellness or the improvement of their medical condition they won’t get credit for it,” he said. “That will be the demarcation—whether it contributes value to the patient or not.” That may be a sticking point for insurers, though.
“The issue that is being wrestled with is what components of the business of providing health coverage are in pursuit of providing care, as opposed to merely running the business,” Howard Burde, the principal of Howard Burde Health Law LLC and a member of the board of the Healthcare Information and Management Systems Society, told BNA. HIMSS is an association that promotes health care information technology.
While it may be difficult to quantify the impact of information technology expenses, “Many of the activities that promote health care directly for individuals, activities that health plans pay for which promote the health and wellness of individuals, should be included,” Burde said. “And they can only be done through the use of data analytics.” He cited as an example disease management technologies to study treatment outcomes and allow patients and health care providers to manage their health care. Indeed, the entire clinical decision support system to identify diagnoses and medical interventions depends on information technology, Burde said.
“Insurers have a much broader view” than individual care providers, he said. “They can give doctors more complete information about their patient [and] suggest courses of action. Those are things which are directly related to the medical care given to a particular patient, and yet are performed by the payers.”
Peg MLR to Recovery Act HIT Spending.
Consumers Union suggests that much of the information technology allowed in the medical loss ratio be pegged to technologies that the government approves for grants under the ARRA. The government is “not giving money just to buy hardware and software,” Steven Findlay, senior health policy analyst with Consumers Union, told BNA.
“What they will do is give them money to adopt these systems, but only if they use them for certain things, which are boiled down to being all about improving the quality of care and service to members. It overlaps significantly with the medical loss ratio dilemma,” he said. “It’s discerning the difference between what is pure administrative and what improves the quality of care and has been demonstrated in studies.”
But Consumers Union does not believe that much of the actual purchase of equipment for IT systems should be included in the medical loss ratio, which is by far the largest share of IT expenditures, Findlay said. Most of the expenditures to build the systems should be considered part of the cost of doing business, he said. “We’ve got to be fairly restrictive here, but at the same time you don’t want to provide disincentives to adopt these systems.”
All contents © 2010 The Bureau of National Affairs, Inc. (800-372-1033). All Rights Reserved.
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