Friday, August 24, 2012

Providence revisited

DCBS has rendered a decision on the 11/1/12 Providence individual rate filing.  They knocked the increase down from 15.7% to 12.2%.  The change is mostly driven by a reduction in annual trend from 7.2% to 5.5%, or as a 23 month factor from 14.3% to 10.8%. 

I wrote before that I thought the Providence trend was high, below is an update of the chart that shows why.  I'm starting it with January of 2010 because that was when the explosive growth in membership tapered off.  Prior to that comparing the book to a point 23 months earlier would be apples and oranges, as the book had more than doubled in that time.  Click for a larger view:

The blue line shows the 12 month change in the rolling 12 month normalized cost per member per month.  It's the same as the figures included in Providence's filing attachment G, column N, except that I'm compounding the changes over 23 months the same way the filing uses them.  So the Feb-2012 value of 7.2% becomes (1 + .072) ^ (23/12) - 1 = 0.143.  That 14.3% figure happens to be what Providence proposed using, it's the actual factor by which the experience claims are marked up for trend as shown in the Rate Projection attachment A.  That pick is shown on the chart as the flat red line.

There are two more lines on the chart.  The flat purple line is what DCBS approved, and the green line is the 23 month change in rolling 12 month normalized cost pmpm.  That is, instead of looking at a 12 month change and extrapolating it over a 23 month period I'm looking at the actual change over 23 months. 

People can decide for themselves how reasonable the proposed and approved trends are.

Wednesday, August 8, 2012

Tweets that make me laugh

First this:

A few items later in my stream was this:

The latter references a new RWJF synthesis on the effects of hospital competition.  The key points:

  • Hospital consolidation generally results in higher prices. This is true across geographic markets and different data sources. When hospitals merge in already concentrated markets, the price increase can be dramatic, often exceeding 20 percent.
  • Hospital competition improves quality of care. This is true under both administered price systems, such as Medicare and the English National Health Service, and market determined pricing such as the private health insurance market. The evidence is more mixed from studies of market determined systems, however.
  • Physician-hospital consolidation has not led to either improved quality or reduced costs. Studies find that consolidation was primarily for the purpose of enhanced bargaining power with payers, and hence did not lead to true integration. Consolidation without integration does not lead to enhanced performance.

For background, Providence was one of the higher cost providers Regence tried to cut out of their network, while Tuality was one of two low cost providers the insurer wanted to keep.  Despite providers being mostly successful in pushing back against that move, it looks like it still struck a nerve...