Health Care Current: February 25, 2014

The power of health care analytics

This weekly series explores breaking news and developments in the U.S. health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

Thinking big, starting small, moving quickly: the power of health care analytics

Back in the mid 1990s, when I was a Chief Information Officer (CIO), we developed an early enterprise data warehouse (EDW). Linking clinical, operational, financial and research information, the EDW was an invaluable tool in managing the organization. Service line costs, unit performance and clinical trials planning were just some of the capabilities it contained. Back then, I figured that by the year 2000, most health care systems and academic medical centers would have implemented such a system. For the most part, 20 years later, we are still talking about how to leverage information. But the buzz words have changed. Now it is all about analytics and “big data.”

This week, the health care equivalent of the Consumer Electronics Show takes place in Orlando, Florida. The annual meeting of the Healthcare Information and Management Systems Society (HIMSS) brings together more than 37,000 attendees and about 900 industrial exhibitors. Last year, the theme of “analytics” was the big buzz, and it seemed that nearly half of the exhibitors at the meeting had this word plastered up on the wall of their booth. With so many uses of the term and no clear definition, the market became quite confused. This year, we are beginning to see clarity out of that market confusion: some leading companies are emerging, and we’re hearing from health care systems that are benefiting from their investments in analytics tools.

While the data are not yet clear on where the industry stands with investments in analytics capabilities, a recent survey found that 79 percent of health care CIOs place investments in analytics as a “key priority” and “critical component” for navigating the changes in health care delivery.1

Why should health care executives invest in analytics now? The answer lies in new capabilities and an increasing imperative.

First, the technology and implementation of health care analytics has come a long way in the past 20 years. The good news is there are now approaches that enable health care systems to “think big, start small and move quickly.” These new technologies not only allow organizations to be more nimble, they also allow for a greater view into early wins. The benefits of a data-driven approach to decision making become clearer earlier, while organizations work to adopt large scale enterprise platforms.

It is, however, critical that health care systems realize the shift to a data-driven organization is much more than a technology challenge. The organizational, data governance and business model implications are equally as critical considerations when embarking on this journey. When done right, the results can be remarkable in terms of cost reduction, improved clinical quality and improved financial performance.

While the need for new technologies and data is apparent, the true value lies in having access to information to grow the business. Many business leaders look outside of health care to see that big box and Internet retailers carefully manage their supply chain, inventory, costs and prices based on what their consumers want; they do this using advanced analytic tools. Yet, we in health care continue to run hospitals and health care systems by the seat of our pants with only a superficial understanding of our costs of care, the supply and productivity of our talent (physicians, nurses, etc.) and what happens after consumers purchase our services (outcomes). We offer treatments without knowing their effectiveness. We do a poor job of understanding what happens to our patients when they leave our sight. Even in the volume-based, fee-for-service world, it is difficult to steer the ship without GPS and radar. With narrow margins, shrinking reimbursement levels and a move to value-based care, being able to tightly manage the enterprise across the care continuum has become a requirement. Managing emerging reimbursement models of bundled payments, accountable care and population health require that we develop and invest in analytics capabilities to achieve a mission: effectively caring for communities with high quality while lowering cost.

My take is that the coming year should see less market confusion and more success stories. In the face of capital constraints, health care organizations are increasingly prioritizing their investments in analytics, and the industry is beginning to figure out how to deliver care using these insights while lowering overall cost.

Email | LinkedIn

PS – For more information about our involvement at HIMSS this year, click here.

1 eHealth Initiative, “The state of health analytics in 2013: Improving Quality & Lowering Costs,” July 2013,

Back to top

My Take

By Mitch Morris, MD, Vice Chairman and National Health Care Provider Lead, Deloitte LLP 



Subscribe to receive the Health Care Current via email

Implementation & Adoption

Health care organizations send letter to CMS opposing Medicare Part D changes

Last Tuesday, more than 200 organizations sent a letter to the Centers for Medicare and Medicaid Services (CMS) voicing their opposition to Medicare Part D changes that were proposed in January (see below). The group argues that the CMS rules are inconsistent with the purpose of Medicare Part D and make unnecessary changes to the program. The letter states that the program is a success story in terms of stability, affordability and acceptability among beneficiaries, noting its 90 percent approval rating and costs that are 40 percent less than what the Congressional Budget Office (CBO) originally projected. According to the group, the rule would:

  • Significantly reduce plan and medicine choices for beneficiaries, potentially disrupting care
  • Transform the market-based competitive model by unnecessarily expanding the role of the federal government
  • Impose a large cost burden, impeding the ability of plan sponsors and other health sectors to continue offering affordable choices to patients
  • Create uncertainty for health care companies that have already begun making preparations for the 2015 plan year
  • Create additional burden for many of the organizations that are also currently devoting significant resources to health insurance exchanges (HIXs)

The organizations included in the letter represent a broad range of health care industry players, including insurers, pharmaceutical companies and consumer groups. They are urging CMS to withdraw the proposed rules.

