Health Care Current: December 16, 2014

How do we incentivize innovative, patient-centered care?

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.

How do we incentivize innovative, patient-centered care?

For many years there has been criticism of physicians who racked up larger incomes because reimbursement has been based on volume (the number of visits and procedures) rather than value (whether patients got better).

In the U.S. health care system, emerging payment and health care delivery models emphasize good outcomes. Outcomes tend to be measured based on the entire group of patients under the physician’s (or health system’s) care rather than what happens to an individual patient. But in a recent New York Times op-ed piece, “How Medical Care is Being Corrupted,” Drs. Pamela Hartzband and Jerome Groopman at Harvard Medical School stoked the fears of consumers by suggesting that measures used by regulators and insurers in these models were designed to “coerce” physicians into providing inappropriate care driven by evidence-based practice.1 Concern about new models is also something found in Deloitte’s 2014 Survey of U.S. Physicians; most physicians (78 percent) prefer to stick with the traditional payment approaches.2

How many patients can I see today? How many knees can I replace in a week? How many stents can I insert this month? In general, the health care industry in the U.S. seems to be taking baby steps in its evolution from traditional fee-for-service payments to more payments based on value. Today, physicians are sometimes judged by the ambiance of the waiting room instead of the quality of their work. Today, the traditional approach to reimbursement is doing little to reward good outcomes.

While I believe that hard work should be rewarded, I also believe the industry could do a better job of rewarding good outcomes. If a physician takes care of people with diabetes, it is reasonable that he or she be measured by how many of those patients have good control of their blood sugar as measured by a simple blood test. And physicians who care for women with breast cancer could be gauged by how often the patient receives the treatment that randomized studies demonstrate could be their best chance for a cure.

The best care may be based on the individual patients’ needs in the context of what is most likely to result in the best outcome. And many physicians agree: Deloitte’s 2014 Survey of U.S. Physicians found that seven out of 10 physicians acknowledge the importance of being capable of closely integrating clinical care, data analytics and consumer engagement to improve patient health.3

We know that a middle-aged man with high cholesterol and who is overweight, smokes and does not take low-dose aspirin has a far higher chance of having a heart attack than one who has a healthy weight and doesn’t smoke. I would argue that it’s not wrong to provide an incentive to motivate doctors and health systems to put in place approaches to care that lower the risk of heart attacks. Of course, I also believe that people are responsible for their good health. We are beginning to see health plans try new ways (e.g., lower insurance premiums for those who do not smoke) to financially incentivize people into changing their behavior.

Historically, physicians have not been held financially accountable for the health of their patients and outcomes of their treatments. I believe it is time to change that, but acknowledge that the devil is in the details.

Both the private sector – health providers and health plans – and the Centers for Medicare and Medicaid Services (CMS) are focused on those details. Across the industry, stakeholders are actively working to develop new approaches to rewarding physicians and health systems for care can enable good health for Americans.

Physicians are aware that the shift to value-based care is happening and inevitable. The physician respondents to the survey predicted that value-based payment models will equal about 50 percent of their total compensation in 10 years. But just as patients have needs and preferences about the physicians that care for them, physicians also have needs and preferences for how they practice medicine. And most of them have opinions about what skills they need to navigate in an industry based on value. Physicians were asked which skills they need to possess to successfully practice medicine in the future, and they reported the following as important:

But most (78 percent) physicians remain concerned that value-based payment models may penalize them for factors out of their control and not capture quality improvements achieved outside of performance goals.4 To boost their comfort level and help ease the transition somewhat, physicians say they need expanded clinical support capabilities, comprehensive health IT, access to non-physician staff, managerial expertise and business knowledge and possibly most importantly, fairly structured value-based payment models to support their participation in value-based care efforts.

Transparency is important but I suggest that stakeholders should consider focusing on better understanding which approaches result in the healthiest populations because the old model may not work much longer. Ultimately, incentivizing innovative, patient-centered care by providers and greater engagement by consumers could drive better health outcomes.

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Pamela Hartzband and Jerome Groopman, New York Times, “How Medical Care Is Being Corrupted,” November 18, 2014,
The Deloitte 2014 Survey of U.S. Physicians, a nationally representative sample of the U.S. physician population, assesses value-based care (VBC), future of medicine, impact of health reform, and health information technology (HIT). Publications can be found at The Deloitte 2011 and 2013 Surveys of U.S. Physicians can also be found at
Physicians responding “very important”/”important” when asked which physician capabilities will be important in the next 1-3 years as the practice of medicine evolves.
Physicians responding “agree”/“strongly agree” when asked about risk-based compensation agreements.

