Omnicare profits triple

The Washington Post reported OmniCare's profits soared because of recent settlements for kickbacks decreased their anticipated legal defense costs.  Omnicare Inc., which dispenses drugs to nursing homes and long-term care facilities, said its profit almost tripled in the fourth quarter after it resolved allegations it paid kickbacks to nursing homes, and received money for buying and recommending drugs.

In June, Omnicare agreed to pay $98 million to settle the investigation. The terms were completed in November. The Justice Department said Omnicare paid $50 million to Mariner and Sava Senior Care owner/operators Murray Forman, Leonard Grunstein, and Rubin Schron to gain their business, while also asking for and getting kickbacks from two drug companies for recommending their products.

In the fourth quarter, the company said its profit rose to $80 million, or 68 cents per share, from $27.6 million, or 24 cents per share, a year earlier. Omnicare said it earned 74 cents per share from continuing operations, but that includes a tax benefit of 11 cents per share. Its revenue fell 2 percent to $1.54 billion from $1.57 billion

Analysts expected a profit of 63 cents per share and $1.55 billion in revenue, according to a Thomson Reuters survey.

The company reported a total of $5.7 million in pretax litigation costs in its latest quarter, compared to $48.1 million pretax a year ago.

Omnicare said its pharmacy services revenue fell 1 percent to $1.51 billion from $1.53 billion. The decline came from greater use of low-cost generic drugs, smaller reimbursement payments for certain drugs, and a decrease in the amount of beds served. The company said it did more business with assisted living facilities, which typically don't buy as many drugs as acute care centers or other facilities it does business with.

Revenue from Omnicare's clinical research business slipped to $34.3 million from $49.1 million.

In 2009, Omnicare said its profit jumped 51 percent to $211.9 million, or $1.80 per share, from $140.5 million, or $1.19 per share. Revenue decreased less than 1 percent to $6.17 billion from $6.21 billion.

 

 

Spending on nursing home care rose

Life and Time Health Insurance reported that spending on nursing home care climbed to more than $138 billion in 2008, up 4.6% from the 2007 total, according to federal analysts.  The "good" news is that the rate of increase decelerated from 5.8% in 2007.   Analysts from the Centers for Medicare and Medicaid Services have reported those figures in the latest issue of Health Affairs, an academic journal that covers health care finance and delivery systems.

The slowdown in the LTC spending growth rate was due partly to reduced growth in private spending on nursing homes.  Private payers account for 38% of total spending on nursing home services.  Increases in nursing home care prices fell to 4% in 2008, from 4.7% in 2007, and that also contributed to the deceleration, the researchers report.

Meanwhile, public spending for nursing home services grew slightly faster than the year before because of increased growth in Medicaid nursing home spending.  Medicaid, which accounted for 41% of total nursing home spending in 2008, saw spending on that item grow 2.6% in 2008, after growing just 2.6% in 2007 and 1.5% in 2006.

 

Long Term Care Costs increase....again.

McKnights ran an article about the increase in nursing home and assisted living costs which each rose by an average of 3.3% over the last year, according to the 2009 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs.

The average cost of a private room in a skilled nursing facility expanded to $219 per day from $212 a day in 2008.

Semi-private room costs increased by 3.7% to $191 per day.

The monthly cost of assisted living nationally rose to $3,131 from $3,031 in 2008.

The average hourly cost of an in-home caregiver climbed by 5% to $21 per hour, up from $20 the previous year.

Once again, Alaska topped the list of states for the most expensive nursing home care. The average daily rate in that state is $584. Louisiana received the opposite distinction. Its average nursing home rate totaled just $132 per day—the lowest in the country, according to the MetLife report.
 

To reduce health care costs, reduce malpractice.

David Leonhardt had a recent article in the NY Times discussing the need to lower medical malpractice as away to lower medical malpractice litigations. Seems like common sense to me.

