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Health Care Current: April 19, 2016

A glimpse into the future of health care at VA

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

A glimpse into the future of health care at VA

As we wrote several weeks ago, “the health plan of the future is easy to see.” The health plan of the future may not just help with the financing but may also be the facilitator and enabler of achieving health through a consumer-focused platform.

This is happening across the health care industry. While other industries have automated and streamlined their services so people are empowered to book trips, order cars, or get products instantly delivered to their homes, the health care system is catching up. Many health care stakeholders today are focused on having a more patient- and consumer-centric system.

There are some success stories – the ongoing shift to incenting value over volume, the health information technology revolution resulting in major reductions in the cost of storing data and increases in analytical capabilities, and the widespread adoption of electronic health records (EHRs) are a few examples of the current transformation happening in health care.

But, health care is not like those other industries in many ways. Human relationships, empathy, and compassion should always be central components to almost any system improvement in health care.

This is especially true for the US Department of Veterans Affairs (VA) – an organization that is extending beyond the traditional confines of the health care system to meet consumers where they are. Despite the well-publicized issues at VA over recent years, it is important to keep in mind there are aspects of health delivery for which VA stands as a model.

VA is on a journey to become more patient-centric and focused on improving the health and quality of life for Veterans. Recognizing that not all Veterans are the same and there is no “one” Veteran, VA is focused on deepening its understanding of what barriers and concerns Veterans are facing and what they will encounter and live through both inside and outside of the health care system. Using this information as a guide, VA is organizing and planning better care experiences for Veterans.1

VA faces many of the same constraints as the private health care sector:

VA has a head start in many ways, some of which may serve as lessons for the commercial sector. Its integrated provider-payer system allows for more fluid data flow. VA also has access to social and other services such as housing all that have important impacts on Veterans’ lives. VA’s progress in telehealth is also virtually unparalleled to other health systems. It made early investments and a commitment to increasing access to specialists, incorporating mental health care into primary care and leading in home monitoring that allows older Veterans to live at home longer. Finally, while VA is cognizant of return-on-investment (ROI) – resources are finite and successful health care stakeholders must be mindful of balancing cost and quality – ROI is less about a business case for VA. The organization remains one that is striving to do whatever is necessary to ensure that Veterans get the right treatment in the right place at the right time.2

These early commitments give us a glimpse into what the future of VA will look like. In the journey to better serve Veterans, transparency, connectedness, and building the capabilities for patients to feel like they are better at understanding and being able to manage their own health are critical.

For some Veterans, this could be making transactions easier – managing tasks such as booking appointments and filling prescriptions on their own. Beyond transactions, some Veterans want the ability to communicate with their care team over the phone, through secure emails, text, and video chat. Having access to real-time, synchronous expert care through telehealth can help improve access to care, the patient experience, care delivery, and ultimately, health outcomes. Technological and data analytics capabilities will be important, but the human element, the relationship between the patient and clinician, and meeting Veterans wherever they are on their journey, will be paramount.

The terminology is different at VA. Whether it’s concepts of adapting to military culture or being a proud patriot who is outwardly proud of their military service, Veterans interact with the VA system differently than their counterparts in the commercial population.3 But, what is not different is the outcomes that each is looking for: High quality care at the right time in the right place.

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My Take

By Terri Cooper, PhD, Principal and the Federal Health Sector Leader, Deloitte Consulting LLP


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CMS to test alternative payment models with 5,000 physician practices under CPC+

The US Centers for Medicare and Medicaid Services (CMS) will test two alternative payment models for primary care management with approximately 5,000 physician practices starting in January 2017. Under the Comprehensive Primary Care Plus (CPC+) model, primary care practices will select from two tracks:

CMS estimates that Track 1 of the CPC+ will be budget neutral, but Track 2 could save $2 billion over the five-year program. CMS will pay practices incentive payments at the start of performance periods, and practices will either keep or have to repay those payments based on their quality and utilization metrics. All of the participating practices will be responsible for giving patients 24-hour access to care and their information, delivering preventive care, engaging with patients and their families, and coordinating care with hospitals and other clinicians, such as specialists.

