2016: A year in review for health care | Deloitte US has been added to your bookmarks.
2016: A year in review for health care
Health Care Current | December 20, 2016
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
2016: Year in review for health care
By Sarah Thomas, Managing Director, Deloitte Center for Health Solutions, Deloitte Services LP
As the holidays approach, I have been thinking about the last year on a personal and professional level. I’ve also reviewed what has happened on the national and global front around health care. For many of us, the election and ensuing transition are foremost in our minds. But, aside from those events, quite a lot of significant activity colored the health care landscape this year.
New public health crises: At the beginning of the year, the Ebola crisis – the infectious disease epidemic that had dominated international public health news for several years – seemed to be waning. But, as that problem moved out of our sight, we began to worry about Zika – an insect-borne and sexually-transmitted illness with the potential to cause serious birth defects. There were even concerns about Olympic athletes’ contracting the disease. Though no significant illness was reported around the Olympics, we may not have seen the end of Zika.
Another, less global, public health crisis that rose in the public’s awareness in 2016 has been the opioid epidemic. It stems from many converging trends – from income inequality to treatment patterns around chronic pain. Although we have learned more about effective treatment programs and states have developed better surveillance to prevent some aspects of this problem, we are just beginning to understand how to address the root causes. Opioid abuse’s presence in health care will likely not go away any time soon. The 21st Century Cures legislation included new programs and funding to tackle this problem.
Intense CMS activity around value-based care: Between the final rule for the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and multiple announcements of new payment initiatives, CMS has kept health systems and clinicians busy transitioning to new payment arrangements and program designs. Up to now, these programs have been voluntary. But, barring any major regulatory or legislative changes, the next wave of bundling programs will not be. Early adopters have learned many lessons about bundling, various forms of accountable care organizations (ACOs), and patient-centered medical homes (PCMHs) that the broader health care community can learn from.
- The final MACRA rules were published in early November. Comparing the proposed and final rule, CMS took steps to give health systems and clinicians a transition period before some aspects of the program start. Clinicians now can report fewer measures for a shorter period to avoid negative pay-for-performance adjustments. CMS also removed cost measures for the first year and excluded more clinicians from the program.1
- The second evaluation of the Bundled Payments for Care Improvement (BPCI) initiative found statistically significant savings among participants, especially for joint replacement procedures.2 Whether organizations will be able to consistently find these types of savings from other types of bundles is the next big question in bundling. We examined this question in the forthcoming Deloitte Center for Health Solutions paper, “Do bundled payments produce savings?” which will be published next month.
Increased focus on drug value: In 2016, the debate about drug prices continued. The focus shifted to specific products with high launch prices and price increases. Meanwhile, surveys of consumers flagged affordability of health care as a major concern, and many consumers identified drug prices as part of this issue.3 As consumer concern and attention about this issue rises, industry leaders have been focused on how to bring payments for pharmaceutical and medical device products into alignment with the value that they bring to better health outcomes. As a result, this year saw increased activity in value-based contracting between life sciences companies and purchasers, which have the potential to align payments with value. This is another area that the 21st Century Cures legislation tackles, offering policy direction to change how the government reviews and approves drugs (see the December 6, 2016 Health Care Current).
Exchanges: Citing losses, many large health insurance companies announced their plans to leave the public health insurance exchanges, and consumers saw fewer choices and higher premiums in some areas of the country. Premium subsidies help to insulate low-income consumers from some of these premium increases. Deloitte’s own consumer research found that people who obtain health insurance through the exchanges continue to act like savvy shoppers. They are showing signs of increased confidence in coverage affordability and are just as satisfied with their coverage as people with employer coverage.
Despite all of the progress we’ve made throughout the year, we need to remain committed to improving performance and value in health care, even as the policy direction for the new administration and Congress takes shape. Health care spending is beginning to accelerate again. Part of that is expected as more people have coverage.4 Moreover, longevity among the US population appears to be on the decline.5 Part of the problem is that we still haven’t figured out what it takes to maintain healthy habits and healthier living. Chronic conditions related to diet and exercise persist even though there are lower rates of smoking. As excited as I am about the promise of wellness programs leveraging new digital technology and lessons from behavioral economics, I continue to wait to see something really work for large populations over a sustained period of time.
