Gorillas in the Mist

Editor's Note: We don't usually do this, but our friend and sometimes colleague The Passive Aggressive Paperpusher had some things to say and offers up this post. Enjoy:

This Wall Street Journal article from last summer gives a quick overview of the Greater Pittsburgh medical insurance and medical provider markets.

newly combined Highmark-West Penn will face off against... UPMC. The prestigious $8 billion,19-hospital network employs 2,881 doctors and has about 56% of the inpatient market share in Allegheny County...

UPMC, which is the region's biggest provider. Highmark has reserves of $3.71 billion and market share of more than 50% in western Pennsylvania...

On the provider side, there is the UPMC gorilla, the Allegheny General dog, and then numerous independent or small chains of community hospitals (Heritage Valley, Excela Health.)  The payor/insurance side is dominated by Highmark.  UPMC runs an insurance company but its definately a secondary business interest for UPMC as the true money maker is the medical/hospital side of the non-profit.  Aetna, United Healthcare and Cigna also compete in the commercial group medical market.

That is the overview of the two interrelated healthcare markets in Western Pennsylvania.  Each side is dominated by a single large player, and those players each have a sideline business that is on the other gorilla's turf.  The silverbacks have been beating their chests and bleating for the past six months until political pressure forced a one year cooling off period earlier this week.

So why did this happen, and why will the 2013 contract negoatiations be just as nasty.

CASH money homey.

Let me back up and go back to grad school for a moment.  The two markets are highly consolidated, the GINI co-efficients are relatively high.  Now what is a GINI coefficient?

The Gini coefficient (or Gini ratio)  is a summary statistic of the Lorenz curve and a measure of inequality in a population.

The Gini coefficient ranges from a minimum value of zero, when all individuals are equal, to a theoretical maximum of one in an infinite population in which every individual except one has a size of zero.

Gini co-efficients are a quick glance way of measuring market power and consolidation.  The higher the Gini co-effcient, the more concentrated an industrial sector, and the more the largest players in that market sector can be price makers instead of price-takers.  Price-taking behavior is the underlying assumption of Econ 101 market competition as it assumes no one producer or buyer is big enough to move a market.  That is not the case in Western Pennsylvania healthcare.

In an interrelated set of markets like medical provision and medical paying, an interesting exercise is to compare the Gini co-efficients between the sectors.  This produces an outcome grid like the one below:



Currently the Western Pennsylvania health markets are stuck in the top left hand corner --- two gorillas both attempting to apply market pressure against the other to capture as much consumer surplus as possible.  Each gorilla would like to move the situation to a High-Low combination and capture much more consumer surplus.  The Econ 101 solution space is the bottom right hand corner where the consumer (us) is not getting royally shafted.

UPMC's strategic goal is to fracture the insurance market so that it, as the dominant provider, does not have to deal with a countervailing payor organization that can take its 3 million members and go home.  Closing out access to most UPMC hospitals would force Highmark consumers and more importantly, their HR departments to begin to look elsewhere.  The UPMC play was never intended to wipe-out Highmark, just defenestrate it.  The was combined with new contracts signed with national insurance carriers that gave them in-network access to UPMC hospitals.  These steps would minimize market concentration in the insurance/payor market, and thus allow UPMC to maintain a long-term upper hand in all rate negoatiations.

Highmark's strategic goal is to survive as an 800 pound gorilla/dominant player. They have a tougher hand to play, for if PPACA is upheld, in 2014, the state health insurance exchanges will simplify and lower the costs of entry for new insurers to enter the Western PA market.  That will naturally lower the payor Gini co-efficient and favor large, integrated providers who can hold the individually weaker insurers over a barrel.

If Allegheny General was to close, there would be no counter-vailing provider with which Highmark could credibly threaten to redirect their customers to if UPMC got too expensive.  The community hospitals are too small and too general for high end/specialized care to fill that roll.  Highmark will most likely seek to first rebuild AGH, and then begin to cherry pick some of the healthy community hospitals.  This will allow Highmark to create one of the two highly likely vertically integrated medical care silos in Western Pennsylvania over the next decade.

So that is the basic outline of what the fight is about: it is barely about reimbursement rates.

The Passive Agressive Paperpusher is the author of several blogs and a regular contributor to The Angry Drunk Bureaucrat. Join him at 3 PM on Monday December 26 on ADB+ where he will take readers' questions.

