Health Care Current: January 28 2014 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: January 28, 2014
Is transparency in health care enough?
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.
- My Take
- Implementation & Adoption
- On the Hill & In the Courts
- Around the Country
- Breaking Boundaries
Seeing past the blind spot: Is transparency in health care enough?
In November of 1980, my father was teaching me how to drive in our family’s 18-foot long Chevy Impala station wagon. Clearly nervous about his teenager piloting the 4,300 pounds of steel, he would constantly remind me to check my mirrors and blind spots, while noting that, in a vehicle this size, I still wouldn’t have a complete view of where I was going or what was happening around me. That same month, the agency that was then known as the Department of Health, Education and Welfare, now the U.S. Department of Health and Human Services (HHS), issued a policy that barred the Agency from disclosing identifiable annual Medicare reimbursement payments of individual physicians or payments in a manner that identified individual physicians.1 While many have debated the relative merits of this policy, some argued it created a new blind spot in our view into the health care system.
Over the last three decades, cars have gotten smaller and more sophisticated while our health care system has grown enormously and has, in some experts’ opinion, become unsustainable. Today, one of the great hopes of reforming the system is to increase transparency. In theory, with a clear view into price, cost and quality, individuals, clinicians, employers, payers and the government would be able to make informed decisions about the value of care they procure or provide. In turn, patients would seek high-quality, low-cost providers, while physicians would be pressured to deliver better care at a lower cost to remain competitive; outliers would be particularly salient.
On January 14, the Centers for Medicare and Medicaid Services (CMS) removed this blind spot in a controversial move: it ended three decades of prohibition and issued a rule stating that information on physician reimbursement could be released on a case-by-case basis. The rule specified that:
- Individuals and groups seeking Medicare physician payment data must submit specific requests
- HHS will not put the data on its website in a searchable format
- HHS will use a “balancing test” that weighs individual physicians’ privacy interests against the potential public benefit presented by the release of information to determine what will be released
- No patient identity information will be released, but the data could be used to track health care utilization and fraud trends across the system
- CMS plans to publish “aggregate” data sets about Medicaid physician services
- HHS will launch a website to post payments and gifts made to physicians from prescription drug and medical device manufacturers and will expand its Physician Compare website to include health care quality information for clinicians and group practices2
The ruling raises many questions: How much information will be released and under what circumstances? Will it uncover fraud, drive down costs and lead patients to make better-informed decisions or will it impugn honest practitioners and misdirect consumers with the false economy of low price?
The challenge with transparency is that a complete picture often cannot emerge through one data point from a single data set (e.g., reimbursement). Instead, stakeholders get a cluster of data from one source at a time, typically without sufficient context to be insightful: a little cost here, a little quality there. This is a common issue in health care: programs rank providers based upon outcomes and then critics charge that the data is not risk-adjusted; cost of care is of great concern to consumers, but equally, consumer ratings of hospitals typically reflect their service experience.3
True transparency could enable a comprehensive, comprehendible and actionable view of health care. For a patient, that means being able to answer a simple question: “Where can I go to get good care for a reasonable price in a respectful manner?” For employers and government agencies, the questions are more complex, but the data needs are very similar. Reimbursement information is one small, isolated piece. How this information will be used remains to be seen and what cautions go along with it have yet to be determined. However, waiting for all the necessary information to be available to get a complete view is not an option. Consumers and employers are demanding it and many providers have acknowledged that some information is better than no information. More importantly, as other industries have shown, where demand exists, someone will step in to fill the void using whatever data and whatever method is available—rightly or wrongly. While some argue the move is incomplete, it is still an important one.
Teaching my own son to drive reminded me of how challenging it is to simultaneously process the information you have while accounting for that which you don’t have. Even with GPS, back up cameras and parking sensors, it fundamentally boils down to “check your mirrors, check your blind spots.” Still, that comes with a caution: part of the Federal Motor Vehicle Safety Standards states, “Each convex mirror shall have permanently and indelibly marked at the lower edge of the mirror's reflective surface, in letters not less than 4.8 mm nor more than 6.4 mm high the words ‘Objects in Mirror Are Closer Than They Appear.’”
