Life Science Compliance Update

July 18, 2013

AMA’s National Health Insurer Report Card – $12 Billion Could be Saved Through Increased Claims Automation

Patients are responsible for nearly one-quarter of the medical bill, according to the findings released today from American Medical Association's (AMA) sixth annual check-up of health insurers and their patterns for processing and paying medical claims.

For the first time, the AMA's National Health Insurer Report Card examined the portion of health care expenses that patients are responsible for through copays, deductibles and coinsurance. During Feb. and March of this year, patients paid an average 23.6 percent of the amount that health insurers set for paying physicians.

"Physicians want to provide patients with their individual out-of-pocket costs, but must work through a maze of complex insurer rules to find useful information," said AMA Board Member Barbara L. McAneny, M.D. "The AMA is calling on insurers to provide physicians with better tools that can automatically determine a patient's payment responsibility prior to treatment."

The National Health Insurer Report Card is the cornerstone of the AMA's Heal the Claims Process ™ campaign. Launched in June 2008, the campaign's goal is to lead the charge against administrative waste by improving the health care billing and payment system.

Administrative Burden Index

The AMA also unveiled its new Administrative Burden Index (ABI) to rank commercial health insurers according to the level of unnecessary cost they contribute to the billing and payment of medical claims. The AMA found that administrative tasks associated with avoidable errors, inefficiency and waste in the medical claims process resulted in an average ABI cost per claim of $2.36 for physicians and insurers. Cigna (CI) had the best ABI cost per claim of $1.25, or 47 percent below the commercial insurer average. HCSC had the worst ABI cost per claim of $3.32, or 41 percent above the commercial insurer average.

The AMA estimates that $12 billion a year could be saved if insurers eliminated unnecessary administrative tasks with automated systems for processing and paying medical claims. This savings represents 21 percent of total administrative costs that physicians spend to ensure accurate payments from insurers.

"The high administrative costs associated with the burdens of processing medical claims annually should not be accepted as the price of doing business with health insurers," said Dr. McAneny. "The AMA is a strong advocate of an automated approach for processing medical claims that will save precious health care dollars and free physicians from needless administrative tasks that take time away from patient care."

Other Key Findings

Since 2008, the AMA's National Health Insurer Report Card has examined the claims processing performance of the nation's largest health insurers and provided an objective and reliable gauge of denials, timeliness, accuracy, and transparency. Key findings from six years of data generated by the report card include:

Accuracy:  Error rates for commercial health insurers on paid medical claims have dropped significantly from nearly 20 percent in 2010 to 7.1 percent in 2013. While dramatic improvements have been made in accuracy during the last three years, the AMA estimates that more than $43 billion could have been saved if commercial insurers consistently paid claims correctly since 2010. UnitedHealthcare (UHC) led commercial health insurers with an accuracy rating of 97.52 percent. Regence trailed all insurers with an accuracy rating of 85.03 percent. Medicare led all insurers with an accuracy rating of 98.10 percent.

Denials. Medical claim denials dropped 47 percent in 2013 after a sharp spike in 2012 among most commercial health insurers. The overall denial rate for commercial health insurers went from 3.48 percent in 2012 to 1.82 percent in 2013. Among all insurers this year, Cigna (CI) had the lowest denial rate at .54 percent, while Medicare had the highest denial rate at 4.92 percent.

Timeliness. Health insurers have improved response times to medical claims by 17 percent from 2008 to 2013. Humana (HUM) had the fastest median response time of six days, while Aetna (AET) was the slowest with a median response time of 14 days. Medicare's median response time of 14 days has gone unchanged since 2008.

Transparency. Health insurers have improved the transparency of rules used to edit medical claims by 37 percent from 2008 to 2013. Reducing the use of undisclosed payer-specific edits unlocks the flow of transparent information to physicians and reduces the administrative costs of reconciling medical claims.