Note: CMS issued their proposed rules on January 6, 2014. According to CMS, the rules intended to strengthen protections, improve health care quality and reduce costs for Medicare beneficiaries with private Medicare Advantage (MA) and Part D prescription drug plans, effective in 2015. Proposed changes included:

  • New criteria for identifying protected classes of drugs
  • Revisions that promote competition in Part D plans
  • Changes to the regulatory definition of negotiated prices
  • Changes to help ensure that plan choices are meaningful for beneficiaries

For more information on the proposed rules, see the January 14 Health Care Current.

Back to top

CMS to conduct end-to-end testing on ICD-10 codes

CMS announced last week that it will offer “end-to-end” testing on Medicare fee-for-service (FFS) claims using ICD-10 diagnostic and procedure codes as part of its preparedness strategy before the October 1, 2014, ICD-10 implementation date. CMS’s four-pronged testing approach includes:

  • Internal testing of CMS claims processing systems: as of October 1, 2013, all Medicare FFS claims processing systems were installed, tested and found to be ready for ICD-10 implementation; CMS will continue to test any software changes with each quarterly release
  • Provider-initiated Beta testing tools: CMS provides Beta versions of its software for providers to use to test the readiness of their systems
  • Acknowledgement testing: from March 3-7, CMS will offer all providers, billing companies and clearinghouses the opportunity to determine whether CMS will be able to accept claims using ICD-10 codes through acknowledgement testing; after this initial phase of testing ends, CMS will assess whether additional weeks of acknowledgment testing are needed
  • End-to-end testing: CMS will offer end-to-end testing to a small sample group of providers in the summer of 2014 to verify that claim submitters (e.g. providers and claim clearinghouses) are able to submit claims to the Medicare FFS systems using ICD-10 codes and receive appropriately adjudicated claims and accurate remittance advice

Legislators and several physician industry groups, including the American Medical Association (AMA) and the Medical Group Management Association, have encouraged CMS to do more extensive testing of the software and claims system with large samples of providers to ensure the transition to ICD-10 codes is smooth. In a statement released last Thursday, the AMA applauded the decision by CMS to conduct end-to-end testing, but urged CMS to reconsider mandating providers to use ICD-10 by October 1, 2014. In a recent letter to HHS Secretary Kathleen Sebelius, the AMA proposed a two-year implementation period for ICD-10, during which CMS would not reject Medicare payment claims based on their use of ICD-10 coding.

Analysis: though many provider groups may desire to participate in the initial rounds of testing, some may not be able to participate fully due to factors such as system constraints or their overall readiness. As a result, many providers may request future testing dates. Additionally, provider groups may raise concerns about how the group that is allowed to participate in initial testing will be selected and may request more clarity around the timeline. Until this clarity comes, many provider groups are starting internal testing and are developing their own plans for clearinghouse testing. In the end, any additional opportunity to test “end-to-end” with CMS that could include claims feedback could be valuable to providers. End-to-end testing could help better prepare health care organizations for the transition to ICD-10 and remediate potential significant backlogs.

Back to top

AdvaMed: medical device tax costing the industry 33,000 jobs

According to a new report based on survey findings released by the medical device trade group AdvaMed, companies have seen “employment reductions” of 14,000 industry workers and have decided not to hire an additional 19,000 workers as a result of the medical device tax. The 2.3 percent tax began on January 1, 2013, and was included in the Affordable Care Act (ACA) as a revenue raising-provision to support the implementation of the Act. Applying recent estimates of how many jobs are created indirectly by the industry as a ratio to how many are directly created (4:1), the report concluded that the tax has resulted in an indirect loss of approximately 132,000 jobs for a total job loss of 165,000 since the introduction of the tax.

AdvaMed conducted an electronic survey of member companies between November 14 and December 9, 2013, on the impact of the tax. Survey highlights:

  • 30.6 percent of survey respondents indicated they have reduced research and development as a result of the tax
  • Almost 10 percent of respondents indicated they have relocated manufacturing outside of the U.S. or have expanded manufacturing abroad, rather than in the U.S., because of the tax
  • Approximately 75 percent of the respondents indicated that they had done one or more of the following: deferred or cancelled capital investments and/or plans they had to open new facilities, reduced investments in start-up companies and had reduced or deferred increases in compensation for employees

Analysis: while the medical device industry has been vocal in their support of repealing the medical device tax, there are two issues impacting the potential of repeal. 1) The tax will result in an estimated $29 billion in revenue over 10 years (2013-2023). If this tax was repealed, this revenue would need to be replaced by other yet to be identified revenue sources or expenditure reductions. 2) If the industry was successful in repealing the tax, other industries that pay excise taxes or fees may seek similar modifications. For example, the ACA imposed an annual fee on pharmaceutical companies who manufacture or import branded prescription drugs. The pharma industry, along with other industries, could seek similar repeal of their fees and taxes.