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My Take

By Mitch Morris, MD, Vice Chair and Health Care Provider Global Leader, Deloitte Consulting LLP


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Congress signs $1.1 trillion spending bill; includes health care-related items

Leaders from both chambers of Congress convened last week to work on a spending bill that would fund the federal government through September 2015. The House voted (219-206) to approve the $1.1 trillion spending package before the Continuing Resolution expired last Thursday, December 11. Senate lawmakers voted (56-40) to approve the spending bill on Saturday night. Major health care provisions included in the bill:

Funding for the ACA remains largely unaffected. Global health programs, such as AIDS relief and response to the Ebola crisis, will receive significant boosts in funding. The bill does not address several health care issues that have been raised recently as possibilities for action, such as ICD-10 implementation, the Medicare Sustainable Growth Rate (SGR) – also known as the “doc fix,” extending Medicaid reimbursement rate boosts to primary care physicians, or extending appropriations for the Children’s Health Insurance Plan (CHIP), which is set to expire at the end of 2015.

Related: The ACA increased Medicaid payments for primary care physicians to Medicare levels from January 1, 2013 through December 31, 2014. Starting January 1, 2015, Medicaid payments to primary care physicians will go back to whatever Medicaid programs had set. The Urban Institute looked at data from 49 states and the District of Columbia and found that the drop from Medicare to Medicaid levels will lead to an average 42.8 percent decrease in pay for primary care physicians in Medicaid. The higher payments were delayed because of regulatory and implementation challenges; full implementation of the program did not start until mid- to late-2013 in some states. Provider participation increased in the Medicaid program in many states in response to the higher payments.

America’s Health Insurance Plans (AHIP) opposes the provision in the bill that caps the risk corridor program. A spokesperson for the group said last week that requiring the program to be budget neutral will result in higher premiums for consumers, making it harder for them to afford health insurance coverage. The group urged Congress and other stakeholders to focus on provisions that could help make health coverage more affordable, such as repealing the health insurance tax.

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Implementation & Adoption

HHS: Nearly 1.4 million consumers have selected plans on

On December 11, HHS released its third weekly update on plan selection in the second open enrollment period for the federally facilitated marketplace (FFM). Enrollment has grown:

  • Nearly 1.4 million consumers have selected a plan through the FFM; 618,548 consumers selected one during the third week, 48 percent of which were new to the marketplace.
  • 183,000 total consumers have chosen plans through state-based marketplaces, including 49,000 in California alone. Figures were not available for the New York, Idaho, or Rhode Island marketplaces.
  • More than 98,000 users visited, the Spanish-language FFM in the third week, bringing its total to 244,016 users since November 15.

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Survey: Out-of-pocket spending continues to burden consumers

Consumers are spending more on out-of-pocket (OOP) expenses for their health care according to a recent Commonwealth Fund survey conducted from September to October 2014 among adults age 19 to 64. More than one-in-five uninsured adults spend more than 5 percent of their income on OOP expenses (not including premiums), and 13 percent of privately insured adults spend greater than five percent of their income on deductibles. High OOP expenses disproportionately affect low-income earners and the chronically ill. People whose incomes are lower than the federal poverty level (FPL) and individuals who report having fair/poor health or at least one chronic condition are more likely to spend a high share of their income on health care.

OOP expenses continue to place financial pressure on consumers: 43 percent of the privately insured population report that deductibles are “somewhat, very difficult or impossible to afford.” Consumers also report that copayments and coinsurance are financially burdensome. Unaffordability also causes many to forgo needed health care. Of adults with deductibles higher than 5 percent of their income, 40 percent reported they delayed or skipped care (e.g., preventive care visit, specialist care or recommended follow-up test) due to the cost associated with that care.

The higher OOP spending burden comes partially from changes in benefit design and slower growth in incomes. Health plan benefit design changes (e.g., higher deductibles, copayments and coinsurance) over the past decade have increased cost sharing for consumers. During the same time, the increased growth in health care costs outstripped income growth, and slow growth in individual and family median incomes has made it difficult for consumers to afford their health care, even for those who have health insurance coverage.