To learn more about Heal the Claims Process™ campaign, including the National Health Insurer Report Card and the new Administrative Burden Index, please visit the AMA website at

July 25, 2011

CVS Caremark Under Pressure to Dissolve from Their “Friends”

CVS Caremark is coming under increasing pressure from consumer groups and shareholders to split up, at the same time that federal and state regulators are looking into accusations of anticompetitive behavior by the merged company, according to a recent article from the New York Times.

The four-year-old merger of the drugstore chain and the pharmacy benefit manager is the subject of an investigation by the Federal Trade Commission (FTC) and a multistate inquiry by the attorneys general of 24 states, according to earlier disclosures by CVS Caremark.

Carolyn Castel, a company spokeswoman, asserted that the company is “cooperating fully” with the inquiries and “remains confident that their business practices and service offerings are being conducted in compliance with antitrust laws.”

Interestingly, the leadership team of CVS Caremark team includes an unexpected individual, Troyen A. Brennan, M.D., M.P.H., who serves as the Executive Vice President and Chief Medical Officer. What is somewhat surprising about his membership on this team is that Brennan is the author of the community catalyst paper, which called for the end of academic relationships with industry.  It is somewhat paradoxical that Brennan could be calling for an end of physician-academic relationships with industry, while at the same time sitting in an extremely influential position within the very industry he seeks to place severe restrictions on.

In fact, Brennan recently emphasized CVS Caremark’s emphasis on working with health care practitioners to improve non-adherence to prescription medication.  This kind of industry-physician collaboration seems at odd with the 2006 paper Brennan pen that called for the end of such relationships.

Consequently, last week, five consumer groups wrote a letter to Jon Leibowitz, FTC chairman, claiming “there is strong evidence that the CVS Caremark merger has harmed consumers.” The groups, which called for breaking up the $27 billion merger, also accused the company of using confidential patient information from Caremark, which manages prescription benefits for health plans, to steer consumers to CVS pharmacies.

“The company’s practices effectively gave CVS an unfair advantage over other pharmacies, reducing competition and limiting consumer choice, according to the letter, which was signed by Community Catalyst, Consumer Federation of America, Consumers Union, the National Legislative Association on Prescription Drug Prices and U.S. Pirg.”

Additionally, the consumer groups charged the merged company had engaged in unfair practices that favored company-owned pharmacies, including sharing information Caremark obtained in processing prescriptions to help solicit non-CVS customers to fill their prescriptions at CVS drugstores.

Sharon Anglin Treat, a Democratic legislator in the Maine House of Representatives, explained that the situation is one in which a pharmacy benefit manager, which manages prescription benefits, is “using the information to steer people to their own pharmacies.”  Tate, who is also the executive director of the National Legislative Association on Prescription Drug Prices, a consumer group that signed the letter, notted that, “it really does appear that CVS has been unable to avoid a very significant conflict of interest.”

Mark N. Cooper, the director for research at the Consumer Federation of America, one of the groups that signed the letter, said that the “merger was a mistake” and that FTC should review the original grounds — including efficiencies, cost savings and consumer benefit — for the merger and determine whether the union had been justified.

The Times noted that, “CVS Caremark denied accusations that it had engaged in improper business practices, saying the charges were “false, unfounded and misleading.” It defended its privacy protections, saying it maintained a firewall to ensure that Caremark and CVS did not share “certain competitively sensitive information,” Ms. Castel also told the Times that the company did not improperly steer patients to CVS pharmacies, and “there are no plans to split up the company.”

CVS Caremark says the merger is helping its customers by reducing costs and improving health outcomes. “The innovative products we have introduced into the marketplace since the merger are gaining traction,” Ms. Castel said, and will “enhance shareholder value.”

The company also said it “places a high priority on protecting the privacy of its customers and plan members.” Ms. Castel said CVS Caremark used patient data internally for “appropriate purposes,” like identifying potentially adverse drug reactions.

In addition, some investors say the sharing of patient information is central to any claims by CVS Caremark that the combination of the drugstore chain and pharmacy benefit manager can better serve patients by coordinating information and reducing costs


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