UPMC, Highmark Reach Deal

In a non-descriptive bank building in downtown Pittsburgh, the heads of the major health insurance players and their aides hammered out an agreement for the control of drugs and other health care costs in the Western Pennsylvanian Market.

UPMC CEO Jeffrey A. Romoff thanked the Highmark CEO Kenneth R. Melani, M.D., and the heads of the other five familiar players in the negotiations: Governor Tom Corbett from Harrisburg, Rep. Randy Vulakovich from Shaler, and Rep. Dan Frankel from Squirrel Hill.

"How did things ever get so far? I don't know. It was so -- unfortunate -- so unnecessary. Melani lost patients -- and I lost patients..."  said Romoff speaking to the goup.  "If Melani agrees, then I'm willing to let things go on the way they were before."

Allegheny County Executive Dan Onorato thanked Romoff for helping to set up this meeting, and praised Romoff for his modesty.  Melani objected, however, that Romoff carried too many judges and politicians in his back pocket and refused to share them.

Romoff countered that he never refused to collaborate on shared interests with Highmark, except for one time, because "I believe that Obamacare is going to destroy us in the years to come."

He continued, "I mean, it's not like chiropractic or acupuncture -- or even mental therapy -- which is something that people want nowadays, and is mandated by HHS.  Even the lobbyists that've helped us in the past with malpractice insurance restrictions and other things are going to refuse to help us when it comes to Obamacare.  And I believe that then and I believe that now."

Onorato suggested that, while the times have changed from one in which Health Insurance Providers could do whatever they want, Romoff needed to share his influence in Harrisburg and Washington and that UPMC could bill Highmark for these services, adding "after all, we are not Communists."

After Corbett suggested that Health Care should be provided to those that could afford it, but not to children or African-Americans, Romoff relented and offered a wish that a peaceful solution could be found to their problems.  Romoff would provide political influence in exchange for the extension of health coverage in Western PA.

Melani insisted, however, that assurances be provided that as UPMC's position become stronger, Romoff would not exact a hostile takeover at a future date.

Romoff objected to the insinuation saying that he had selfish reasons to keep to the deal: his youngest son Michael had been forced out of the health care field by false charges and it was Romoff's desire to bring him back into the fold.  If, however, information were to be leaked to the Department of Health and Human Services or to the FDA, he would blame people in the room.

With that the meeting concluded, but an anonymous insider with UPMC later suggested that Romoff believed that it was Onorato behind this manufactured crisis the whole time.

Yes We Can (Boehner Remix)

Heh. Boner.

A Bureaucrat's Aside Re: The Duke of Wellington

At the end of the day, "Obama's Waterloo" was less like the Napoleonic defeat in 1815 and more like the ABBA song: not the best in the world, but with a beat and you can dance to it.

Paging Dr. Altmire...

And from 2PJs:

From the web site of Rep. Jason Altmire (D Health Care/UPMC Lobby-PA). Read it and weep, folks:

"I ran for Congress in large part because I believe we need to find a way to bring down the cost of health care. I also ran for Congress with a simple promise: I would do my best to represent my district and to give western Pennsylvania a voice in Washington, not the other way around.

"I regret that this year-long process of debating health care reform has resulted in a final product that I cannot support. The cost of inaction on health care is great, but it would be an even bigger mistake to pass a bill that could compound the problem of skyrocketing health care costs.

"Simply moving money around within the existing system, rather than enacting real delivery system reform, might change who pays the bill, but it does not improve the quality of care or reduce costs for families, small businesses, or the federal government. It creates a system of winners and losers, rather than reforming the system in a way that lets everyone win. It is estimated that after passage of this bill, federal health care expenditures would likely increase above what they would under current law.

"It has become clear that the vast majority of my constituents want me to oppose this bill. Particularly hard hit would be western Pennsylvania’s Medicare beneficiaries, which many experts believe would experience dramatic premium increases with enactment of this bill.

"I am acutely aware that my decision to vote against the health care bill will disappoint some of my constituents and alienate supporters of the bill. The politically easy vote would have been to vote with my party. But I was not sent to Congress to take the easy way out or to vote the way they want me to vote in Washington. I was elected to represent my district and give western Pennsylvania a voice in Congress. I strongly believe that a vote in opposition to the health care bill is consistent with the views of the district I represent, and is the correct vote based on the impact of the bill on my constituents and the overall health care system."

Why is my bullshit detector going off?

