7 August 2012

Midwest Edition
Calendar
September 6-8
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Missouri Throws Out Med-Mal Cap

States Split on Limiting Non-Economic Damages
The Missouri Supreme Court last month threw out the states $350,000 cap on non-economic damages for medical malpractice awards. This was just the most recentdevelopment for a controversial issue whose momentum has shifted back and forth in recent years. Sixteen medical malpractice caps have been upheld and 11 have been overturned in various states in recent years, according to the American Medical Association. During the 2012 legislative session, 35 states introduced more than 350 pieces of legislation addressing medical malpractice, according to the National Conference of State Legislators. Approximately 30 states currently have nondamage related caps. Many conservative politicians have claimed that limiting malpractice awards would help keep down healthcare costs, saying they are driven up by litigious patients and trial lawyers. California was the rst state in the union to introduce such caps, with its landmark MICRA legislation signed into law in 1975. That law limited pain-and-suffering damages to $250,000. Missouri once routinely capped malpractice awards until about a decade ago, linked to a cost-of-living escalator. However, that legislation was thrown out by the state courts. As a result, it had no damage limits from 2002 to 2005, when former Gov. Matt Blunt signed legislation to create caps. But the Supreme Court ruled that limiting damage awards violated the right to trial by jury in a lawsuit regarding a child born with brain injuries at Cox Hospital in Springeld, Mo. With the issue being at odds in so many states, it pays to ask what medical malpractice really means for providers and insurers. And the answer depends upon whom you ask. Dave Dillon, spokesperson for the Missouri Hospital Association, said no caps create a number of problems for providers. In 2002, when the state lost its previous caps, he said insurers that provided liability moved out of state. Without caps, it is impossible to assess risk. If an award goes from a xed ceiling to anything a jury will allow, insurers either dont provide that kind of coverage or they charge premiums for maximum amounts they can envision. Dillon said that the cost of purchasing liability insurance increased as well. He said that becomes a consideration for doctors choosing where to practice. A 2003 report by the AHRQ compared the supply of physicians in states that did and did not have caps. In 1970, when no states had caps on damages, the report found that most states had about the same level of physicians. In 2000, states with caps averaged 135 physicians per 100,000 residents while
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September 9-11
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October 3-5
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Wednesday, August 15, 2012

Noon, CDT

HEALTH BENEFIT EXCHANGES: A PROGRESS REPORT

Please join David Panush, director of government relations, the California Health Benefits Exchange, Anthony Wright, executive director, Health Access, and Jon Gabel, senior fellow, NORC/University of Chicago, to discuss the next major step in the implementation of the Affordable Care Act in California.

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NEWS
Malpractice (Continued from Page One)
states without a cap averaged 120. With adjustments, they found that states with caps had about 12% more physicians than those without. According to the Missouri State Medical Association, the number of lawsuits led against physicians fell almost 58% after the damage caps went into effect. The state also saw a $27 million decrease in lawsuit insurance premiums. The good news is that access and quality of care may not be impacted. A state-by-state assessment of emergency medical care released in January 2006 by the American College of Emergency Physicians found that states that ranked lower on the medical liability environment scale (those without caps or with high ones) all ranked high for access to emergency care. Those that

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In Brief
Freestanding Hospice Opens In Cook County
Although Cook County is the most populous metropolitan area in the Midwest, it did not contain a freestanding inpatient hospice center until now. The hospice, operated by Midwest Palliative and Hospice CareCenter, will open the new center in Glenview, a suburb of Chicago, on Aug. 9. Along with the16-bed inpatient center, named the Marshak Family Hospice Pavilion, it will include a large adjacent garden that will be open to the public. Amenities for patients and their families will include in-room kitchenettes, laundry facilities and a childrens area. It is a home away from home where families can stay with their loved one around the clock, Midwest Palliative said in a prepared statement. According to the Medicare Payment Advisory Commission, the use of Medicares hospice benefit has grown dramatically over the past five years as patients become more educated about end-of-life issues. Altogether, Midwest Palliative cares for 3,200 patients annually in 150 communities throughout the Chicago area.

graded the lowest on access to care all had caps. Tim Aylward, a partner at the Kansas City law rm Horn Aylward and Bandy LLC, said it does impact the industry, but that the effect is likely not as dramatic as some predict. In the 24 hours after the recent court opinion was handed down, the rm received a stream of letters from plaintiffs lawyers demanding attorneys to accept their settlements, or they would pull them. He said they were using the courts decision as a lever, which was anticipated. We expect most plaintiffs will start saying every case is worth multi-million dollars at least initially, he said. It will be harder to get them settled before trial, which is what the courts want. TAMMY WORTH