Warnings like this serve as an important reminder that what we see may not be an accurate reflection of reality. But, as we move to slow the growth in cost of health care, each new element of transparency we add is an important step. So, we shall see what warnings come with this new information. But, we’ll also look toward the day when the full spectrum of information is available to us, helping us move forward and, perhaps, automatically preventing us from getting into an accident.
PS - For more information on this ruling, see the January 21 Health Care Current.
1 Healthcare Payer News, “Medicare may divulge what it pays physicians,” January 14, 2014. http://www.healthcarepayernews.com/content/medicare-may-divulge-what-it-pays-physicians
2 HHS, “Modified Policy on Freedom of Information Act Disclosure of Amounts Paid to Individual Physicians under the Medicare Program,”
3 Deloitte, “2012 Survey of U.S. Health Care Consumers: Consumers’ utilization of the health care system,” 2012. www.deloitte.com/us/consumerstudies
By Harry Greenspun, MD, Senior Advisor, Health Care Transformation & Technology, Deloitte Center for Health Solutions, Deloitte LLP
Implementation & Adoption
IRS: consumers with limited coverage won’t pay individual mandate penalties
A notice issued last Thursday by the U.S. Internal Revenue Service (IRS) outlined further exceptions for the Affordable Care Act’s (ACA) individual mandate requirement to obtain health insurance coverage or pay a penalty. Under the announcement, certain individuals will be exempt from paying the individual mandate penalty despite having coverage that does not include the full range of required benefits considered to be minimum essential coverage. This includes individuals with limited-benefit health coverage under certain Medicaid Section 1115 demonstration projects, coverage for the medically needy, space-available care and line-of-duty care for military members.
Related: a Gallup poll conducted in November indicated that approximately 28 percent of individuals plan to opt out of health care coverage and pay the penalty (the greater of $95 or 1 percent of their annual income) in 2014.
RAND: consumers keeping non-compliant health plans in 2014 not likely to impact HIXs
According to a new RAND Corporation study, health insurance exchanges (HIX) are not likely to be negatively affected by the White House Administration’s decision to allow individuals to keep insurance plans that do not meet ACA criteria in 2014. The study analyzed three scenarios: current policy, which allows individuals to keep their non-compliant plans and two Congressional proposals that would allow plans to continue indefinitely—one with the option to enroll new members and the other without that option.
According to the report, all three scenarios would cause disruption to HIX risk pools, but the disruption would not be severe enough to threaten HIX viability. Current policy is projected to increase premiums by 1 percent. According to the report, the most disruptive scenario would be that which allows individuals to keep and lets new members enroll in, non-compliant health plans. This option could lead to a 10 percent increase in HIX premiums and 3.2 million less enrollees, as well as an additional $5 billion in federal spending through 2015. The other two options were found to be the least disruptive and would have small effects on enrollment and premiums. Allowing individuals to keep their old plans could increase the number of people who are insured; however, given the cheaper price of these plans, their actuarial value is not comparable to plans offered through HIX.
Reports: health care spending continues slow growth; price growth remains slow; and health care jobs decline
According to briefs released this month by the Altarum Institute’s Center for Sustainable Health Spending, national health expenditures for the first 11 months of 2013 increased by 4 percent from the previous year. Depending on December data, the 2013 growth rate could be below 4 percent—the lowest rate in the past 50 years. Other findings:
- Gross domestic product (GDP): health care spending’s share of GDP (17.2 percent last November) was the lowest the U.S. has seen since September of 2012
- Pricing: national health care prices in December 2013 were 1.1 percent higher than those of December 2012; this was an increase 0.1 percent above the lowest value in the last 50 years
- Jobs: private health care employment fell by 6,000 jobs; the December 2013 drop is the first in the industry since July 2003
According to Charles Roehrig, Director of Altarum Institute’s Center for Sustainable Health Spending, “While 2013 looks to be another year of historically slow growth in health spending, the data currently suggest an upward drift during the second half. We expect this upward trend to accelerate in 2014 with the advent of ACA expanded coverage and a recovering economy.”
Gallup: rate of uninsured has dropped
According to a recent Gallup poll, the uninsured rate has declined this month to 16.1 percent of the U.S. population—the lowest percentage since 2012. The data showed a gradual decline in uninsurance from 18.6 percent mid-year 2013 to 17.3 percent in December. The poll, conducted January 2-19, includes data based on approximately 9,000 interviews with adults age 18 and older. The authors note that uninsured rates have fluctuated during different periods over the past several years and that it is too soon to draw definitive conclusions on the impact health care reform has had on insurance rates.