Back to top

On the Hill & In the Courts

Virginia district court: subsidies for federally-facilitated HIX are lawful

A federal judge in Virginia ruled that HIX tax subsidies can legally be offered to individuals in states with federally-facilitated HIXs. Eastern District of Virginia Judge James R. Spencer ruled that the argument against the subsidies being used in any HIX model other than a state-based HIX lacks merit within the legislative history and context of the ACA. Had the District Court ruled against the legality of the subsidies for federally HIXs, the U.S. Department of Health and Human Services (HHS) could have been required to halt financial assistance to help purchase health insurance for millions of Americans.

Note: 34 states have chosen to allow the federal government to run their HIX. This is the second in favor of the subsidies, after another federal judge also ruled them legal in January. There are two similar lawsuits pending in Indiana and Oklahoma, courts; should the rulings in those cases oppose the other rulings, the U.S. Supreme Court may review the provision.

Back to top

Comments to Senate Finance Committee: U.S. mental health system in need of reform

Earlier this month, the Senate Finance Committee released a report that summarized comments the committee received in response to an open letter in August 2013 to the mental health care community. In total, 242 stakeholders submitted 175 letters containing recommendations and proposals for improving mental health care services in the U.S. Three themes — increase funding, expand training and education and ensure greater access — emerged from the comments. Recommendations focused on the following topic areas:

  • Care integration: integrate and co-locate primary care and mental health services to increase care coordination, improve Medicare and Medicaid billing regulations, create better incentives for the adoption of health information technology, expand the role of innovation organizations and promote managed care models for dual eligible beneficiaries.
  • Care expansion: create a national tele-health services program to reach across state borders to care for patients and eliminate Medicaid age exclusions and Medicare lifetime limits; expand workforce through an increase in the number of providers, role expansion, training and further education.
  • Workforce expansion: allow social workers, nurses and physician assistants to bill Medicare and Medicaid for mental health services and simplify administrative processes to become Medicare and Medicaid providers.
  • Regulatory alignment and parity: make improvements to and better align Medicare and Medicaid policies (a majority of the submissions — 69 percent — identified improvements and recommendations that applied to both). Specifically, create more alignment between Medicare and Medicaid rules to simplify regulations for mental health practitioners.

According to the Substance Abuse and Mental Health Services Administration, national expenditure for mental health services and substance abuse is projected to total $239 billion in 2014, up from $121 billion in 2003.

Back to top

Around the Country

Pennsylvania submits revised alternative Medicaid expansion request

Pennsylvania Governor Tom Corbett submitted a new plan for Medicaid expansion to CMS that would add more than 500,000 low-income adults to the program through the “Healthy Pennsylvania” private option. The five-year Medicaid waiver proposal would allow the state to use federal funding to subsidize the purchase of private health plans via the state’s HIX. The proposed Medicaid waiver would:

  • Increase access to coverage for two populations: 1) adult parents/caretaker relatives whose income is greater than 33 percent of the federal poverty level (FPL) and 2) childless adults. Individuals must be between 21 and 65 years of age, have an income less than 133 percent of the FPL and cannot be eligible for Medicare.
  • Require beneficiaries age 18 and older to pay co-pays as outlined by the current state Medicaid program beginning the first year of the demonstration.
  • Require any beneficiary age 21 or older enrolled in the Low Risk Benefit Plan, High Risk Benefit Plan or the Healthy Pennsylvania Private Coverage Option whose income is greater than 100 percent of the FPL to pay a monthly premium of $25 for a household with one adult and $35 per month for a household with more than one adult in the second year of the program (calendar year [CY] 2016)
    Note: eligibility requirements will be adjusted annually based on annual FPL adjustments
  • Require adults age 18 and older to pay a $10 copay for treatment received for non-emergent conditions in the emergency room beginning CY2016.

The waiver will be open for public comment for 30 days. After the comment period, CMS will review the waiver and comments prior to beginning discussions with the state regarding its approval or denial of the request. Pennsylvania submitted a Medicaid expansion waiver request in December 2013, but received much opposition to provisions that required beneficiaries to prove they searched for work and individuals with incomes at 50 percent of the FPL to pay premiums. For more information on the state’s previous proposal, see “Pennsylvania releases alternate Medicaid expansion plan” in the December 10, 2013 Health Care Current.

