Health Care Current: August 23 2016 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: August 23, 2016
Telehealth: Aligning the incentives with the demand
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.
- My Take
- Implementation & Adoption
- On the Hill & In the Courts
- Around the Country
- Breaking Boundaries
Telehealth: Aligning the incentives with the demand
Walking with my dog Tarot down my street last week, I was stopped by a man selling organic lawn services. He explained how beautiful my yard would look and how much easier it would be for me if I used his services. He stressed that this was a much more sophisticated service than older services I might have been familiar with – it could reduce harmful runoff and environmental impact and is safe for my pets.
Despite his impassioned pitch, I told him I wasn’t interested. Undeterred, he began to recite additional innovations. I finally had to explain: Tarot spends most of the day running in the yard, to the point that our grass was perpetually torn up. We had finally replaced it with artificial turf. No matter how good his lawn service was, we had absolutely no use for it.
Such has been the history of telehealth. For years, it has been pitched as a solution to a range of problems – access, cost, quality, convenience, and beyond. Year after year, new and increasingly sophisticated entrants appeared, but adoption of telehealth remained relatively anemic. Why?
As discussed in a recent Deloitte health policy brief, Realizing the potential of telehealth, a lack of aligned incentives, rather than a lack of good technology, has stymied telehealth adoption. Reimbursement, competition, licensure, and others issues have been insurmountable barriers for most providers and payers. As a result, telehealth has been largely restricted (albeit highly successful) to integrated delivery systems and government health services where the business model made sense. However, with the expansion of new reimbursement models and the rise of consumerism, new drivers of adoption have emerged.
For example, the US Centers for Medicare and Medicaid Services (CMS) Next Generation Accountable Care Organization (ACO) model is testing whether strong financial incentives for ACOs, combined with tools to support better patient engagement and care management, can improve health outcomes and reduce expenditures for beneficiaries in traditional Medicare.1 Under the model, CMS waives some traditional telehealth restrictions. Unlike in traditional Medicare, ACOs providing telehealth services do not have to be in rural areas or originate from a medical facility (they can originate from the patient’s home). ACOs can experiment with using telehealth to reduce avoidable hospital readmission rates and triage patients to urgent care or the physician office instead of using the emergency department.2 Under these experimental reimbursement models, the incentives for using telehealth services may be more properly aligned among the different stakeholders.
CMS has other demonstrations and initiatives that waive certain telehealth restrictions. For example, the Comprehensive Primary Care Plus (CPC+) Model,3 the Comprehensive Care for Joint Replacement Model (CCJR),4 and the Bundled Payment for Care Improvement Initiative (BPCI) all have waivers around telehealth.5 Under the CPC+ model, participating practices must provide patients with 24-hour access to care and deliver preventive care services, engaging with patients and their families and coordinating care with hospitals and other clinicians, such as specialists. Telehealth may provide a cost effective way for physician practices to meet these requirements.
Outside of Medicare, much of telehealth oversight takes place at the state level. States regulate telehealth coverage through three major channels: Medicaid reimbursement, private insurance parity, and provider licensing and reciprocity. In general, states have taken diverse approaches to regulating the service and addressing licensing issues, creating a mixture of barriers and incentives for telehealth.
Medicaid programs in 47 states and the District of Columbia (DC) provide some level of reimbursement for live video, the most traditional telehealth service. Only seven states offer what could be considered a “full” range of services, reimbursing for live video, store and forward, and remote-patient monitoring (though the restrictions and limitations vary).
The private insurance market looks different. Twenty eight states and DC have laws requiring private insurers to reimburse for telehealth services at the same rate as in-person services. Though many telehealth companies accredit this as a “win,” as payment models evolve toward value-based models, payment parity laws may become less relevant. Shared risk and shared savings models are expected to increase the incentives for health plans to encourage the use of telehealth services as they will have more incentives to reduce avoidable hospital readmissions and triage patients to urgent care centers or the physician offices.