Michigan Boosts Medical Homes

Blues Plan Has Designated Some 4,000 to Date
Blue Cross Blue Shield of Michigan has dramatically increased in the number of patient-centered medical homes statewide, claiming they have contributed to a signicant drop in overall medical costs. The Michigan Blues has designated 994 medical practices throughout the Wolverine State for 2012, up 28% from 2011. According to data gathered and analyzed by the plan, those enrollees in medical homes had a 23.8% lower rate of hospital admissions for certain unspecied medical conditions, a 9.3% lower rate of emergency room hospital visits, an 8.3% decrease in the use of hightech radiology, and a 3% higher rate of generic drug utilization. This program benets patients by improving the doctor-patient relationship. Patients have better access to their doctors' ofces, not only when they are sick, but when they need advice and guidance to keep them healthy, said Thomas L. Simmer, M.D., the Michigan Blues chief medical ofcer. Physicians and their care teams are improving patient outcomes, which leads to lower costs because there is less need for testing and hospital care. According to plan ofcials, about 4,000 physicians have been designated medical homes statewide, and another 4,000 are working toward a medical home designation. The medical home program began in 2009, when 1,200 physicians received the designation. Overall, 75% of those doctors who received a medical home designation for their practices retain in on a year-to-year basis, according to the health plan.

Generic Drug Use Saves More Than $1 Trillion

A new report by the advocacy organization Citizens Against Government Waste has concluded that the use of generic drugs by hospitals and other providers has

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Cardinal Reports FY 2012 Earnings

Modest Growth in Net Income, China Acquisitions
Dublin, Ohio-based healthcare services giant Cardinal Health reported at revenue growth for the fourth quarter of scal 2012, but posted a moderate boost in earnings compared to the year-ago period and for the entire calendar year. Cardinals revenues for the fourth quarter of 2012 were $26.8 billion, identical to the fourth quarter of scal 2011. However, net income for the quarter was $236 million, compared to $207 million in the year-ago quarter, an increase of 14%. For scal 2012, revenues were $107.6 billion, compared to $102.6 billion, up 5%. Net income was $1.07 billion, compared to $959 million for scal 2011, up 11% yearover-year. Overall, scal 2012 was another strong year, meeting virtually all of our nancial goals, including revenues, margin growth, operating earnings, EPS and cash ow. It was also a year in which we made great strides on our strategic priorities including expansion of our retail independent customer base (and) improved generic contribution, said George Barrett, Cardinals chief executive ofcer. The company reported it had increased its annual dividend by 10.5% to just under 24 cents per share, and it had closed several transactions in China. Cardinals stock dipped about 5% after the Aug. 2 earnings announcement, dropping from about $41 per share to the $39 range in trading on the New York Stock Exchange.

In Brief
saved the U.S. healthcare system $1.1 trillion over the past decade. According to CAGW, generic drugs comprised 80% of the 4 billion prescriptions issued in the United States in 2011. Half of the savings it reported using generics came from drugs that were introduced to the market since 2002. It also noted that since federal legislation was passed in the mid-1980s to promote the use of generics, savings estimates were about 1,000 times original projections. Generic medicines continue to have a healing effect, not only on the patients who consume them but also on taxpayers, said CAGW President Tom Schatz. Since the federal government picks up 29% of the costs of all healthcare spending annually, mostly through Medicare and Medicaid, and state and local governments pick up an additional 16% of such costs, the availability of lower cost generic drugs will increasingly be an important tool in slowing the mounting expense to taxpayers of healthcare in the future.

Midwest Health Investments On Rise

Numbers For First Half Still Below Pre-Recession Years
Healthcare startups in the Midwest topped half a billion dollars in total investments during the rst half of the year, according to a Cleveland-based publication. BioEnterprises Midwest Health Care Venture Investment Report said the total investments reached $511 million during the rst half of the 2012 in 97 different companies. It's been a great year to date for Midwest healthcare startups, said Baiju R. Shah, BioEnterprises chief executive ofcer. The regional company pipeline continues to advance, requiring larger nancing rounds and attracting broader investor interest. The 2012 total compares to $315.1 million worth of investments during the rst half of 2011 in 86 companies. The comparable periods during 2010 and 2009 topped $400 million, but the pre-2008 totals were far more than $500 million, according to the publication. Of the total invested in 2012, healthcare software and service companies represented $118 million of those investments. Medical device rms received $131 million, while biopharmaceutical rms received $259 million. Among the Midwest states, Ohio led led with $126.4 million in investments in four different companies 44 different companies. Cleveland was the leader among metropolitan areas, with $104.1 million, followed by Minneapolis with $86.1 million.