On a personal level, I am happy to be able to continue to run and hike with my dog Toby, and am plotting my strategy around holiday eating – a necessity given how much I love to cook and eat, the amount of treats this time of year, and the natural tendency for my body to want to dig in and eat since it is cold outside. I need an app for that!
As we close out the year on the Health Care Current, wishing all our readers a healthy and happy 2017 – and better value in the health care system going forward.
1 Deloitte Center for Regulatory Strategy, “CMS locks in January 1, 2017 start date in final rule on new Medicare payment tracks under MACRA,” Reg Pulse, October 17, 2016.
2 The Lewin Group, CMS Bundled Payments for Care Improvement Initiative Models 2-4: Year 2 Evaluation & Monitoring Annual Report, August 2016.
3 Kaiser Family Foundation, Kaiser health tracking poll: September 2016.
4 CMS, “National Health Spending: Faster Growth In 2015 As Coverage Expands And Utilization Increases,” Health Affairs, December 2016
5 Lenny Bernstein, Washington Post, “US life expectancy declines for the first time since 1993,” December 8, 2016
Implementation & Adoption
CMS releases final 2018 Notice of Benefit and Payment Parameters
Late last week, CMS released the Notice of Benefit and Payment Parameters final rule and the final annual Letter to Issuers for 2018, a major regulation that lays out policy for the exchanges and other insurance programs. The final rule sets forth rules on the risk adjustment model, cost-sharing, standardized benefits and network adequacy, and sets user fees for federal exchanges and state exchanges on the federal platform. The regulations take effect January 17, 2017.
Key components of the final rule include:
- Cost-sharing parameters: The rule finalizes the premium adjustment percentage for 2018, which is used to set the rate of increase for several parameters detailed in the ACA, including the maximum annual limitation on cost sharing for 2018. It also finalizes the maximum annual limitations on cost sharing for the 2018 benefit year for cost-sharing reduction plan variations.
- Risk adjustment: The rule incorporates partial year adjustment factors in the adult risk adjustment model in response to feedback that the existing model under predicts claims costs for enrollees who are enrolled for only part of the year. It finalizes the use of prescription drug utilization data to improve the predictive ability of the risk adjustment models beginning for the 2018 benefit year and the ability to use prescription drug data as another way to account for sicker members. CMS finalized the high-cost risk pool calculation into the risk adjustment methodology. This high-cost risk pool calculation would allow health plans to only be responsible for 40 percent of beneficiaries’ costs above $1 million.
- Promoting consumer choice: The rule includes amendments that aim to promote consumer choice in health plans, including a requirement that at least one Qualified Health Plan (QHP) at the silver coverage level and at least one QHP at the gold coverage level must be offered throughout the service area in which a QHP issuer offers coverage through the exchange. It also allows for flexibility in benefit design in bronze plans.
- Special enrollment periods: CMS codifies several special enrollment periods that are already available to consumers through the federally-facilitated exchanges to clarify and simplify rules for consumers. The rule also includes a pilot that will test whether pre-enrollment verification of special enrollment periods strengthens the risk pool of the exchange while maintaining access to coverage.
In a press release by the agency, CMS notes that the provisions aim to improve the consumer experience on the exchanges by providing them with better tools to compare networks, strengthening the individual and small group markets, and broadening the availability of plan options with new cost-sharing rules and consumer protections.
White House: 125,000 lives saved from reduced hospital-acquired conditions
The White House Council of Economic Advisors (CEA) released a comprehensive report on the status of President Obama’s health care legacy. Noting that the administration focused on expanding health insurance coverage under the Affordable Care Act (ACA), the report also highlighted other legislative changes that improved quality.
According to the report, coverage gains have improved access to care, health outcomes, and financial security for the newly insured. In turn, expanded coverage reduced the burden of uncompensated care as a share of hospital costs, which have fallen by more than a quarter since 2013.
Citing an Agency for Healthcare Research and Quality (AHRQ) preliminary report indicating a 21 percent reduction in hospital-acquired conditions (HACs) from 2010 to 2015, the CEA report said that this means that nearly 125,000 fewer patients died in a hospital due to HACs. Moreover, lower rates of HACs created cost savings of approximately $28 billion from 2010 to 2015. Additionally, hospital readmission rates have declined, especially for Medicare beneficiaries.