CMS will collaborate with commercial and state health plans to deliver the initiative and select primary care practices for it. Through Memorandum of Understanding (MOU) agreements, CMS and payers will align payment, data sharing, and quality priorities and metrics for the CPC+ program. In addition, CMS will require organizations that participate in Track 2 to have a letter from their health information technology (IT) vendor(s) stating that they are supportive of the organization’s efforts to transform primary care delivery.

Analysis: While, at this point, it is unclear how this program will align with requirements under the Medicare Access and CHIP Reauthorization Act (MACRA), the integration of payers into the CPC+ program is another way that CMS is showing its focus on aligning health care stakeholders’ priorities as it moves the system toward value-based care.

As explained in Laying new tracks for measuring performance in health care, MACRA fundamentally changes how Medicare will pay physicians and other clinicians paid under the Medicare fee schedule in the future. The law puts significant revenue at stake for physicians. It defines elements of Medicare’s pay-for-performance system for physicians – including use of electronic health records, quality, and service use. It also defines what an alternative payment model (APM) looks like, including the need to share upside and downside risk.

Now, health plans should understand that the next wave of payment innovation should not be ignored. CMS is laying the tracks for how the new systems of Medicare payment innovation and measurement will be designed. Given the investment in technology, process, and operating models that may be required for physicians to succeed and maximize their reimbursement, commercial health plans may need to find ways to run their trains on the same track as CMS. Physicians may simply not have the interest nor resources to manage to a myriad of metrics. Health plans may be unable to continue operating a completely different approach to payments – the fee-for-service and VBC tracks are quickly converging.

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Implementation & Adoption

Chamber of Commerce highlights key components of successful employer wellness programs

According to the US Chamber of Commerce, employer-sponsored wellness programs should be designed based on leading practices in five key areas:

  • Infrastructure
  • Data
  • Evaluation and planning
  • Awareness, education, and behavior change interventions
  • Success

While several financial, political, and cultural trends are driving the demand for more employer-driven, evidence-based workplace wellness programs, programs with these key attributes can have benefits for employers and employees while responding to legal and regulatory requirements.

Ten steps in designing a well-functioning workplace wellness program include:

Analysis: The Deloitte 2015 Survey of Health Care Consumers found that consumers are interested in and see the value of wellness programs offered by their employers. As discussed in Employers still bullish on wellness programs: A check-up on employer health and wellness initiatives, most consumers are willing to participate in programs whether they are optional or required to receive full benefits. As interest in wellness programs continues to grow, employers may find that seeking employee input and giving employees several options for participating may increase employee satisfaction, long-term engagement, and overall program success.

However, employers face numerous challenges when developing a wellness strategy: understanding sensitivities in engaging with employees around lifestyle behavior, sifting through studies and examples to identify evidence-based interventions that can keep employees motivated over time, and navigating an evolving regulatory landscape. Deloitte’s 2015 Survey of US Employers shows that despite these challenges, employers are still bullish on wellness programs. Many employers said they are likely to maintain or scale-up their current wellness and disease management programs, not only to encourage healthy habits among their employees, but also to bolster recruitment and retention rates.

(Source: US Chamber of Commerce, “Winning with Wellness,” 2016)

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Value-based payment arrangements are on the rise

Value-based payment arrangements have increased nearly 11 percentage points between 2014 and 2015 according to the Health Care Transformation Task Force. The group, a collaboration between private sector entities including patients, health plans, providers, and purchasers, says this increase demonstrates the members’ commitment to having 75 percent of business under value-based arrangements by 2020.

The results are based on survey responses from 23 of the task force members, of which include four of the top 25 US health insurance companies based on their market share and five of the top 10 non-profit health systems based on their number of short-term, acute-care hospitals. The survey asks health plans what percent of their total membership and what percent of total services are delivered by providers under value-based care arrangements (e.g., bundled payments, global budget, shared savings). It asks providers what percent of their current revenue comes from value-based contracts. More providers say they are in value-based arrangements than plans: 42 percent vs. 38 percent. Most of the arrangements are bundled payment, shared savings, and global budget models.

(Source: Health Care Transformation Task Force, “Health Care Transformation Task Force Reports Increase in Value-Based Payments,” April 12, 2016)

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HHS asks for comments on how to measure interoperability progress under MACRA

The US Department of Health and Human Services (HHS) is seeking input on how to improve and measure progress toward interoperability in health care through a request for information. MACRA established a national objective to achieve widespread exchange of health information through interoperable EHRs by December 2018. The law requires HHS to establish metrics to measure progress against this goal by July 2016.