On one hand he's saying that he wants to reform health care, while on the other he's saying that he can't support the biggest (albeit far from perfect) reform to health care within his lifetime. Now, if he was disappointed that the bill didn't go far enough, I could understand and, while I would be vexed about his choice, I could at least agree that much more needs to be done.

But even the very liberal Rep. Kucinich eventually agreed that, in this case, half a loaf is better than no loaf at all.

The whole response smacks of a calculated attempt to retain a seat rather than doing what's right by the country. That's a shame. I mean, what's the benefit of having a Democrat in PA-4 if he's not actually going to, you know, vote for Democratic legislation; might as well have voted back in Missy Hart -- at least we would know how she would have voted.

Rousseau postulated that representatives should reflect the views of their constitutents, but Hamilton and Madison both argued that constituents are stupid as hell and could be ignored, less government descend into mobocracy. Both views of representative government are valid, but bear in mind, one out of three of those political philosophers is, and this is no insult to the people of France, a dirty, dirty Frenchman.

And so no Mr. Altmire, you were not sent to sent to Congress to take the easy way out or to vote the way the Democratic party wanted you to vote in Washington. You were sent to Washington as a small part of a larger hope that across this country we could elect people that weren't total ball sucking, bent-over, ankle-grabbing, twatwaffles.

I'm sad that we were wrong about former Representative Altmire.

Baucus Healthcare Plan "Mostly Filler"

(Reuters) Washington D.C. - Senate Finance Committee Chairman Max Baucus unveiled a much anticipated health care reform plan Wednesday containing nearly 90% filler, including graphs, charts, pictures, and other miscellaneous items.

The plan does not call for a government run insurance option, as advocated by President Obama and most Democrats, but does contain nearly 50 pages of pictures of cats with silly, anthropomorphic captions.

Baucus (D-MT) released the plan aimed at overhauling America's care system ahead of a vote scheduled in the Finance Committee for next week. After weeks of negotiations, it became clear that most of the proposed bill, aimed at pulling some bipartisan support, contained long, drawn out character back-stories and snippets of 1994 sitcoms.

"The cost of America's broken health care system has stretched families, businesses and the economy too far for too long," he said in a statement. "The license plate said fresh and it had dice in the mirror, if anything I can say this cab is rare, but I thought 'Now forget it' - 'Yo homes to Bel Air'."

Although Baucus held more than 100 hours of meetings over several weeks with a bipartisan group of Senate health-care negotiators known as the "Gang of Six," most of the plan was written by staffers at the last minute, in an all night drafting session yesterday.

White House press secretary Robert Gibbs called the bill "very poor work" and threatened that Senator Baucus may have to repeat his term if he doesn't "step up".

Senator Baucus said he plans on doubling his efforts on his final thesis "Actualizing the Potentiality of Multivariable Analysis Across Different Financial Vectors," which is currently made up entirely of the first 30 pages of the phone book.

Above: Page 27 from the Baucus proposal

Obama to Congress: STFU & GBTW

From transcript of address: "OMG! LOL! WTF? BBQ!"

New Healthcare Plans would Provide Democrats with Backbones, Balls

(Reuters) Washington D.C. - High ranking Congressional Democrats have apparently agreed to an amendment to the current health care bills that would provide their party leadership with backbones, spines, and balls.

Speaking on behalf of a joint House-Senate caucus, Senate Majority Leader said that a final compromise will allow the Democrats to push through several other pieces of legislation including National Chocolate Month, Reallocation of Monies under Appropriation Act 5 of 2008, and Charlie Sheen Appreciation Day.

"The Democrats may have sacrificed the core of the proposed health care and climate change bills, but with this new bill, we'll be able to pass issues of vital importance including a reduction of timber tariffs from Canadian importance. Spines and balls will be of vital importance. Vital."

The Democrats' negotiation session was nearly derailed when two dozen invited Republicans threatened to shut down the meeting. Republican Minority Leader Eric Cantor said in a written statement that the proposed amendment was "the first step on the road to socialism."

"If Democrats are allowed to have spines, backbones, or balls, they will trample on the rights of all of those in the minority that did not vote for them. Why should a majority of people have the right to rule over a country, just because more people voted for them? ... That's akin to socialism."

Democratic Leadership in the House say that they will take Representative Cantor's comments into consideration, and will probably remove the backbone and balls provisions of the amendment.

The White House spokesman Robert Gibbs did not comment on the ongoing negotiations, except to say that the President supported any bill that advanced the cause of health care reform even if it sets back the cause of health care reform.