Health care spending per enrollee has grown more slowly in the public and private sector than before the ACA. Slower per enrollee spending growth was true for hospital services, physician services, and prescription drugs. Without the ACA, the authors estimate that the average employer-sponsored insurance premium for families would have been $3,600 higher today. Including out-of-pocket costs, the average savings for a family with employer-sponsored coverage in 2016 is estimated to be $4,400.
(Source: CEA, “The economic record of the Obama administration: Reforming the health care system,” December 2016; AHRQ, “Interim data from national efforts to make health care safer,” December 2016)
Congress gears up for discussions on Medicaid reforms
The Senate Finance Committee wrote a letter to the National Governors Association announcing a roundtable convening in early 2017 to discuss Medicaid reforms. Key topics at the roundtable will be:
- How to provide states with flexibility to design and operate innovative Medicaid programs that are fiscally responsible
- Strategies to foster a collaborative relationship between states and the federal government
- Ideas to foster parity in resources with health care coverage
- Successful innovations of state Medicaid programs that could be replicated by other states
- Ways to improve the coordination of Medicare and Medicaid services for the dual eligible population
On the House side, discussions on similar topics are happening. Committee chairs are seeking feedback from state governors and insurance commissioners on the future of Medicaid programs and ways to strengthen the insurance marketplace.
Related: The Congressional Budget Office (CBO) recently noted in a budget options paper the challenges of setting caps in Medicaid that would balance the goals of reducing federal spending, fund states to be able to continue programs, and maintain efficiency. This is especially the case because Medicaid programs vary so much from state to state. The paper outlined several program design choices to reduce federal Medicaid spending and noted that these could interact in complex ways. Choices include whether to set overall per-enrollee caps, what categories of spending and eligibility to include in spending limits, how much flexibility to grant states to make changes, and how optional expansion under the ACA would be figured into the caps.
(Source: US Senate Committee on Finance, December 16, 2016; CBO, Options for reducing the deficit: 2017-2016, Impose caps for federal spending on Medicaid, December 2016)
GAO: Small practices face challenges implementing value-based payment models
In a new report, the US Government Accountability Office (GAO) identified 14 challenges related to financial resources, health IT, population health care management, performance measurement, and model participation requirements that small and rural practices face when implementing new payment models.
The main challenge for small practices (ones with 15 physicians or less) is that electronic health records (EHR) systems are not interoperable. Small and rural practices often lack the financial resources to make initial investments in EHR systems. Connecting two EHR systems can cost around $20,000 for a small or large practice. Practices would likely also need to invest in staff to develop the EHR systems and analyze the data needed for participation. Any recovery of investments through savings gained from risk sharing under value-based payment model would take time. These models generally require at least a year of performance data to determine any shared savings payments.
The report identifies partner organizations, including group practices, private companies, non-profits, and universities, that have worked with small and rural practices to help them participate in new payment models and share financial risks. Partner organizations also offer comprehensive services to mitigate the challenges faced for new payment models, including sharing resources and analyzing data to improve the practices’ performance.
The GAO report comes in anticipation of the Quality Payment Program (QPP) that will go into effect in 2017 under MACRA.
On the Hill & In the Courts
Last week, CMS announced two more new options for clinicians to participate in advanced alternative payment models (advanced APMs) in 2018, the second performance year under MACRA.
Beginning early next year, CMS will accept applications for the following:
- New practices and payers in the Comprehensive Primary Care Plus (CPC+) model
- New participants in the Next Generation ACO model
Adding these two new opportunities to the list, CMS says that an estimated 25 percent of clinicians in the QPP would be part of these advanced APMs by the 2018 performance period. Last month, CMS announced options for the 2017 and 2018 performance years (see the November 1, 2016 Health Care Current). CMS says that these lists will continue to grow as more models are developed.