Allina To Open Another Urgent Care Facility

Minneapolis-based Allina Health is building its third urgent care facility in conjunction with the Emergency Physicians Professional Association. The 14,000-square-foot center, which will be located in the Minneapolis suburb of Vadnais Heights, will begin construction later this month and open next spring. Branded Urgency Rooms, and marketed as a customerfriendly alternative to the emergency room, the first such facility was opened in Woodbury, Minn. In 2010. A second facility in Eagan is slated to open in October.

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OPINION

Page 4

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The $64 Billion-Plus Taxpayer Question

Theres a Penalty For ACA Scofflaws Is It Collectable?
Now that the U.S. Supreme Court has decided through 140 million income tax returns to that ObamaCares mandate to buy health track down the few who are actually liable. insurance is a tax, will the Internal Revenue This requires collecting information from both Service be able to collect it? the insurance companies and the individual Generally speaking, if you owe the IRS, it will lers in an expensive feat of bureaucratic get the money from youwith the possible detective work. What are the specics? The exception of the ObamaCare tax. Though details of any plan other than taking your ObamaCares individual mandate imposes a word for it have not been worked out yet, but tax on people who do not purchase the likely scenario nds insurance companies government-approved health insurance, the sending documentation to the IRS and to the law explicitly neuters the IRSs ability to taxpayer, which the taxpayer would then collect the tax. include with his return. That means even more Bizarre? Yes. And it matters. If bureaucracy and regulatory burden than the policymakers expect uninsured healthcare industry and the IRS By young people to buy health currently have. insurance when it is even more Taking all parts of ObamaCare Joseph expensive than it is today, the threat together, the IRS is expected to spend Antos and $881 million from 2010 through 2013 of serious consequences for not doing so must be real. Yes, the threat Michael R. on thousands of new workers and that the IRS might come after you if upgrades to computer systems. Strain you do not do what you are told Finally, even if the IRS has determined looks real at rst glance. But that you owe the new tax, it has very Democratic politicians, fearing public limited ability to force you to pay it. backlash for making the mandate too Basically, the IRS has two options: To ask intrusive, pulled its teeth. you for the money and to reduce the size of First, the tax/penalty is too small to matter your tax refund. But the IRS cannot reduce to the people who are its target. In 2014, the your refund unless you overpay. Since tax will be the larger of $95 or 1% of taxable taxpayers have great control over their income for an individual. By 2016 it rises to withholding, a savvy taxpayer who does not $695 or 2.5% of income. Young people would want to buy insurance could easily work the not want to pay a dollar if they could avoid it, system to ensure that the IRS could not hold but avoiding the tax means signing up for back his refund to enforce the mandate tax. insurance that many do not think they need. And half of American households do not owe That insurance is not free. Even with subsidies, any income tax to begin with, so good luck they will pay at least 3% of their incomes for getting the money from them. And half of premiums and up to 6% of the cost of the American households do not owe any income insurance in deductibles and co-payments. tax to begin with, so good luck getting the That adds up to a lot more than 95 bucks. money from them. Second, the law counts on most of the This contrasts sharply with the way the IRS scofaws turning themselves in. If you do not collects other taxes. To put it simply, the IRS have insurance and think you owe the tax, gets the money it is owed because it has broad then you will be asked to check a box to that powers to enforce compliance. After all, effect on your tax return. If you choose to theres a reason were all scared of the IRS. ignore the mandate, you might also choose not to check the box. But even those who do Joseph Antos is the Wilson H. Taylor Scholar in confess that they do not have insurance may Healthcare and Retirement Policy at the not be liable for the new tax. Illegal aliens, American Enterprise Institute, where Michael Native Americans, prisoners, those who are R. Strain is a research fellow. This post first without insurance for less than 3 months, appeared at The American. those who do not have to le an income tax return, anyone who faces a hardship or cannot nd affordable coverage, and others are all exempt. Op-ed submissions of up to 600 words are welcomed. Please e-mail proposals to Third, the law requires the IRS to sift
editor@payersandproviders.com

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