Health Care Current: December 23, 2014

Orchestrating a harmonious health care system

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.

Orchestrating a harmonious health care system

Last week, my family and I attended a Philadelphia holiday tradition at the Kimmel Center for the Performing Arts—a performance by the largest standalone pops orchestra in America, which also included the POPS Festival Chorus, Philadelphia Boys Choir and a guest appearance of the African Episcopal Church of St. Thomas Gospel Choir.

The acoustics of the Kimmel Center are nothing short of an IMAX movie on steroids, which gives way to goose bumps and holiday magic for two and a half hours. Each instrument in the 70-piece orchestra blended with the chorus in such an incredible way that even the audience sing-along sounded better than Bing Crosby’s best cut of “White Christmas.”

At the center of the stage stood David Charles Abell, a renowned British American conductor who led the group with eye contact, body movements and his magic wand. All of the amazingly talented individuals performed their role in perfect harmony and true fidelity. All remained in sync with their conductor.

It was hard for me not to drift into thoughts of what it would be like for our health care system if we could create that kind of alignment and harmony. Now that the first year of the marketplaces is nearly over and major provisions of the Affordable Care Act (ACA) mostly implemented, it is obvious that health care delivery systems and health care financing players are making strategic choices to better position their organizations for long-term success.

This has never been more true than in 2014. This year, there were nearly 1,400 transactions across the industry, including mergers, acquisitions, trades and divestitures.1 The number of accountable care organizations (ACO) reached an all-time high, as 89 new ACOs joined the Medicare Shared Savings program yesterday.2 In the health insurance marketplaces, 25 percent more health plans signed on to offer products in 2015.3 Along with this, the industry saw continued hospital consolidation, new entrants in health care from retail and financial services, Apple Inc. and Google entering the scene with new technology and major pharmaceutical players divesting and swapping assets to focus on specific therapeutic areas.

While many health care executives see that today’s operating model is not likely to work in the future, many are less clear about how to navigate the changes required to be successful. It is much easier to do nothing than it is to make a calculated risk and invest in a new operating model.

We know from business researchers like Michael Porter, Clayton Christensen and Deloitte’s own Michael Raynor that when the customers’ needs are not met, an industry goes through a period of massive change and disruption. Retail, airlines, banking—these are all good examples of industries that have experienced this restructuring.

Restructuring requires great leadership. There are many strong leaders in health care, but health care could benefit from leaders that orchestrate the various instruments of the financing and delivery system to work together harmoniously. We have a complex regulatory maze but that isn’t helping align each of the pieces and players. Today, market leaders make moves without the benefit of an industry vision, a roadmap or even a hint of what is to come.

Leadership can help align the customers, patients, health care providers, suppliers, life sciences and health plans so each fits together like a system, focused on cost, quality and service. This would be magic. The question is who can provide that leadership? Maestro, please!


Email | LinkedIn

P.S. We will not publish a Health Care Current on December 30, 2014, so from all of us at Deloitte, we wish you Happy Holidays and a very best New Year for 2015! Peace be with you and your family!

1FactSet Research Systems, Inc.
2CMS, “Medicare Shared Savings Program Accountable Care Organizations,”
3HHS, “Health plan choice and premiums in the 2015 health insurance marketplace,” December 4, 2014,

Back to top

My Take

By Bill Copeland, Vice Chairman, U.S. Life Sciences & Health Care Leader, Deloitte LLP



Subscribe to receive the Health Care Current via email

HHS: Enrollment grows to nearly 2.5 million by December 12

On December 16, the U.S. Department of Health and Human Services (HHS) released its fourth weekly update on plan selection in the second open enrollment period for the federally facilitated marketplace (FFM):

  • Nearly 2.5 million consumers have selected plans since open enrollment began on November 15; more than 1,082,000 selected plans during the fourth week (December 6 through December 12) 
  • Cumulatively, a little more than half (52 percent) of selections came from renewing consumers 
  • More than 117,000 users visited, the Spanish-language FFM, during the fourth week; this bought the total to 348,760 users 
  • Officials in California, a state-run marketplace, reported more than 144,000 new enrollments as of December 15

HHS’s announcement does not include figures from users who visited during the final three days before the enrollment deadline of December 15 for coverage starting January 1. Analysts have said that many users visited up to that deadline. These numbers also do not include figures from the state-based marketplaces, although we have included separate numbers from California, which administers the state-based exchange with the largest enrollment.