New patient engagement and payment models under CMMI
Earlier this month, the CMS Innovation Center (CMMI) announced two new demonstrations to increase patient engagement and encourage shared decision making with providers. According to CMMI, engaging beneficiaries in their own care will help transform the health care delivery system. The two models, called Beneficiary Engagement and Incentives (BEI) models, are the Shared Decision Making Model (SDM Model) and the Direct Decision Support Model (DDS Model).
Letters of Intent for both DSOs and MSSP or NextGen ACOs to participate in the BEI models are available and will be accepted through March 5, 2017.
Related: Last week, CMS also announced a new ACO, the Medicare-Medicaid Accountable Care Organization Model. Built on the current MSSP model, the Medicare-Medicaid ACO is designed to partner closely with states to improve care quality and lower costs for beneficiaries who are dually-eligible for both Medicare and Medicaid.
Today, Medicaid spending by dually-eligible beneficiaries in Medicare ACOs is not integrated into the delivery or payment models. The new ACO model will allow MSSP ACOs to take on risk for financial and quality outcomes for both Medicare and Medicaid. CMS is limiting participation to six states for the first year, giving preference to states without many people in Medicare ACOs.
CMS decides not to move forward with Part B Demo
Last week, CMS announced it will not move forward with a demonstration to test new ways of paying for drugs covered under Medicare Part B. CMS released a proposed rule in March 2016 to pilot a new Medicare Part B payment formula to see if it changes physician prescribing and treatment patterns. The goal was to reward positive patient outcomes and encourage prescribing of the most effective drugs.
Medicare Part B covers prescription drugs administered in a physician’s office or hospital outpatient department, such as cancer medications, injectable antibiotics, or eye care treatments. Medicare Part B generally pays physicians and hospital outpatient departments the average sales price of a drug, plus a six percent add-on. The proposed model planned to test whether changing the add-on payment to 2.5 percent plus a flat fee payment of $16.80 per drug per day changed prescribing behavior and led to improved quality and value. In the proposed rule, CMS also expressed interest in rolling out a second phase of the pilot that would test value-based payment arrangements.
During the comment period, CMS received a range of comments, from support for moving forward to strong concerns from some stakeholders, including some members of Congress, that the model could shift patients to higher-cost sites of care. After considering comments, CMS announced last week it will not move forward with the demonstration.
Final OIG rule aims to protect payment innovation from anti-kickback constraints
Last week, the Office of the Inspector General (OIG) for the US Department of Health and Human Services finalized a rule to expand safe harbors from the Anti-Kickback Statute (AKS), which will give providers more flexibility with innovative payment practices. The rule intends to allow providers more latitude to use provider cost-sharing and patient rebates as tools for rewarding use of high-value services and not treat these as fraudulent kickbacks under Medicare and Medicaid. The rule also includes provisions limiting civil money penalties (CMPs) for beneficiary incentives.
The AKS is designed to protect both beneficiaries and the health care system from fraud and abuse. It prohibits remuneration, or offering or paying financial incentives, to either patients or providers for anything of value to induce or reward referrals or generate business under Medicare of Medicaid.
Further, AKS prohibits clinicians from referring a Medicare or Medicaid beneficiary to a facility with which the doctor has a financial relationship, which can include PCMHs and other care delivery innovations intended to enhance continuity of care and provider responsibility for patient outcomes. The penalties for AKS violations can be criminal or civil/administrative, can include potential fines of up to $50,000 per violation, and can result in exclusion from the Medicare or Medicaid programs.
Providers have raised concerns that these protections might be barriers to advancing value-based payment models. Sometimes, these models reward providers that reach care quality targets and patients may have lower cost-sharing for some high-value services.
The final rule, which was first introduced as a draft in 2014, includes all the safe harbor provisions originally proposed in the ACA and the Medicare Modernization Act and addresses most of the comments submitted by industry stakeholders.
Around the Country
NGA releases roadmap for states to improve health information exchange between providers
The National Governors Association (NGA) Center for Best Practices has released a roadmap for states to improve interoperability. The Office of the National Coordinator for Health Information Technology provided funding and support for the roadmap, which lays out steps for states to address barriers to clinical information exchange. The roadmap includes examples of successful strategies and measures to evaluate progress. The audience for the report is governors, governors' senior health policy officials, state lawmakers, state health IT officials, and state legislative counselors. The roadmap outlines the following recommendations for states:
Social and economic factors are correlated with states’ health outcomes
A recent report analyzed the statistical relationship between 39 health measures and 123 social and economic factors.