Related: The Deloitte Center for Health Solutions recently took a deep dive into the topic of OOP spending in “Dig deep: Impacts and implications of rising out-of-pocket health care costs” to find that as much as $672 billion (19 percent of total health care spending) is estimated to be hidden from the National Health Expenditure Accounts. Consumers encounter high cost sharing for services like nutritional supplements and complementary and alternative medicine—services that are generally covered less frequently by insurance. Even during the recession, when overall health care spending slowed, spending for these types of services continued to rise.

(Source: Collins, Sara R., Rasmussen, Petra W., Doty, Michelle M., and Beutel, Sophie. The Commonwealth Fund, “Too High a Price: Out-of-Pocket Health Care Costs in the United States,” November 2014)

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SSI claims for people with disability dropped by 10.6 percent in 2014

Disability claims for the Supplemental Security Income (SSI) program in the first half of 2014 dropped more than 10 percent from the same period in 2013. Modern Healthcare’s analysis of SSI claims data found that approximately 1,189,000 claims were filed in the first six months of 2014 compared with more than 1,330,000 during the same period of 2013. SSI is a means-tested program that pays cash benefits to older adults and blind or disabled Americans. Individuals who receive SSI are automatically eligible for Medicaid.

According to the analysis, states that expanded Medicaid under the ACA experienced greater declines in SSI claims. Additional findings include:

  • 68 percent of the states that expanded Medicaid experienced 10 percent or higher decreases in SSI claims; decreases of this magnitude were less common in states without Medicaid expansions although 50 percent of those states also saw decreases of 10 percent or more
  • SSI claims in states that expanded Medicaid during the first six months of 2014 decreased 11.2 percent, compared with a 10 percent drop in non-expansion states

Even though Medicaid expansion states were more likely to have drops in SSI claims, it is unclear whether the drops are because of the ACA. In expansion states, new Medicaid eligibility categories (e.g., childless adults) allowed individuals to access Medicaid without going through SSI who may have applied for SSI previously; this might have led to the declines. However, the improving economy also may have been behind the decreases. The Social Security Administration has not commented on whether it believes Medicaid expansion affected the number of SSI applications in 2014.

(Source: Dickson, Virgil. Modern Healthcare, “Is Medicaid expansion reducing disability claims?” December 6, 2014)

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ONC releases Health IT Strategic Plan; targets data collection, sharing and usability

Last week, the Office of the National Coordinator for Health Information Technology (ONC) released the Federal Health IT Strategic Plan 2015-2020. The plan continues ONC’s efforts to increase health IT adoption and to develop new ways to collect, share and use data. ONC acknowledges that it will need to collaborate with state, local and tribal governments as well as health care entities, providers, payers and technology developers, among others, to achieve the goals outlined in the plan.

The Strategic Plan frames the Nationwide Interoperability Roadmap, which will be released in early 2015. The Roadmap will help guide and define how the federal and private sector can move forward with sharing health IT information. The plan, which is open for public comments until February 6, 2015, outlines five key goals, each with a corresponding set of objectives:

(Source: The Office of the National Coordinator for Health Information Technology (ONC), “Federal Health IT Strategic Plan 2015-2020,” December 2014)

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On the Hill & In the Courts

CMS extends the deadline for claims and enrollment data submission for reinsurance and risk adjustment programs

Health plans that participate in two of the ACA’s premium stabilization programs – reinsurance and risk adjustment – will now have longer to submit their claims and enrollment files to CMS. On December 5, CMS extended the reinsurance and risk adjustment submissions deadline by two weeks, from December 5 to December 19. The extension affects health plans that sell ACA-compliant plans both inside and outside of the health insurance marketplaces in states where HHS runs the programs. Health plans must submit enrollment data and medical and pharmacy claims data for CMS to calculate the first monthly payment estimates for the two programs. Issuers entitled to reinsurance and risk adjustment payments must submit claims and enrollment files to the External Data Gathering Environment (EDGE) server by the new deadline so they may receive their reimbursement payments.

Background: The ACA created three programs to address concerns by health plans facing uncertainty in the new health insurance reform markets, including that they might attract enrollees with higher-than-average spending. The risk adjustment program is permanent; the risk corridors and reinsurance programs will expire after 2016. The permanent risk adjustment program’s goal is to pay accurately to reflect underlying health risk, making health plans neutral to whether they enroll healthy or sick people. The temporary reinsurance program was created to protect health plans from unexpected high costs. A recent report, “The 10 percent problem: Future health insurance marketplace premium increases likely to reach double digits,” found that the expiration of the reinsurance and risk corridors program could cause health plans to increase premiums more than 10 percent over the next three years in order to reach or maintain profitability in 2017. The analysis was based on simulations using Deloitte's Health Care Reform Premium Stabilization Projection (HCRPSP) model, which incorporates multiple variables affecting premiums, including cost trend, policy and marketplace factors.