Last Tuesday, HHS said it was giving 500,000 consumers an extension to enroll due to the long wait times that many experienced when they contacted the federal call center before the deadline. Call center employees began contacting them on December 16 to complete the enrollment process. For this group, HHS said that coverage will still begin on January 1.

Related: In the last week, HHS has awarded several states with grants to support marketplace development.

  • Arkansas: The Arkansas Health Insurance Marketplace (AHIM) received $99 million to help the state move from the FFM to a state-based marketplace model.  
  • Massachusetts: The (Massachusetts) Health Connector received more than $9 million to develop and improve a Small Business Health Options Program (SHOP) marketplace for small employers to shop for employee coverage and to enhance functions such as those for reporting requirements, renewals, determinations, appeals and more. It will also be used to create a Navigator and Certified Application Counselor portal. 
  • New Hampshire: The New Hampshire Health Plan (NHHP) received more than $3 million to support Covering New Hampshire, its consumer assistance program.
  • New York: The New York State of Health Marketplace received approximately $63 million for upgrades to enhance consumer experience and compliance efforts and help the state prepare for 2015 open enrollment.
  • Rhode Island: Health Source Rhode Island will use the almost $3 million for projects related to the state’s SHOP, training and planning efforts, and IT-related functions.

(Source: HHS, “Open Enrollment Week 4: December 6 – December 12, 2014,” December 16, 2014)

Back to top


Implementation & Adoption

CCIIO issues draft 2016 letter to FFM issuers

Last Friday, the Centers for Medicare and Medicaid Services (CMS) Center for Consumer Information and Insurance Oversight (CCIIO) released the Draft 2016 Letter to Issuers in the Federally Facilitated Marketplace. The letter proposes certification standards for qualified health plans (QHP) and procedures for enrollment and eligibility. It also covers what leeway states running their own marketplace have with requirements, procedures and deadlines. CCIIO proposes the initial QHP application submission window for health plans participating on the FFM be March 16, 2015 through April 15, 2015. Other key dates include:

Back to top


National uninsured rate drops from 14.4 in 2013 to 12.2 in 2014; young adults see greatest drop

Last week, the U.S. Centers for Disease Control and Prevention (CDC) National Center for Health Statistics published results from the National Health Interview Survey. The survey was conducted from January to June 2014 and found that 12.2 percent of the population is uninsured. This is down from 2013 when 14.4 percent of the total population was uninsured. Uninsured rates across all age groups dropped during the first half of 2014, and individuals age 19-25 saw the largest decline from 26.5 in 2013 to 20.1 percent in 2014. Despite the drops in the uninsured rate, non-elderly adults age 18-64 were almost three times more likely than children age 0-17 to lack health insurance coverage in 2014.

The survey also found that children were the most likely group of people under 65 to have public health insurance coverage (42.7 percent) while adults age 45-64 were more likely to have private health insurance coverage (71 percent). States with the highest rates of uninsured adults were Florida, North Carolina and Texas; rates were lowest in Kansas, Michigan, New York, Ohio and Pennsylvania.

(Source: Martinez, Michael E., Cohen, Robin A., CDC National Center for Health Statistics, Division of Health Interview Statistics, “Health Insurance Coverage: Early Release of Estimates from the National Health Interview Survey, January-June 2014,” December 2014)

Back to top

Report: Potential impact of a Supreme Court ruling against subsidies in the FFM

The House Committee on Energy and Commerce released an analysis last week that found that $65 billion in federal insurance subsidies would be at risk if the Supreme Court rules for the plaintiffs in King v. Burwell. If the Supreme Court finds that subsidies cannot be offered to individuals who obtained health insurance in the FFM, the average individual in these 36 states would lose $4,800 per year in support. The map here displays the number of consumers who would lose coverage in each state that uses the FFM. Consumers in Florida and Texas would be the most affected.

Potential impact of a Supreme Court ruling against the FFM insurance subsidies

Background: The plaintiffs in King v. Burwell challenge the government’s authority to issue tax subsidies through the FFM and argue that the ACA only allows the government to provide subsidies to individuals who purchase insurance through a state-based marketplace. The Supreme Court announced yesterday that it will hear arguments in the case on March 4, 2015. District of Columbia and the 14 states that have established their own marketplaces would be unaffected by the ruling.