The Office of the National Coordinator for Health IT (ONC) at HHS asked for comments on three main areas:

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On the Hill & In the Courts

Actuaries: Risk adjustment system for exchanges is working as designed

The American Academy of the Actuaries recently said that the risk adjustment program is operating as intended, shrinking the loss ratio differences among insurers. The Academy found that risk adjustments evened out loss ratios between health plans with high losses and low losses. The reinsurance program helped even out losses more, limiting the losses that health plans with more catastrophic cases would have had.

Loss ratios still varied widely across insurers due to differences in how well premiums accounted for claims and due to differences in administrative costs for health plans. According to the Academy, four modifications may improve the program in the future:

Background: The ACA established the risk adjustment program to prevent adverse selection in the public health insurance exchanges. The program reallocates funds from health plans with low-risk enrollee populations to health plans that enroll more high-risk people. In most states, CMS operates the risk adjustment program and assesses health plans by their average actuarial risk (Massachusetts administers its risk adjustment program). Payments to health plans are budget neutral and spread out financial risk to keep premiums stable. The risk adjustment program applies to plans inside and outside of the exchanges.

(Source: The American Academy of Actuaries, “Insights on the ACA Risk Adjustment Program,” April 2016)

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States struggle with the potential repercussions of Supreme Court decision on self-funded plans

The recent US Supreme Court decision that states cannot require self-funded plans to submit claims data may require many states to reassess fees on self-funded plans. Kentucky, Maine, New Hampshire, Oregon, Vermont, Washington, and other states partly fund programs like state-based exchanges, childhood immunization programs, and all-payer claims databases through fees assessed on self-funded plans.

In March, the Supreme Court ruled that Vermont cannot make self-funded insurance plans report medical claims data to the state (see the March 8, 2016 Health Care Current). Though this was about data collection, the decision hinged on the opinion that reporting and record-keeping fall under ERISA, and therefore the Employee Retirement Income Security Act (ERISA) pre-empts state efforts to place similar regulations on self-insured plans.

In light of the March ruling, the Supreme Court has asked the Sixth Circuit Court to reconsider its earlier ruling in Self-Insurance Institute of America Inc. v Snyder et al., in which it upheld Michigan’s tax on all health plans, including self-funded plans. Initially, the Sixth Circuit ruled that a state tax on all health plans did not conflict with ERISA. However, with the Supreme Court decision, many states are watching to see if the Sixth Circuit Court interprets the ruling to prevent states from assessing fees on self-funded health plans to fund a number of program across the country and maintain all-payer claims databases.

At this point it is unclear how the Sixth Circuit will rule. In the Supreme Court’s March decision, Justice Kennedy said that the Secretary of Labor, not states, has the authority to administer reporting requirements by plans governed by ERISA. His opinion suggests that it could be possible that the Department of Labor could support reporting requirements like that in Vermont.

(Source: Trish Riley, National Academy for State Health Policy, “Are States Losing Key Tools for Health Reform?” April 5, 2016)

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Around the Country

Cost growth goals, payment and delivery reforms, and telehealth help states curb costs

State governments may be well-positioned to implement health care cost control and quality improvement reforms according to a recent report from the Center for American Progress (CAP). The report explores 15 approaches that states have or could consider using to slow health care cost growth and improve the quality of health care.

As one example, the report referenced Maryland’s global budgets efforts. Initially begun as a pilot for 10 rural hospitals, the state has expanded the program under an agreement with CMS. The program is voluntary, but all 46 hospitals in the state signed on to the program. The Maryland Health Services Cost Review Commission sets each hospital’s payments at the beginning of each year based on inflation, population change, infrastructure requirements, changes in levels of uncompensated care costs, and quality. In the first year, the state saved Medicare more than $100 million. Maryland’s all-payer rate setting system helped the transition to global budgets but the authors said that states do not need to instate rate setting to implement a global budgeting program.

Another example is that Maryland and Oregon publish state scorecards on health and cost outcomes. This is a simple way to help health care stakeholders and state regulators assess the current state of the health care system and to outline targets for improvement. There are numerous potential quality and costs measures states could use, including life expectancy, rate of immunization for children, rate of child poverty, and median individual health care spending.