No word as to whether the proposed amendment includes "cajones".

Bottom 9 Health Care Lies

My email box, facebook account, twitter feed and carrier pigeon roost is filled with forwards outlining the top five lies about Health Care reform:

Lie #1: President Obama wants to euthanize your grandma!!!

Lie #2: Democrats are going to outlaw private insurance and force you into a government plan!!!

Lie #3: President Obama wants to implement Soviet-style rationing!!!

Lie #4: Obama is secretly plotting to cut senior citizens' Medicare benefits!!!

Lie #5: Obama's health care plan will bankrupt America!!!

Slightly less forwarded are the Bottom 8 Health Care Lies:

Bottom Lie #10: The CIA will now be able to give AIDS to the rest of the blacks it missed in the 1980s.

Bottom Lie #9: It will turn Jesus gay.

Bottom Lie #8: Abortions will be made mandatory for everyone who is not pregnant.

Bottom Lie #7: Grandma will be harvested for her organs.

Bottom Lie #6: [Unintelligible due to shouting]

Bottom Lie #5: It turns you into a secret Kenyan Marxist Fascist muslin.

Bottom Lie #4: Americans will be forcibly turned into Europeans, and be made to let children drink and vacation for four weeks a year.

Bottom Lie #3: Medicare and Medicaid will be taken over and run by the Government.

Bottom Lie #2: Dr. House will be mandated to diagnose everything as Lupus.

Bottom Lie #1: There are only 9 Bottom 9 Health Care Lies.

I expect to see these brought up on Fox News any moment now.

Adding to the Noise

Per Maria's post, I think I'm going to go to Specter's Town Hall meeting and heckle Arlen. Of course, in order to lighten the mood and throw everyone off, I think I'm only going to shout out positive things or non sequitors.

For example:

* "HEY ARLEN! I HOPE YOU MAKE A FULL RECOVERY FROM YOUR CANCER! I WISH YOU WELL!"

* "I BELIEVE THAT THE PRESIDENT WAS BORN IN HAWAI'I!"

* "DOES ANYONE HAVE CHANGE FOR THE PARKING METER?!"

* "PUPPIES WITH BIG EYES ARE CUTE!"

* "I REFUSE TO STOP SHOUTING UNTIL I'M FINISHED SHOUTING!"

* "HAVE YOU ACTUALLY READ THE BILL, SENATOR? DID YOU NOTICE THAT ON PAGE 156 THERE WAS A PUNCTUATION ERROR ON LINE THREE? CAN YOU GET THE PRINTERS TO FIX THAT IN THE FINAL VERSION OF THE BILL?"

* "I DON'T WANT TO START ANY TROUBLE SO I'M GOING TO SIT DOWN AND LISTEN TO WHAT OTHER PEOPLE HAVE TO SAY!"

* "I HAVE AN AWESOME BEAN DIP RECIPE THAT I'M WILLING TO SHARE. SEE ME AFTER THE MEETING IF YOU'RE INTERESTED!"

* "SENATOR! MY WIFE DIDN'T THINK THAT I COULD MAKE A SPECTACLE OF MYSELF AT THIS MEETING! DO YOU THINK I HAVE, OR DO I HAVE TO DROP AN ETHNIC SLUR?!"

* "I'M AFRAID OF WHAT THIS COUNTRY IS BECOMING, SENATOR: A LONG DRAWN OUT MARCH TOWARDS ENTROPY AND EVENTUAL HEAT DEATH IN A COLD UNFEELING UNIVERSE!"

* "HOW CAN I SIT ON ONE OF THESE DEATH PANELS, SENATOR?"

* "THE NAZIS HAD FREE HEALTH CARE TOO! YOU KNOW WHAT THEY ALSO HAD? MANDATORY MARCHING! ARE WE GOING TO GET MANDATORY MARCHING, SENATOR, BECAUSE HONESTLY THESE GYM MEMBERSHIP FEES ARE KILLING ME AND I CAN'T FIND THE TIME TO EXERCISE REGULARLY!"

* IF CANADIANS LOVE THEIR SINGLE PAYER SYSTEM SO MUCH, WHY DON'T CANADIAN HOCKEY PLAYERS HAVE MORE TEETH?

And so on...

I also plan to hold up a sign that reads "No evil government subsidized corn, Agnes!"

That'll confuse 'em.