Back to top

ProPublica finds increased prescribing of Schedule 2 drugs to Medicare beneficiaries

Physicians are increasingly prescribing powerful painkillers and stimulants – Schedule 2 controlled substances – to Medicare beneficiaries who get their coverage through Part D. In 2012, Medicare Part D covered 27 million Schedule 2 prescriptions, a 9 percent increase over 2011. In 2012, 269 physicians wrote prescriptions for at least 3,000 Schedule 2 drugs. Florida, Tennessee, North Carolina and Ohio had the most physicians prescribing large numbers (3,000 or more) of these drugs in 2012. Among physicians prescribing large numbers of these drugs, one-in-five faced some form of sanction or investigation. Other highlights include:

Background: Schedule 2 drugs have higher potential for abuse and dependence than other drugs. Medicare has ways to mitigate misuse, such as written prescriptions without the option for refills, but some doctors are prescribing Schedule 2 drugs at high rates, and their prescribing practices have come under scrutiny. The U.S. Drug Enforcement Administration (DEA) lacks the resources to monitor physicians’ prescribing, it has said. It is left to CMS and state medical boards to monitor prescription data and enforce responsible prescribing practices.

(Source: Ornstein, Charles, Grochowski Jones, Ryann, ProPublica, “As controlled substance use rises in Medicare, prolific prescribers face more scrutiny” December 15, 2014)

Back to top


Congress: ONC should decertify EHRs that block information exchange

Congressional lawmakers recently directed the Office of the National Coordinator for Health IT (ONC) to use its authority to stop the certification of electronic health records (EHR) that block health information exchange. The charge was included in report language that accompanied the recent budget legislation (Consolidated and Further Continuing Appropriations Act of 2015). According to the bill, “ONC should take steps to decertify products that proactively block the sharing of information because those practices frustrate congressional intent, devalue taxpayer investments in [Certified EHR Technology], and make CEHRT less valuable and more burdensome for eligible hospitals and eligible providers to use.” The law calls for ONC to submit a report on the blocking problem within 90 days after the bill’s enactment. Finally, it also instructs the Health IT Policy Committee at ONC to submit a report within 12 months that addresses interoperability challenges and barriers.

Response: The Electronic Health Record Association (EHRA) released a statement last week saying that it does not support Congress’s direction to decertify EHR products. The group said that decertification of EHR systems that block information sharing could harm the health care industry and impede Meaningful Use and other reform initiatives.

Back to top

On the Hill & In the Courts

CMS: Medicare payments to be cut for hospitals with high HAC rates

CMS will cut Medicare reimbursement rates by 1 percent for more than 720 hospitals because of their high rates of hospital-acquired conditions (HAC). The payment penalty is a policy that aims to reduce the rate of HACs. Payments cuts of $373 million will be spread among one out of every seven hospitals in the country starting in fiscal year 2015. Certain hospitals, such as specialized psychiatric or critical access (mostly rural) hospitals, were exempt from the penalties.

Medicare scored hospitals on three measures of HACs – bloodstream infections from tubes, infections caused by bladder tubes, and the prevalence of eight different serious, common hospital complications. Hospitals with the highest portion of HACs receive the payment reduction penalty. Medicare will evaluate performance on these measures and others (including surgical site infection) and recalculate the penalties next year.

Related: In 2013, approximately 121 out of 1,000 patients contracted a HAC during their hospitalization. The December 9, 2014 Health Care Current highlighted government estimates that the nationwide rate of HACs has fallen 17 percent since 2010, resulting in savings of $12 billion during that period. Also last week, CMS announced that more than 1,700 hospitals would be getting a payment boost in 2015 from Medicare in adjustments through the Value-Based Purchasing Program. More hospitals will get payment increases than decreases, and the positive scores are up from 2014 when a little more than 1,200 hospitals received payment increases.

Back to top

FDA accepts third biosimilar application

Last week, Apotex Inc., a Canadian pharmaceutical company, announced that the U.S. Food and Drug Administration (FDA) had accepted an application for their drug, pegfilgrastim, a biosimilar version of Amgen’s Neulasta. The drug is used to fight infections and fevers for cancer patients undergoing chemotherapy treatment and had $3.6 billion in sales in 2013. According to Apotex, this is the first biosimilar filing the FDA has accepted for review for a long acting formulation of the drug and this filing is the third biosimilar application accepted in the U.S. While the acceptance of the application is considered by many drug industry experts to be an important first step, the industry is waiting to learn more from the FDA on how biosimilar products will be defined and approved. In May, the FDA said it will categorize biosimilarity into four levels: not similar, similar, highly similar and highly similar with a fingerprint-like similarity.