As care delivery models evolve, it’s also important to note what consumers expect. Deloitte’s 2016 Survey of US Health Care Consumers found that about half of surveyed consumers, whether they have a chronic condition or not, say they would use telehealth for post-acute care or chronic condition monitoring. Additionally over the last few years, a proliferation of vendors have started offering direct-to-consumer telehealth services. While some consumers may prefer only using telehealth services from their physician or health plan, some health care organizations see these industry disruptors as a threat to their usual way of business.
Meeting consumer demand and innovating business strategy may be a motivator, beyond cost and quality alone, for broadening telehealth adoption.6 Telehealth is finding its way into broader use as new drivers and new business models emerge. Perhaps now it can run free, just as Tarot can in our yard.
1 Patrick Conway, “Building on the success of the ACO model,” The CMS Blog, March 10, 2015.
2 Studies have shown that a quarter of all ER visits are for non-emergent care, resulting in otherwise avoidable health costs. Using telehealth to increase appropriate care sites is one strategy of ACO care coordination.
3 Centers for Medicare and Medicaid Services, Comprehensive Care for Joint Replacement Model, 2016.
5 CMS, BPCI: General Information, 2016.
6 Darius Tahir, “Telehealth services surging despite questions of value,” Modern Healthcare, February 21, 2015.
By Harry Greenspun, MD, Managing Director, Deloitte Center for Health Solutions, Deloitte Services LP
Medicare spending is higher for those under age 65 with disabilities; main driver is Part D drugs
In 2014, average per-capita spending on Medicare beneficiaries under age 65 was higher than for beneficiaries age 65 and older ($13,098 vs. $9,972). This is according to a recent Kaiser Family Foundation (KFF) report that compared these two groups of beneficiaries.
The researchers found that higher Part D prescription drug spending was the main reason for the higher Medicare spending for beneficiaries under 65. From 2000 to 2005, Medicare spending was lower for beneficiaries under 65, but the pattern changed in 2006 when Part D started. Spending on post-acute care services like skilled nursing facilities and home health was lower for Medicare beneficiaries under 65.
While Part B drug spending accounts for a different share of total spending, the average amount is nearly identical: $2,523 for under 65 and $2,617 for the 65+ population. Medicare spending for beneficiaries under 65 rose with age. In 2014, Medicare spent $7,918 per year on average on 25 year-olds, $11,834 on 35 year-olds and $13,578 on 45 year-olds before leveling off. Medicare spending was highest ($17,193 in 2014) among those 65 and older who were originally eligible for Medicare because of a disability.
(Source: KFF, “Similar but Not the Same: How Medicare Per Capita Spending Compares for Younger and Older Beneficiaries,” August 16, 2016)
Implementation & Adoption
EBRI: Self-insured health plans increasingly popular amongst small, midsized companies
More small and midsized companies offered self-insured health plan options between 2013 and 2015, according to a recent newsletter from the Employee Benefit Research Institute (EBRI). The percentage of midsized companies (defined as 100-499 employees) offering at least one self-insured health plan option increased from 25.3 percent in 2013 to 30.1 percent in 2015. Smaller companies (fewer than 100 employees) were less likely to offer a self-insured plan to start with; the share grew (from 13.3 to 14.2 percent). Meanwhile, large companies (500 or more employees) – the most likely to offer at least one self-insured option – retreated somewhat over the time period. In 2013, 83.9 percent offered one of these options; the share was 80.4 percent in 2015.
The upticks among small and midsized companies caused the percentage of covered employees who enrolled in self-insured plans to increase overall: 60 percent of covered employees were enrolled in a self-insured health plan in 2015, compared with 46 percent in 1996.
Many industry experts expected that the Affordable Care Act (ACA) would lead more employers to self-insure, saying that these options are more attractive for employers than “fully-insured” alternatives because of increased costs for employer-sponsored health coverage under the ACA.