The direct costs of malpractice lawsuits — jury awards, settlements and the like — are such a minuscule part of health spending that they barely merit discussion, economists say. But that doesn’t mean the malpractice system is working.

The fear of lawsuits among doctors does seem to lead to a wasteful treatment. Amitabh Chandra — a Harvard economist whose research is cited by both the American Medical Association and the AAJ — says about 3 percent of overall medical spending, is a reasonable upper-end estimate.  At the same time, though, the current system appears to treat actual malpractice too lightly. Trials may get a lot of attention, but they are the exception. Far more common are errors that never lead to any action.

After reviewing thousands of patient records, medical researchers have estimated that only 2 to 3 percent of cases of medical negligence lead to a malpractice claim.  Medical errors happen more frequently here than in other rich countries, as the Robert Wood Johnson Foundation recently found.  Only a tiny share of victims receive compensation.  Among those who do, the awards vary from the lavish to the minimal. 

All told, jury awards, settlements and administrative costs — which, by definition, are similar to the combined cost of insurance — add up to less than $10 billion a year. This equals less than one-half of a percentage point of medical spending

Research — into various surgical operations, for instance — has found less of evidence of defensive medicine.   The problem is that just about every incentive in our medical system is to do more. Most patients have no idea how much their care costs. Doctors are generally paid more when they do more. Similarly, you would want to see more serious efforts to reduce medical error and tougher discipline for doctors who made repeated errors — in exchange for a less confrontational, less costly process for those doctors who, like all of us, sometimes make mistakes.

The goal, remember, isn’t just to reduce malpractice lawsuits. It’s also to reduce malpractice.

 

Ken Connor's article: Tort Reform: Remedy or Red Herring?

The conservative Center for a Just Society had an incredible article from the well-respected Ken Connor discussing tort reform and health care.  The article is below:

"In the state of nature... all men are born equal, but they cannot continue in this equality. Society makes them lose it, and they recover it only by the protection of the law."
Charles de Montesquieu

In the ongoing debate over health care reform, critics on the right are increasingly citing the lack of tort reform as a major deficiency of the current proposals floating around the halls of Congress. Instead of focusing on truly conservative solutions to our nation's mounting health care crisis, Republican lawmakers and pundits are playing the same old song-and-dance—blaming ballooning health care costs on trial lawyers. This red herring tactic is a classic example of politicians trampling principle in pursuit of politics. In this case, Republicans moonlighting as "conservatives" seek to use tort reform to shield corporate malefactors (who also happen to be their financial benefactors) from full accountability for their wrongdoing. In so doing, they are undermining a bedrock principle of our nation's justice system.

For years, Big Business and the U.S. Chamber of Commerce have spent millions of dollars in a public relations campaign aimed at demonizing trial lawyers, portraying them as unethical con-artists out to game the system. These corporate interests have a vested interest in keeping the tide of public opinion running against trial lawyers because it deflects attention from the widespread problem of negligent and reckless conduct that injures consumers. This "shoot the messenger" tactic not only enables businesses to avoid financial accountability for wrongdoing—it deliberately undermines the people's civil liberty.

The reality is that trial lawyers are the people's first line of defense to secure redress of grievances for private or civil wrongs committed against them. The most highly publicized of these kinds of cases usually involve David and Goliath-type scenarios—think of the massive frauds committed by WorldCom, Enron, or Bernie Madoff and you get an idea why trial lawyers are essential to securing justice for those wronged at the hands of well-heeled rogues with deep pockets and limitless legal resources. And yes, sometimes these cases involve substantial claims against doctors or hospitals accused of malpractice.

Despite unfair characterizations to the contrary, medical malpractice is no joke. Every day thousands of Americans walk into doctors' offices, emergency rooms, and operating rooms trusting their lives to the expertise and integrity of the medical system. Errors in diagnosis, misread charts, medication errors... all can cause irreparable harm to their victims. And these kinds of accidents happen often—far more than Republican advocates of "reform" are willing to admit and far more than most people realize. According to several studies conducted over the last decade, up to 98,000 people die every year as a result of an estimated 15 million instances of preventable medical errors. These statistics place death by malpractice as the 6th leading cause of death in the United States.