Background: The Biologics Price Competition and Innovation Act of 2009 was enacted as part of the ACA to establish an expedited pathway for FDA licensure of biological products that are biosimilar to products already approved on the market. According to the guidance, biosimilarity is defined as “highly similar to the reference product notwithstanding minor differences in clinically inactive components; and there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product.”

Back to top

CMS to fine 257,000 eligible professionals for failing to meet Meaningful Use

Thousands of physicians will see a 1 percent reduction in their Medicare payments in January 2015. CMS announced last week that 257,000 eligible professionals were being penalized because they failed to meet Meaningful Use by October 1, 2014. A portion (28,000) will see a 2 percent reduction because they failed to meet the threshold for e-prescribing. Eligible professionals who received penalty notifications will have through February to ask CMS to review possible errors. CMS already received and approved 55,000 hardship exemption applications from eligible Medicare professionals. Approximately 2,000 hardship exemption applications were denied, mostly because the eligible professionals misunderstood the rule. Hardship exemptions are only for one year, so those who were approved this year need to apply again for a 2015 exemption.

Reaction: The American Medical Association (AMA) released a statement after CMS made this announcement that it was “appalled” that the number of penalties was so high. According to AMA, this represents more than 50 percent of the eligible professionals that are participating in the Meaningful Use program, and it is much higher than anticipated. AMA said that the failure rate is so high because the requirements for the program are too strict and inflexible. It also said that many EHRs have “poor usability” and disrupt physician workflow.

Back to top

Tennessee announces Medicaid expansion plan; hospitals to finance future funding gap

Last week, Tennessee Governor Bill Haslam introduced Insure Tennessee, the state’s approach to Medicaid expansion through the ACA. Insure Tennessee would provide eligible individuals two new program options:

  • Volunteer Plan: Enrollees would get vouchers to help pay for premiums and other cost sharing for their employer’s private insurance plans. Enrollees would be responsible for any costs in excess of the voucher amount.
  • Healthy Incentives Plan: Individuals could enroll in a “Healthy Incentives for Tennesseans” account. Modeled after health reimbursement accounts (HRA), beneficiaries would use this account for premiums and other cost sharing.

The state would pay for the plan using the federal funding match for Medicaid expansion. Once that amount drops below 100 percent after 2016, Tennessee hospitals would pay the difference. Insure Tennessee would provide coverage to more than 200,000 Tennesseans who earn less than 138 percent of the federal poverty level (FPL). Insure Tennessee is a two-year pilot program and requires approval from the Tennessee state legislature and CMS before it can begin.

Reaction: Last week, the Tennessee Hospital Association (THA) came out in support of the expansion plan. THA said the plan will help reduce the number of uninsured and help individuals access quality coverage and care. The Tennessee Medical Association (TMA) applauded the announcement, but acknowledged that it has concerns about several aspects of the plan. Although the state’s hospitals will finance the 10 percent gap in funding, TMA believes those costs will be passed on to physicians. TMA also referenced the recent reimbursement cut included in the TennCare budget on December 5, noting that it will be difficult to add thousands of individuals to the Medicaid rolls at the same time that physicians’ payments are cut.

(Source: Tennessee Newsroom & Media Center, “Insure Tennessee - One-Pager,” December 2014; Tennessee Newsroom & Media Center, “Insure Tennessee - Slide Deck,” December 2014)

Back to top

Around the Country


CMS funds more State Innovation Models

On December 16, CMS’s Innovation Center announced $665 million in awards for the second round of the State Innovation Models (SIM) program. The recipients include 28 states, three territories, and the District of Columbia. The initiative supports state-led, multi-payer health services delivery models and payments that aim to reduce costs and improve quality and performance in Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). The funding includes:

  • Nearly $43 million in Model Design funds for 17 states, three territories, and D.C. to develop State Health Care Innovation Plans; these recipients will have twelve months to design and then submit their plans to CMS. 
  • More than $622 million in Model Test funds for 11 states to implement their State Health Care Innovation Plans; these states join six others already in the testing phase of SIM grants.