(Source: Employee Benefit Research Institute, “Self-Insured Health Plans: Recent Trends by Firm Size, 1996‒2015”, July 2016)
Independent analyst: Average requested rate hike in exchanges is 24 percent but caveats apply
Charles Gaba, an independent analyst who has been tracking enrollment in the public health insurance exchanges since 2013, calculated that the national average increase is 23.9 percent based on information on health plans’ proposed premium changes. Gaba also found that, in the five states that have approved final premium rates for 2017, the average rate increase is 17 percent.
Gaba’s coverage noted caveats to the widely-reported rate increases:
(Source: Charles Gaba, ACASignups.net, “Avg. *requested* indy market rate hike: 24 percent; *approved* hikes across 5 states: 17.0 percent,” August 14, 2016)
CMS proposes updates to PACE program
CMS has proposed changes to the Programs of All-Inclusive Care for the Elderly (PACE) program, the first major program overhaul in more than a decade. The proposed updates reflect recommendations from lawmakers, patient advocates, participating organizations, and health care providers. Major changes include:
The proposed updates align closely with other recent CMS regulations addressing the role of clinicians, including removing “physician” as statutory language from the Medicare Codes of Participation and opening the door for broader roles for non-physician clinicians, such as nurse practitioners and physician assistants. CMS also suggests removing reporting redundancies and expanding eligibility for waivers meant to reduce administrative burden.
Many industry leaders have expressed support for the proposed updates, especially surrounding patient protection and flexibility for providers.
Background: PACE provides coordinated care in home- and community-based settings for individuals age 55 and older who would otherwise require institutional care. The program coordinates medical practitioners and social services around the needs of individual beneficiaries. Last updated in 2006, PACE serves over 34,000 older adults in 31 states, with enrollment increasing by over 60 percent since 2011.
While PACE enrollment is small, it is steadily increasing since implementation of the PACE Innovation Act. Congress passed the Act last year to allow more individuals to enroll in the program (see the October 27, 2015 Health Care Current). It expands the scope of PACE, allowing enrollment for individuals under age 55 who require nursing home level care, and individuals age 55 or older who have multiple and complex care needs who are not yet at a nursing home level.
On the Hill & In the Courts
CMS proposes updates to DSH payments to account for third-party payments
CMS has proposed to change the formula used to calculate Medicaid disproportionate share hospital (DSH) payments. As hospital-specific DSH payments are made from a limited annual federal allotment, CMS says that this will help ensure program integrity and financial equity. In the proposed rule, CMS says it would take into account all third-party payments, including Medicare payments, in the DSH calculation. DSH payments go to hospitals who serve a large share of Medicaid, underinsured, and uninsured populations to lessen the financial impact associated with these populations.
CMS would alter the formula used to calculate the hospital-specific payment amounts to account for all private and Medicare payments. CMS says that payments from Medicare and Medicaid for dual-eligible beneficiaries are “generous” when compared to the payments for an uninsured patient or one with only Medicaid coverage and should be represented in the DSH payment calculations. Further, even though the underinsured population accounts for a share of uncompensated care, any health insurance payments for them should also be counted in the formula.
The new formula proposal comes following extensive request for clarification from states, hospitals, and other stakeholders on the formula in current law and regulation. Congress, in writing the ACA, assumed that with Medicaid expansion and the individual mandate, hospitals would see fewer uninsured patients, and therefore cut Medicaid DSH payment amounts. CMS says that the interpretation of statute to include all third party payments in the formula will better reflect the real economic burden of DSH hospitals, and better apply the law as intended.
PDUFA VI: Patient input and real-world evidence key for regulatory decision-making
Last week, leaders from the US Food and Drug Administration (FDA), industry stakeholders, and patient groups convened to discuss the future of new drug development and the pending reauthorization of the Prescription Drug User Fee Act (PDUFA) VI. The FDA’s Center for Drug Evaluation and Research (CDER) director, Janet Woodcock, emphasized the importance of enhancing patient input and incorporating it into regulatory review and integrating real-world evidence (RWE) into regulatory decision-making.