For the victims and their families, the tragedy inflicted as a result of medical malpractice is very real, and the process of seeking a just remedy can be overwhelming. It is for precisely these kinds of situations that the 7th Amendment to the United States Constitution guarantees all Americans the right to a fair trial before a jury of their peers. This right is a foundational principle of our civil liberty and should be a core tenet of conservatism because it affirms the responsibilities citizens have in a free society and the accountability of all before the law.

Nevertheless, the importance of the civil justice system and the right to trial by jury is poorly understood by many conservatives because trial lawyers are constantly demonized by special interests seeking to evade justice. Many Republicans have been wrongly led to believe that tort "reform" is some kind of Reaganesque trickle-down solution to the high cost of insurance and the high cost of medical care. The facts, however, don't support such a notion. Skyrocketing insurance premiums are not a result of malpractice litigation, and the high cost of medical care stems more from "offensive medicine" (profiteering by doctors seeking to make an extra buck), rather than "defensive medicine" purportedly resulting from fears of malpractice suits.

In 2007, the Congressional Budget Office estimated that costs associated with medical malpractice claims only amounted to 2% of overall health care spending. Furthermore, multiple studies suggest that the high cost of medical insurance has virtually no correlation with the frequency or amount of malpractice payouts but is actually a result of insurance companies playing the market and—in some cases—intentionally misrepresenting the influence of malpractice payouts in order to keep premiums high. Doctors are not fleeing the medical profession from fear of lawsuits, and those who are sued for medical malpractice are often permitted to continue working with little to no professional censure for the harm they inflicted.

The truth is that corporate moguls push for tort reform because they have little use for a civil justice system that puts the little guy on the same plane as the rich and powerful. These so-called fiscal conservatives don't like equal justice. They want preferential treatment—something they are accustomed to getting from politicians because of their hefty campaign contributions.

Conservatives need to educate themselves about the importance of a civil justice system that protects everyone and treats all litigants—rich and poor alike—as equals before the law. Furthermore, true conservatives ought to resist attempts to federalize tort law and impose one-size-fits-all solutions to "problems" that are, in large part, the fictional creations of special interest lobbyists seeking to enrich the coffers of their wealthy clients. Any change in medical malpractice laws should occur at the state level and be tailored to meet conditions in the individual states. The people in Topeka may approach the same problem differently from the folks in Tallahassee. They may be experiencing different problems, or perhaps, none at all. In any event, the residents of Attapulgus, Georgia don't want Chuck Schumer and Olympia Snow dictating the remedy they can pursue when a doctor leaves a pair of scissors in the site of their incision or causes avoidable brain damage to their newborn.

Tort reform subsidizes wrongdoing by shielding wrongdoers from accountability for the consequences of their misconduct. It is an affirmative action program for corporate miscreants. Incorporating tort reform into health care reform will do nothing to cut medical costs. It is, however, guaranteed to result in more, not fewer, cases of medical malpractice. Furthermore, federalizing tort laws will only result in the accretion of more power in the hands of the central government and the emasculation of the rights of states and individuals.

If Republicans are truly sincere in their commitment to protecting the rights and liberties of the American people against more and bigger government, they should resist any attempt to federalize the laws of medical malpractice.

Why are health care costs so high?

There is a new study from WellPoint: Institute of Health Care Knowledge that shows why the U.S. spends so much on health care costs in comparison to other Western countries despite the quality being lower than in those countries.  The study states:

Despite the common belief that costs increase due to excess insurer profits, the aging of America and the high cost of medical malpractice, these factors have little if any impact on health care premiums. The key drivers of health care premium increases are advances in medical technology and subsequent increases in utilization, excess price inflation for medical services, cost-shifting, the high cost of regulatory compliance and patient lifestyles (e.g., physical inactivity and increases in obesity). Though still a factor, prescription drugs contribute less significantly to rising health care costs due to the increased use of generic medications.