(Source: U.S. Centers for Medicare & Medicaid Services, “Update on EDGE server initial data submission deadline” December 2014)

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Congressmen Upton and Sessions urge CMS to continue toward ICD-10 implementation

Congressional committee leaders are working to meet the ICD-10 implementation deadline of October 1, 2015, according to an announcement released last week. House Energy and Commerce Committee Chairman, Fred Upton, and House Rules Committee Chairman, Pete Sessions, issued a statement in support of the current deadline, emphasizing that the Energy and Commerce Committee has worked continuously with CMS to ensure this implementation deadline will be met. Opposition to the implementation increased over the last several weeks as lawmakers began work on the spending bill for the federal government. Some medical associations lobbied Congress to include another delay in the implementation deadline. This lobbying effort was successful in March 2014 when the earlier deadline was delayed until 2015 by the Protecting Access to Medicare Act of 2014 (see the April 1, 2014 Health Care Current). The lawmakers described ICD-10 implementation as “an important milestone in the future of health care technologies” and indicated they are prepared to hold a hearing in the New Year to discuss the issue.

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OIG: 51 percent of Medicaid managed care providers inaccessible to patients

More than half (51 percent) of physicians listed as participating in Medicaid managed care plans would not or could not offer appointments to Medicaid beneficiaries according to a recent Office of the Inspector General (OIG) report. The investigators found that 35 percent of the listed providers were not at the location listed by the managed care plan, 8 percent were found at the location but were not participating in the Medicaid managed care plan and another 8 percent were participating but not accepting new patients. The 49 percent of providers that offered new appointments for Medicaid managed care plan patients had wait times that ranged from same-day appointments to 9 months; the median wait time was 2 weeks. This is despite requirements that states must include access standards for managed care organizations.

Investigators contacted more than 1,800 primary care providers and specialists that were listed in the directories of more than 200 different Medicaid plans in 32 states. The issues discovered by the OIG could create significant obstacles for patients to access care, including long wait times. The OIG report found that primary care providers were less likely to offer appointments than specialists, but specialists had longer wait times than primary care providers. To improve access to care, OIG recommends CMS:

  • Work with state Medicaid agencies to require adequate plan networks
  • Strengthen oversight of managed care plans
  • Assess the number of participating providers who can offer appointments
  • Verify that provider contact information is accurate
  • Assess that plans meet states’ standards

CMS agreed with all of the recommendations. Currently, nearly three-quarters of Medicaid enrollees are covered under managed care plans.

(Source: U.S. Department of Health and Human Services, Office of Inspector General, “Access to Care: Provider Availability in Medicaid Managed Care,” December 2014)

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Around the Country

The definition of pediatric services varies across states due to lack of ACA clarity

The ACA mandates all plans sold in the individual or small group market cover “pediatric services, including oral and vision care” as an essential health benefit (EHB). However, when it issued final regulations corresponding to EHBs, HHS did not define what pediatric services must consist of at a national level. Today, states have adopted benchmark plans with varying levels of coverage for children’s health across the nation.

Researchers looked at states’ practices and regulation of health insurance plans in the individual and small group markets. They found significant differences in what plans cover state to state, especially for services related to developmental disabilities or other special needs. Other findings:

  • None of the state benchmark plans include a category of benefits defined as “pediatric services;” the plans only expressly identified oral and vision care benefits, as they were directly discussed in the final EHB regulation
  • 32 states require orthodontia, making it the most mandated benefit across the nation
  • Many states have specific exclusions on services: 13 exclude services for children with learning disabilities; 25 require coverage for congenital defects.

The authors recommend that HHS revise EHB standards for pediatric care, CHIP plans be used as a benchmark plan for pediatric services, treatment limits and exclusions be prohibited, and medical necessity be incorporated into defined benefits for pediatrics.