Background: State Innovation funds support state initiatives used to transform the health care delivery system through innovative strategies to improve value and reduce costs. Elements of the strategies include quality measures, evaluation of innovation activities and initiatives and adoption of health information technology and exchange. States engage a variety of health care stakeholders, such as public and private payers, providers and patients in developing their strategies. The ACA created the Innovation Center to improve outcomes and reduce costs through testing new payment and delivery models in health care using Medicare, Medicaid, and CHIP. Currently, 37 states and territories, plus the District of Columbia, participate in the SIM initiative, representing 61 percent of the country’s population.

Back to top

Vermont cancels plans to adopt single-payer health care system

Vermont Governor Peter Shumlin announced on December 17 his recommendation that the state not move forward with its plan for a single-payer health care system – otherwise known as Green Mountain Care. After review of the current financial climate and estimated fiscal consequences, Governor Shumlin believes “now is not the right time to ask [the] legislature to take the step of passing a financing plan for Green Mountain Care.” In order to finance this plan, the following would have been required:

  • 11.5 percent payroll tax for every Vermont business
  • 9.5 percent maximum income tax for every Vermont resident
  • Small business owners would have to pay both the payroll and income taxes

Both state and federal funding were issues; federal funding for the plan was $150 million less than 2013 estimations. The state’s general revenue growth has also been slower than anticipated and was too low to support increasing Medicaid provider payments. Moreover, opting out of the federal marketplace created by the ACA also would have been challenging. Until these issues are worked out, Governor Shumlin emphasized that the state should still work to contain costs, promote use of health information technology and increase payments to community health and medical homes. Vermont passed legislation to establish the single-payer system in 2011, and its program would have been the first state single-payer system in the United States.

(Source: “Governor Peter Shumlin Health Care Speech 12.17.2014” December 17, 2014)

Back to top

Using EMRs to reduce NICU errors

Researchers at the Montefiore Medical Center’s neonatal intensive care unit (NICU) implemented a unique baby naming system in the EHR that has reduced confusion, miscommunication and errors. EHRs typically generate sequential patient record numbers. As NICU babies are generally born within hours of one another, the numbers are often close. Previous studies have shown that the misidentification risk in the NICU is high – with near miss wrong-patient orders 1.6 times higher for neonates than for other patients.

Often, newborns admitted to the NICU are given temporary names such as “BabyBoy” or “BabyGirl,” which increases the chances of confusing patient charts. In a recent experiment, the Montefiore researchers used a formula to create a first name for neonates involving a number combined with the mother’s name and baby’s sex. The new system has resulted in a 49.9 percent reduction in the error rate for individual orders, and a 25.1 percent reduction in errors for each ordering session.

The Montefiore NICU researchers previously published the results of a trial that tested the efficacy of the Retract-and-Reorder (RNR) algorithm, a simple algorithm to locate when a physician places an order on one patient, then cancels the order very quickly and then orders the exact same medications or labs on another patient. The researchers tested two safety interventions designed to prevent RNR occurrences: an ID-verify alert and an ID-re-entry function. Compared with results from the control arm of the trial, the ID-verify alert lowered the odds of an RNR occurrence by 16 percent.

The team recently won a grant from the Agency for Healthcare Research and Quality to study wrong-patient errors. They have also applied for an NIH grant to test a randomized control design across multiple NICU environments to see if this preliminary data will hold up in a more rigorous, larger scale study.

Analysis: Studies such as these show that when EHRs are used within the context of a clinician’s normal workflow and provide a snapshot of existing information relevant to patient care, they can be a valuable tool in improving care delivery.

Many innovators in the health care industry wish to shake up an existing way of doing things using newer technologies. As this example shows, applying existing technology and data in a new way to ongoing clinical issues can result in an innovative solution. New data collection or data entry screens are not needed if information comes from an available source, such as the EHR or lab system.

Complaints about EHRs have centered on usability and the need for new workflows. In this case, the researchers took an existing workflow and made it better, making sure to abstract workflows, protocols and procedures from the core software. Developing and sharing clinical algorithms like these can be important for growth in use and value of health information technology; EHRs may even become “app-friendly,” customized by the clinician based on best practices used throughout the U.S. health care system.

Back to top

Breaking Boundaries


Did you find this useful?