The meeting also covered the goals letter and what to expect from PDUFA VI. For example, PDUFA VI would enhance clinical trial designs to support innovation and regulatory evaluation and advance drug development through greater use of model-informed techniques. The new molecular entity program will allow greater flexibility in the pre-market review process. The group also discussed hiring review staff and electronic submission processes.
Related: The FDA published performance and procedure goals for PDUFA VI in a letter last month (see the July 26, 2016 Health Care Current). The letter is an agreement between the FDA, industry stakeholders, and patient advocates and is the first step toward reauthorization. Congress is expected to reauthorize PDUFA VI this October before PDUFA V expires in September 2017. PDUFA VI will continue many of the programs piloted under PDUFA V. For example, PDUFA V included pilot programs for the use of patient input that PDUFA VI will continue with the emphasis on RWE for regulatory decision-making purposes.
California reference-based pricing decreased price of some procedures by 20 percent
The California Public Employees’ Retirement System (CalPERS) has found that its reference pricing initiative has saved money, and many hospitals in the state have seen their market share for certain procedures increase. In 2011, CalPERS began capping payments to hospitals for knee and hip replacements, cataract removal surgery, colonoscopies and other common procedures. Patients can still use higher-priced services but must pay the difference as well as the usual cost sharing. CalPERS saw a 20 percent decline in the prices of referenced-priced services while the prices paid by other employer-sponsored plans increased roughly 5.5 percent.
One example is hip and knee replacement: CalPERS sets payments at $30,000. The patient pays the usual cost sharing of 20 percent, or up to $3,000 for a knee or hip replacement. In addition, if the patient chooses to receive care at a hospital that charges $40,000 for the procedure, he or she would also be responsible for paying the $10,000 difference.
A number of studies have evaluated how these changes have affected consumer behavior, costs to employers, and health care prices. Under reference pricing in California, the average price for several services dropped:
- Prices for cataract removal surgery dropped nearly 20 percent, which saved the system $1.3 million over two years
- Colonoscopy prices dropped 28 percent, saving nearly $7 million
- Knee or shoulder arthroscopy fell by 17 percent
Hospital market share also changed after the program started. Lower-priced hospitals increased their market share by 28 percent for hip and knee replacements, taking business from many higher-priced hospitals.
Many stakeholders say that despite the savings, reference pricing is not the only solution needed for curbing cost growth. It relies on patients shopping for care, which only works with certain procedures that can be scheduled (it is difficult to shop around for a good price for emergency procedures). Procedures like this only represent roughly 40 percent of health care spending. Reference pricing also requires a market with a certain level of competition between providers.
(Source: Austin Frakt, “How common procedures became 20 percent cheaper for many Californians,” New York Times, August 8, 2016)
Around the Country
Report: An early understanding of state-level churn under the ACA
Income, employment, and health status all contribute to health insurance coverage transitions – commonly referred to as churn – often between Medicaid, the Children’s Health Insurance Program (CHIP), and being uninsured. Since 2014, people are now more likely to churn between Medicaid, CHIP, and qualified health plan (QHPs) coverage on the exchanges.
Prior to the ACA, analysts predicted there would be a high level of churn among people with incomes below 200 percent of the federal poverty level (FPL). One study estimated that within a six month time period, 35 percent of adults with household incomes below 200 percent of the FPL would experience an eligibility change and 50 percent of adults would have done so within a year.
The National Academy for State Health Policy (NASHP) recently published a brief that explores state efforts to measure coverage transitions and the challenges for health plans, providers, and state entities that process enrollment changes, finding:
- Access challenges: Individuals who change insurance sources regularly may be less likely to have a regular source of care, increasing the risk of not receiving preventive care or necessary treatments.