Researchers found correlations between:
- Adult obesity and pneumonia-related deaths
- A shortage of primary care services and higher rates of deaths related to diabetes, heart disease, stroke, and pneumonia, and lower overall life expectancy
- Higher taxes on cigarettes and lower smoking rates, as well as longer life expectancy and lower death rates
- Higher spending on social services (rather than health services) and better health outcomes; states with higher spending on social services had lower rates of adult obesity, asthma, mentally unhealthy days, days with activity limitations, and mortality rates for lung cancer, acute myocardial infarction, and diabetes
- Lower spending on public transportation and more car accidents
- Income support and motor vehicle mortality; researchers found the risk of motor vehicle crashes decreases with socioeconomic status
- Health insurance and access to affordable care and health outcomes
- Per-capita spending on natural resources, including regulation of industries and lower asthma rates
The report stresses that these correlations do not equate to causation. Although some health outcomes were more favorable among states that had expanded Medicaid under the ACA, these states also had better outcomes for unrelated conditions, such as motor vehicle fatalities and teen births. The researchers note that these states may have the economic resources and political constituency to act in ways that promote public health. Conversely, states with poorer health rankings may lack the budgets to support economic programs for vulnerable populations.
The report was written in response to research from the National Research Council and the Institute of Medicine which found that Americans die earlier and have poorer health compared to residents of other high-income countries. By comparing health across states and different social, economic, and physical conditions, the researchers hope to allow states to use the information to improve their health outcomes.
(Source: “Health of the states: How US states compare in health status and the factors that shape health,” Urban Institute, December 2016)
Can virtual reality help the opioid addiction crisis?
Drug overdose is now the leading cause of accidental death in the US, ahead of car accidents and suicide. A new report from AHRQ shows hospital admissions related to overdoses from heroin and other opioids rose 64 percent in the US between 2005 and 2014. Three out of four Americans who are addicted to heroin were introduced to opioids through prescription drugs, and people of all ages, state, and income all are affected. While many states are taking steps to treat and prevent opioid abuse, no one solution exists. This problem has challenged health care organizations to manage the staggering costs.
While there is no one-size-fits-all solution to the opioid crisis, one startup is hoping to play a role in its decline. AppliedVR is building a library of virtual reality (VR) content for alleviating pain and anxiety before, during, and after medical treatment. To date, the company has created three different VR pain applications and one for managing anxiety. It also uses external content. Patients can access the apps through VR headsets that are being used in hospitals, physician offices, and clinics for procedures including blood draws, epidurals, and pain management after operations.
Currently AppliedVR is working with Cedars-Sinai Medical Center and Children’s Hospital Los Angeles to conduct studies. One early study had 60 patients with a range of medical conditions use the VR software to play a game. The game is simple and its purpose is to mesmerize the patient. Results show that within 20 minutes of playing, the game reduced patients’ pain by 24 percent on average, moving the pain scale score from 5.5 to 4 (on a 10 point scale). Researchers noted this was a similar reduction to what narcotics could produce. The next step is a controlled trial in a larger group of patients.
Analysis: In health care, VR supports clinician training, for example in surgery simulation. Virtual reality has the potential to be a disruptive technology in health care, with wider applications and uses. Recent marketing of lower-cost virtual reality systems for consumers (mainly for gaming) should mean better access. Past studies have shown positive impact in patients being treated for alcohol addiction and behaviors to improve wellness, such as weight management and smoking cessation.
Individuals with chronic pain are higher risk for dependency on pain medications. Innovative strategies are needed from many different health care stakeholders. While targeting the opioid crisis will likely require coordination among them, hospitals are on the front lines of patient care. Implementing evidence-based VR interventions for pain management is one interesting strategy. That said, innovators in the field will likely need to demonstrate clinical effectiveness through rigorous clinical trials.
(Sources: US Agency for Healthcare Research and Quality, news release, Dec. 15, 2016, Mark Price, “Collaboration at every level: Solving the country’s opioid crisis,” Deloitte Health Care Current, May 31, 2016)