(Source: Grace, Aimee M., Noonan, Kathleen G., Cheng, Tina L., Miller, Dorothy, Verga, Brittany, Rubin, David, and Rosenbaum, Sara. Health Affairs, “The ACA’s Pediatric Essential Health Benefit Has Resulted in a State-by-State Patchwork of Coverage with Exclusions,” December, 2014)

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Study: Half of Cover Oregon enrollees were previously uninsured

More than half (53 percent) of the individuals who purchased health insurance coverage through Cover Oregon, the state’s health insurance marketplace, were previously uninsured. Researchers at The Center for Outcomes Research & Education Providence Health & Services published these findings from a recent survey of more than 2,000 respondents representative of the Cover Oregon enrollee population. A significant number of the previously uninsured population (38 percent) was uninsured for the entire year before they signed up, and none of the individuals had coverage at the time they signed up. Among other key findings:

  • The subsidies (57 percent) and individual mandate (36 percent) were primary drivers for many who enrolled in coverage on the marketplace
  • Marketplace enrollees based their coverage decisions on the premium cost (59 percent); copayment amounts, quality ratings, physician networks and coverage of specific services were factors but to a lesser degree
  • Many enrollees learned about the marketplace through TV advertisements and TV or radio news (38 percent) or friends and family (33 percent)
  • Only 59 percent of the previously uninsured enrollee population had a usual source of care before they enrolled in coverage, and this increased to 75 percent after open enrollment
  • The 81 percent of enrollees who indicated they now have a usual source of care obtain their health care from several sources:

While most (85 percent) of the new enrollees report being in good health, the majority (85 percent) of the respondents who are in poor health believe their health is staying the same, and only 6 percent believe their health status is improving.

Related: Deloitte’s Survey of Young Adults and Health Insurance found that a majority (66 percent) of the individuals who remained uninsured after open enrollment did so because they could not afford health insurance. Those who did purchase coverage during open enrollment did so because they wanted to avoid paying medical bills if they get sick, injured or pregnant (67 percent), because it gave them peace of mind (60 percent) and because they didn’t want to pay a fine (49 percent).

(Source: The Center for Outcomes Research & Education Providence Health & Services. “Oregon health insurance enrollment survey,” 2014)

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Nanoflares show cancer cells that may be lurking after surgery

Patients who have surgery to remove cancerous tissue sometimes wait months for scans to tell them and their physicians if the surgery was successful. A study recently published in the Proceedings of the National Academy of Sciences shows that a new kind of nanoparticle – called nanoflares – attaches to individual cancer cells in a blood sample and then glow, allowing cancerous cells to be detected and sorted with the help of a laser.

Small numbers of circulating, lethal tumor cells that allow cancer to spread can be difficult to find. Each nanoflare consists of a piece of gold coated with fluorescent molecules and snippets of DNA. The DNA snippets correspond to RNA found in particular cancer cells. When introduced into a blood sample, the nanoparticles enter cancer cells and the DNA binds to the target RNA, setting off the release of fluorescent molecules and making the cancer cells glow. Different types of cancer cells can be detected by attaching different strands of DNA and fluorescent molecules of different colors.

The nanoparticles may allow clinicians to test treatments before giving them to patients. Different types of cancer cells can be detected and collected using the technique and then cultured in a dish. The study identified breast cancer cells in mice, as well as breast cancer cells added to human blood in a lab. Researchers will now try to determine whether the particles can find cancer cells in patients’ blood samples.

Although other research is using nanoparticles that bind to the surface of cancer cells to detect circulating tumor cells, this new approach could offer some advantages. Differentiating between various cancer cells could allow researchers to keep cancer cells alive so they can be cultured. Because this technique allows specific types of cancer to be cultured and tested in the lab, nanoflares could also be used to better understand cancers and help discover new drugs, even if it takes years for nanoflare-based tests to be approved for treatment.

Analysis: This particular study with gold-nanoparticles is the culmination of many years of research by multiple investigators. This research team discovered a unique way to build gold nanoparticles with genetic markers that are more prevalent in cancer cells, as well as a molecule that will allow for easy detection and retrieval of live cancer cells. While these and similar technologies are still not yet approved for use in humans, in the future nanoflares could allow physicians to test for cancer via a simple blood test. Ultimately, old methods of using more invasive tumor biopsies or costly repetitive imaging scans could be replaced.

This technology has the potential to reduce cost in the future as blood tests will be more economical and feasible than other types of diagnostic tools. The ability of researchers and clinicians to use nanoflares to retrieve live cancer cells could also create new avenues for personalized medicine, including easier retrieval of metastatic cancer cells for genetic testing, personalized drug screening, and, if paired with the right technology, point-of-care diagnostic and prognostic testing.

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Breaking Boundaries

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