- Increased costs for states: If individuals are churning between having coverage and being uninsured, states’ administrative costs may rise and their medical costs could rise due to unmet health needs that become exacerbated in the absence of treatment.
- Lack of coverage caused by income-related churn: Because of the coverage gap in states that have not expanded Medicaid eligibility, adults who earn below the FPL but do not qualify for Medicaid will likely be unable to afford coverage.
Measuring churn is difficult, and none of the states who use the federally-facilitated exchange say they can measure churn between Medicaid and QHPs. However, some states with state-based exchanges are attempting to measure churn or are laying the groundwork to do so in the future.
(Source: Anita Cardwell, “Revisiting churn: An early understanding of state-level health coverage transitions under the ACA,” NASHP, August 2016)
Tiny innovations have potential to make big impact on patient care
Researchers have created a microneedle drug monitoring system that could replace invasive blood draws, improve patient comfort, and reduce costs. The microneedle is a small, thin patch that looks like a hollow cone that is pressed against a patient’s arm during medical treatment. It measures drugs in the bloodstream without requiring a blood draw or piercing the skin. It punctures the outer layer of skin, rather than the next layers of skin that house the nerves, blood vessels, and immune cells.
While other groups are researching microneedle technology for vaccines and drug delivery, researching them as a noninvasive way to monitor patient response to medications is a newer idea. The research is being conducted at the University of British Columbia and the Paul Scherrer Institut (PSI) in Switzerland. The team developed this microneedle to monitor an antibiotic that is used to treat serious infections and is administered through an intravenous line. Patients taking the antibiotic require three to four blood draws every day and need to be closely monitored because of the serious and toxic side effects the antibiotic can cause.
The researchers discovered that fluid just below the outer layer of skin, instead of blood, could be used to monitor levels of antibiotic in the bloodstream. The microneedle collects a very small amount of this fluid, causing a reaction to occur on the inside of the microneedle that researchers can detect using an optical sensor. This technique allows researchers to quickly and easily determine the concentration of the antibiotic, enabling the collection and analysis to be performed in one (tiny) device. The microneedle and its abilities are described in a recent paper in Scientific Reports.
Analysis: Deloitte’s recent report, Top 10 innovations in health care, discusses 10 innovations that could be most likely to help stakeholders achieve the goals of the Triple Aim and transform health care over the next 10 years. Deloitte researchers surveyed leaders across the health care system to identify these innovations. We defined innovation as activities or technologies that can result in getting more for less. More value, better outcomes, greater convenience, access, and simplicity all for less cost, complexity, and time required by the patient and the provider.
This microneedle fits in one category of innovation described in the paper: biosensors included in rapidly shrinking wearables and medical devices. These technologies allow consumers and clinicians to monitor and track more aspects of patients’ health, enabling earlier intervention – and even prevention – in a way that is much less intrusive to patients’ lives. Increased biosensing could improve patient engagement, medication adherence, disease monitoring and, ultimately, health outcomes.
Clinicians could use the data to intervene earlier and more often, and it can be used by researchers to better understand treatment effectiveness. However, wider adoption of biosensors and trackers would likely require:
- Improvements in the technologies’ accuracy; although, some clinicians have noted that trend data is usually helpful, even if specific data points are not completely accurate
- Biosensor and tracker interoperability with electronic health records
- Patient and provider willingness to incorporate these devices and data into daily routines
- Transition to value-based payment models, which would create opportunities for clinicians to indirectly receive reimbursement for the time and costs of accessing and evaluating this new data set
(Source: Sahan A. Ranamukhaarachchi, Celestino Padeste, Matthias Dübner, Urs O. Häfeli, Boris Stoeber, and Victor J. Cadarso, “Integrated hollow microneedle-optofluidic biosensor for therapeutic drug monitoring in sub-nanoliter volumes,” Scientific Reports, July 6, 2016)