Finally, states could consider expanding telehealth services to improve care and reduce costs. One study found that each telehealth Medicare visit saves $46 and each commercially covered telehealth visit saves $126. Despite an increase in telehealth services in recent years, there are still regulations that limit its broader adoption. States can encourage increased use by modifying licensure and practice rules. For example, Maryland, New York, Virginia, and the District of Columbia allow licensure reciprocity – allowing patients to see a doctor across state lines – with bordering states. Higher reimbursement for telehealth services and requiring insurers to cover them could also increase its use. As of February 2016, 23 states have parity laws that require insurers to cover telehealth services at the same rate as in-person services.

Analysis: As explained in The evolving state of innovation: Are 1332 waivers leading the way?, state governments have been incubators of innovation, and health care is no exception. In addition to the policies above, beginning in 2016 states have a new set of tools to develop new models in health care: Section 1332 state innovation waivers. Through the 1332 waiver program – perhaps in conjunction with Medicaid waivers under Section 1115 – states have numerous options for revamping their current approaches to providing health coverage to individuals and families. Waiver programs like these give states the funding, policy innovation, and, impetus to reconsider their access and coverage equation. Many states are formulating plans and beginning discussions around what considerations they need to make to move forward with a waiver.

(Source: Zeke Emanuel, Joshua Sharfstein, Topher Spiro, and Meghan O’Toole, “State Options to Control Health Care Costs and Improve Quality,” April 2016)

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Hospitals swap beds for other services

If you’ve shopped for books or checked your bank statement lately, chances are you went online and not to a brick and mortar building. While it is clear we cannot manage all of our health care needs online, many hospitals are preparing for a health care system that increasingly relies on ambulatory and home care. Providers, health plans, and life sciences companies are emphasizing population health and are focused on helping patients avoid hospitalization and moving care to the most appropriate and cost-effective settings. New hospital payment models focus less on narrowly defined acute care episodes. Also, consumers increasingly desire care options that are more convenient, including care in the home. But what does this mean for hospitals and health care facilities, and how will they shift to accommodate the changing delivery system?

Results from the Health Facilities Management/American Society for Healthcare Engineering 2015 Hospital Construction Survey show that many hospitals and health systems are in the process of repurposing their existing space. Nearly 67 percent of survey respondents said they are either repurposing health care facilities or currently assessing space for other needs.

According to Deloitte’s report, Hospital repurposing: What to do if you've built beds and they don't come, a number of options exist for hospitals looking to repurpose existing space that is no longer needed. These include transitioning the space formerly used for beds to services that are more in demand (e.g., freestanding ERs, outpatient clinics, post-acute care, or observation). Such options often have another advantage, in that they make it possible for hospitals to monetize unused space by adding revenue-generating services or by either subleasing or selling the space.

Hospitals that transition space to outpatient facilities focused on preventive and low-cost services may see the highest returns in terms of outcomes and financial rewards. Models for this use of space should consider focusing on areas that improve the outcome-to-cost ratio (i.e., the total cost to create incremental clinical improvements), which becomes more important as hospitals take on more financial risk. Increasingly, this means concentrating resources on traditionally high-cost chronic disease populations, such as those who have diabetes.

Some hospitals have merged repurposing strategies with their strategies around wellness. They are dedicating space to programs that align with a medically integrated population health model to go beyond simply offering a fitness center. Many are staffing these centers with exercise physiologists and other multi-disciplinary staff that consider health risk factors and tailor programs to the patient. In the process, most wellness centers are also designed to generate revenue. Focusing on lifestyle factors for a population of patients, such as how often they exercise, their nutrition, tobacco habits, and stress levels, is critical. It is not possible to adequately address lifestyle in a couple of short visits every year, so medically integrated fitness centers may help encourage patients and increase outreach to the community throughout the year.

Analysis: As payment systems increasingly reward quality outcomes and aim to reduce unnecessary utilization, acute care bed demand in hospitals will likely continue to decrease in many markets. Hospitals in service areas where this trend is taking place and that are considering repurposing space should consider assessing the market, competition, and demand trends in the local service area, followed by scenario-based planning using patient volumes, profitability, and cost driver differences to weigh several options. For business development, strategy, and executive officers of healthcare systems, shifting the focus from filling beds may help to maximize assets and space utilization.

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Breaking Boundaries

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