Back to top

Virginia Senate committee passes alternative Medicaid expansion plan

On February 16, after rejecting a proposal to expand Medicaid as outlined in the ACA, Virginia Senate Finance Committee leaders approved an alternative Medicaid spending plan that would expand eligibility to 400,000 low-income and disabled Virginians. The alternative plan proposes to subsidize private insurance premiums through a new program, “Marketplace Virginia.” The state would use $2 billion in federal Medicaid expansion funds for the first three years. While the proposal is likely to pass the state’s Senate, the House did not include a provision for Medicaid expansion in its version of the spending plan. Instead, the House Appropriations Committee’s proposal included an additional $81 million in funding for hospitals and $47 million for mental health services.

Related: the February 4 Health Care Current “My Take” delved further into other states’ alternative proposals to expand traditional Medicaid. For more information about state action on Medicaid expansion, view the State Medicaid programs: Map of expansion by state.

Back to top

Kentucky considers “bridge plans” for coverage continuity

In an attempt to alleviate concerns over individuals “churning” between Medicaid and the HIXs due to fluctuations in income, Kentucky is considering offering “bridge plans” at silver and gold levels of coverage during the 2015 plan year open enrollment period that begins November 15 of this year. The state is considering this option for the following populations:

  • Individuals who have been on Medicaid and lost coverage when his/her income increased but whose income still falls below 250 percent of the FPL
  • Parents who have a child enrolled in the Children’s Health Insurance Program, but are eligible for qualified health plans

The bridge plans are an alternative to the ACA’s Basic Health Program (BHP), a program that gives states the option to establish health benefit coverage for individuals who earn between 133-200 percent of the FPL. Under the BHP, the federal government pays a state 95 percent of what would have been spent on premium tax credits had they enrolled in the HIX and 95 percent of the cost-sharing reductions. Carrie Banahan, Executive Director of the Office of the Kentucky Health Benefit Exchange, noted that the state did look into establishing a BHP, but chose not to because of funding concerns. She also said that the state is working with HHS to resolve cost concerns and the amount of premium tax credits an eligible individual could receive to purchase a plan through the HIX. Tennessee and California also submitted bridge plan demonstration requests, but CMS has yet to approve them.

Back to top

Arkansas House votes against alternative Medicaid expansion plan

Last week, the Arkansas House voted against the state’s alternative Medicaid expansion plan on four separate occasions. Arkansas was the first state to receive approval from CMS to use Medicaid funds for a three-year alternative Medicaid expansion plan. The Arkansas Health Care Independence Program (private option) would expand Medicaid eligibility to adults who earn below 133 percent of the FPL by providing premium assistance to purchase qualified health plans (QHPs) through the HIX. Arkansas’ approach has been used as a model for states such as Iowa and Virginia who are considering a private alternative to the ACA’s Medicaid expansion. Since enrollment began on October 1, 2013, more than 87,000 qualified adults have enrolled in the program. Despite amendments to the proposal, such as prohibiting the use of any state public funds to promote or do outreach for the plan, the House failed to obtain the three-fourths majority that it requires to pass spending bills. The vote creates uncertainty for the future of the Medicaid expansion program in Arkansas less than one year after it began.

Response: House Speaker Davy Carter, who supports the proposal, has said he and other representatives will put the bill up for a vote every day of the session until it passes, and that they will not negotiate changes to the plan.

Back to top

Breaking Boundaries

Ricoh & InterSystems create partnership to develop health IT interoperability solutions

Last Wednesday, Ricoh Americas Corporation and InterSystems announced a strategic partnership to deliver software technologies that are meant to make health information technology systems interoperable. Interoperability can allow health care providers to better manage health care information, ultimately enabling them to improve workflow, save money and deliver better patient health outcomes. According to Paul Grabscheid, Vice-President, Strategic Planning, InterSystems, the partnership will “help clients around the world to capture, share, understand, and act upon real-time healthcare data...combining [InterSystems] strategic interoperability foundation with Ricoh’s innovative technologies and solutions [will] enable safer, more effective and more efficient care.”

One photography-based solution integrates a camera, electronic health record (EHR) and Ricoh technology for health care information exchange across disparate devices, systems and organizations. To use it, clinicians use a Ricoh Healthcare Camera to scan a barcode on the patient’s wristband, then to photograph an injury and add written or voice-recorded information to describe the injury on their EHR. The photo and date are then transferred wirelessly to the patient’s EHR.

Back to top

Did you find this useful?