CMS awards new HIX grants
Last Wednesday, CMS awarded nine states more than $200 million in new HIX grant funding. Mississippi plans to use the latest funding to develop its Small Employer Health Options Program (SHOP) exchange and Arkansas anticipates using the award to transition to a state-based HIX in 2016. The other states plan to use the federal funds to enhance eligibility systems, information technology infrastructure and websites and to increase customer service staff. The following states received grants:
- New Mexico: $69.4 million
- Washington: $84.6 million
- New Mexico: $69.4 million
- Mississippi: $16.9 million
- Arkansas: $3.6 million
- Delaware: $8.3 million
- Nevada: $7 million
- Rhode Island: $6.2 million
- Utah: $3.2 million
- New Hampshire: $2 million
Note: according to CMS, “States can choose when to apply for grant funding based on their needs and planned expenditures. States can apply for multi-year funding, known as level two establishment grants. States that are making progress in establishing a Marketplace through a step-by-step approach can apply for funding for each project year, known as level one establishment grants.”
On the Hill & In the Courts
Lawmakers express concern over FDA’s generic drug labeling proposals
Nearly 30 legislators sent a letter to the U.S. Food and Drug Administration (FDA) last Wednesday voicing concerns over the recent generic drug parity rule. The rule, proposed by FDA in November, would allow generic drug companies to change the safety information on their product labels. It would also create parity among abbreviated new drug applications (ANDA) and the reference listed drugs (RLD) so that ANDA manufacturers would be able to distribute new labels even if the drug information was different from the RLDs. Led by the Senate Health, Education, Labor and Pensions Committee ranking member, Lamar Alexander (R-TN) and House Energy and Commerce Committee chairman, Fred Upton (R-MI), the legislators assert that the new rule contradicts the agency’s long-standing policy, the Hatch-Waxman Act, for generic drugs to be the same as the branded drug. Allowing generic manufacturers to alter their labels, the letter argues, would directly conflict with the Act. The legislators also assert that the rule could raise the cost of both generic and branded drugs, cause confusion with FDA labeling approvals and boost companies’ exposure to state tort lawsuits. In their letter, the group asked the FDA to provide both committees with more information regarding the benefit of labeling changes, adverse event policy for generic labeling and an explanation of how the agency arrived at a cost estimate of between $4,237 and $25,852 annually.
District judge blocks navigator restriction law
Last Thursday, a federal district judge in Missouri issued a temporary injunction on a state law that imposed additional requirements on HIX navigators and assisters. The law requires navigators, certified application counselors (CACs) and counselor-designated organizations to receive a state license before being allowed to assist consumers and to meet state licensure requirements in addition to requirements set by the ACA. The law also states that navigators who are not health insurance agents or brokers may not provide advice about the benefits, terms and features of health plans or offer advice about which HIX plan is better or worse. It also prevents them from providing any information regarding plans or products not offered on the HIX.
The lawsuit, brought forward by several Missouri navigator and CAC groups that oppose the licensing law, asserts that the ACA’s navigator provision supersedes the law and that those set by the state obstruct the federal law and operation of the HIX. The Court rejected the state’s petition to dismiss the case and granted a temporary injunction, preventing the state from imposing its navigator licensure laws until the case is heard and ruled on. District Court Judge Ortie Smith noted in his opinion that the state elected to have a federally-facilitated exchange (FFE) run by HHS. In addition, he highlighted that, while the ACA does not preempt state laws, as a federal law it would preempt any state law that prevents its application. The ruling could set precedence for lawsuits in the nearly 20 other states that have enacted navigator laws.
Related: in another ACA legal challenge, Halbig v. Sebelius, the District of Columbia Circuit Court of Appeals granted a motion for an expedited appeal in a lawsuit seeking to block insurance subsidies for individuals purchasing HIX plans on an FFE.
Around the Country
Virginia governor plans to expand Medicaid
Last Monday, Virginia Governor Terry McAuliffe (D) announced that he will be seeking to expand Medicaid through a proposed budget amendment if the state’s Medicaid Innovation and Reform Commission does not agree to do so within the next 60 days. The Commission, which was established last year, will only approve expansion of Virginia’s Medicaid program if high cost-saving thresholds are met. Approximately 400,000 low-income Virginia residents could benefit from expanding Medicaid.