Popular explanations for the upward spiral of health care and health insurance costs include the impact of an aging U.S. population, the high cost of medical malpractice insurance and “excess” insurer profits. None of these, however, is a primary driver of health care costs and the resulting rise in health insurance premiums.

Here is a copy of the study.  Tort reform does nothing to lower the cost of health care and medical malpractice awards do not affect the overall cost of health care.

Kindred profits soar despite recession

The Courier-journal had an interesting article showing how profitable Kindred nursing home chain has been this year and how they rely on "managing" labor costs to insure profitability.  This euphemism means they are understaffed.  

Kindred Healthcare's profits rose 55 percent in the first quarter of the year as the company offset a slight drop in patients by managing costs more closely, especially labor.   Net income was $22.8 million, or 58 cents per share, compared with $14.7 million, or 37 cents per share, a year earlier.

Income from continuing operations  was 57 cents per share, compared with 42 cents per share in the first three months of 2008.   The continuing-operations figure exceeded Wall Street analysts' average expectation by 13 cents per share and also topped Kindred's own previous forecast of 40 to 50 cents per share.

The Louisville long-term care company said it expects its full-year earnings to be $1.35 to $1.45 per share, the same amount it forecast in February.  That means the company can absorb a proposed Medicare cut in nursing-home reimbursements without a drop in earnings. 

Overall revenue for the January-March period was $1.08 billion, up about 3 percent.    Kindred shares rose 9 percent yesterday, adding $1.27 to close at $14.91. The latest earnings were released last night after the market closed.

See full report here.

 

Future Costs of Long Term Care

Prudential Study Sheds Light on the Increasing Costs of Long-Term Care.  Prudential website has a great tool to determine the cost of long term care in each state. 

According to the U.S. Census Bureau, by 2030 the number of Americans aged 65 and older will more than double to 71 million, comprising approximately 20 percent of the U.S. population. With an aging population boom, Prudential issued 2008 Long-Term  Care Cost of Care research report.  The study found an increase in the average cost of long-term care ranging from 5% to 13%, varying by type of service, in the past two years alone.

"Many Americans mistakenly believe that Medicare or private health insurance will pay for their long-term care needs. The reality is long-term care risk is substantial, and under current Medicare and Medicaid policy, much of it is the uninsured private responsibility of individuals who pay for care and of families who care for their relatives," said Andy Mako, Senior Vice President, Long-Term Care Insurance, Prudential.

Prudential's Cost of Care study sheds light on the State-specific average costs associated with nursing homes, assisted living facilities, and home health care services.

The study related significant issues:

-- Average costs for long-term care services increased over the past two years and are expected to continue to rise. The average daily cost for an assisted-living facility is now more than $100, or $3,241 per month. What's more, the average daily cost of a private room in a nursing home is now $217, or $79,205 annually.

-- Home health care experienced the smallest rate increase, rising just 5 percent over the past two years. The average hourly rate for a home health aide/certified nursing assistant increased by $1 in the past two years, to $21.

-- Costs for long-term care services continue to vary significantly by location, with Alaska, New York City, and Stamford, CT consistently being the most expensive areas for nursing home and assisted living facilities, and Oklahoma City, St. Louis, and South Dakota being the least expensive.

In addition to the report being available to consumers on www.prudential.com, Prudential is also launching an updated interactive consumer cost of care mapping tool on its website at www.prudential.com/insurance/longtermcare, designed to provide more in-depth State-specific cost detail - and in some cases City-specific - aimed at arming consumers with essential facts to help them make better financial decisions. "While consumers understand the importance of planning for their financial future, they continue to have misperceptions about the costs of long-term care services and the benefits of long-term care insurance. Our resources can help them dispel these myths and put them on the right path to securing their retirement," added Mako.

 

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