Tennessee seeks additional $80 million to help struggling hospitals in absence of DSH funding
The entire 11-member Congressional delegation of Tennessee signed a letter requesting that CMS Administrator Marilyn Tavenner support the approval of a Medicaid waiver the state recently submitted. The waiver seeks an additional $80 million in funding for the Essential Access Hospital payments in absence of Medicaid Disproportionate Share Hospital (DSH) program funding. The letter states that in 1994 when the state created its Medicaid program, TennCare, through a waiver, it did not include a DSH program, anticipating that the majority of the uninsured population would be covered through the program. The cost of the TennCare has increased and, as a result, the state ended the expanded coverage demonstration in 2005, which has affected hospitals financially.
According to the delegation, Tennessee is the only state that does not have access to Medicaid DSH funding. Last year, hospitals in the state provided more than $700 million in unreimbursed TennCare costs and $970 million in charity care and lost an additional $730 million due to Medicaid underpayments. The requested funding would go to hospitals that are struggling financially due to uncompensated care. Under the ACA, the federal DSH program will be reduced by $18 billion in anticipation of a newly insured population through Medicaid expansion and HIXs. At this time, Tennessee does not plan to expand eligibility of its Medicaid program, which may further complicate hospitals’ uncompensated care cost problems.
Report: Wisconsin hospitals saved $45 million by reducing readmissions and surgical infections
A Wisconsin Hospital Association (WHA) report released last week found that hospitals within the state successfully reduced readmissions, controlled surgery-related infections and saved more than $45 million through a new initiative. The Partners for Patients initiative, currently in its second year, is a collaborative effort between WHA and CMS to reduce costs and improve quality of care in 108 Wisconsin hospitals. According to the report, the program cut surgical site infections by 37 percent between January 2012 and July 2013. Hospital readmissions were reduced by 22 percent during the same time period, generating a savings of $34 million. The reduction represented the prevention of over 3,500 patient readmissions; the average readmission costs $9,600. As a result of the program, 63 percent of eligible Wisconsin hospitals will not incur any CMS readmission payment reduction penalties and none of the 37 percent of hospitals that will be penalized for readmission will receive a penalty greater than a 1 percent; the maximum penalty for fiscal year 2014 is 2 percent. Other report highlights:
- Wisconsin ranked third for average net incentive/penalty payments under Medicare's Value-Based Purchasing Program, with 60 percent of its eligible hospitals receiving bonus payments and the remaining 40 percent experiencing payment penalties up to 0.49 percent
- Central line-associated blood stream infections were reduced by 42 percent, resulting in savings of over $5.9 million
- Patient falls were cut by 26 percent, saving $429,750 between 2012 and 2013
DNA ‘barcoding’ provides faster analysis of cancer-related proteins
Massachusetts General Hospital researchers have developed new DNA ‘barcoding’ technology that enables simultaneous analysis of a patient’s sample for hundreds of cancer-related protein markers. The minimally invasive procedure uses DNA-linked antibodies to detect the proteins. Prior to this breakthrough, pathologists were only able to examine a small number of protein markers at one time for tumor analysis. This technology aims to help pathologists and clinicians gain a better understanding of cancer progression, which may make it possible to determine why certain therapies are ineffective in some patients or lose effectiveness over time. After authenticating the technique's use in cell lines and single cells, researchers tested it on samples from patients with lung cancer, finding that it was able to reflect differences in features of cells within a single tumor as well as differences in protein expression between tumors that appeared the same under a microscope.
Genetic platform developed at UC San Diego used to produce new antibiotic
Scientists from University of California (UC), San Diego developed a genetic platform that identifies and creates naturally occurring drug product molecules. The synthetic biology technology resulted in the discovery of a new antibiotic, taromycin A, generated from a marine bacterium. The antibiotic compound was found to be effective in fighting drug resistant MRSA infections. Beyond the experiment, the technology could have a significant public health impact by providing new insight on antibiotic resistance, a public health challenge. This development highlights the potential for new drug discoveries that utilize the vast microbial diversity in the ocean to identify natural product drug candidates.