Health Care Current: December 8 2015 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: December 8, 2015
Enabling population health through predictive maintenance
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
Enabling population health through predictive maintenance
Wear particle analysis…ultrasonic noise detection…infrared thermography…all of these have one thing in common. They are technologies commonly used in NASA’s predictive maintenance systems that keep equipment and their components working. With the onslaught of new technologies and predictive analytics, NASA can now predict ahead of time when a diesel generator, condenser, transformer, or pump may break down. And, more importantly, it knows this far enough in advance to replace components at just the right time – before they are unusable – preventing both waste and catastrophes (or just an inconvenient breakdown).1
While NASA and many other industries that depend on advanced manufacturing have progressed to this level of predictive maintenance, many others have not evolved beyond the break-fix system. Case in point: Health care.
In health care today, we often wait until something is broken and then we attempt to repair it. We stent the coronary artery after years of hypertension and high cholesterol. We start insulin after decades of obesity and poor diets. This has largely been a result of the way we pay for health care. A patient who is overweight may go years without receiving wellness and medical care – until he or she begins to show signs of difficulty controlling blood sugar. It is often only at that point, when they may already have developed a chronic condition that will require monitoring and medication for the remainder of their lives, that the system gets involved.
As shown below, today, health care largely operates a corrective maintenance system, fixing problems as they arise and charging for services when they are performed. Some of the more advanced health care systems have begun to move toward preventive maintenance systems, regularly performing checks and diagnostic tests such as blood pressure screenings and pap smears to catch things before they become a larger issue. But, few are operating a predictive maintenance system, where the system is designed to help monitor the patient’s health on an ongoing basis to predict when an intervention should be performed.
However, as I explain in the 2016 Health Care Provider Outlook, we are seeing slow movement and progress forward. Promising movements such as accountable care organizations, bundled payments, and other reimbursement models are starting to address some of the underlying structural issues that have plagued the system for so long. As a result, we’re seeing progress toward preventing emergency department visits and prolonged hospital stays. And, more importantly, care is moving away from hospitals and into more accessible, less costly settings – into homes, schools, and even work.
To fully accomplish the shift to a predictive maintenance system, technology adoption will play an important role. Mobile phones, telehealth, and portals are just a few examples of technologies that can help providers monitor patients’ conditions and prevent major health care problems. Digital technologies will shape the health care landscape through tools that encourage and empower consumers to take better care of themselves, and thus reduce reliance on the costliest and most acute health care resources. Other enabling technologies will be needed to take information from remote devices, electronic health records, consumers, and clinicians to coordinate messaging and tasks across the health ecosystem.
Technology is just one component, however. Care coordination and consumer engagement strategies will be important to help ensure that the technologies are used properly and routinely. Physicians and care providers may also need to change the way they practice, shifting to employ evidence-based medicine and best practices to design the system to achieve optimal outcomes. And finally, analytics that assess outcomes, both clinical and financial, may help health care systems fully understand impact and continually improve the system.
If we are going to be successful at effectively managing population health, the public and private sectors may need to align financial incentives and move away from the “break-fix” model of care and into a new era of predictive maintenance and optimization.
1 US Department of Energy, O&M Best Practices Guide, Release 3.0, Chapter 6: Predictive Maintenance Technologies,” 2013
By Mitch Morris, MD, US and Global Health Care Sector leader, Deloitte Consulting LLP
CMS: Health care spending increased 5.3 percent in 2014
The most recent US Centers for Medicare and Medicaid Services (CMS) National Health Expenditures show that health care spending grew 5.3 percent in 2014, reaching $3.0 trillion and 17.5 percent of gross domestic product (GDP). This follows five years of low growth in spending. The uptick is primarily due to increased spending under the Affordable Care Act (ACA). Drug spending increased 12.2 percent in 2014, and hospital and physician costs grew faster in 2014 than 2013.
In 2014, average spending per person reached $9,523, an increase of 4.5 percent over 2013. Out-of-pocket spending grew less quickly, by 1.3 percent in 2014 to $329.8 billion. Higher spending from the ACA is due to the increase in coverage between 2013 and 2014; more than 23 million individuals gained coverage through Medicaid expansion and the health insurance exchanges. That increase in coverage also led to a shift in who is paying for health care in the US. The federal government finances 28 percent of health care spending, which is 2 percentage points higher than 2013, and state and local governments pay for 17 percent. Together, federal, state and local government expenditures on health care grew from 44 percent to 45 percent from 2012 to 2014. Consumers account for 28 percent of health care spending, more than private businesses and other private revenue combined (27 percent).
(Source: Anne B. Martin, Micah Hartman, Joseph Benson, Aaron Catlin, & the National Health Expenditure Accounts Team, “National Health Spending In 2014: Faster Growth Driven By Coverage Expansion And Prescription Drug Spending,” Health Affairs, December 2015)
Implementation & Adoption
Analysis: HMO plans more common than PPOs in the exchanges
A Kaiser Health News analysis found that in 2016, compared with earlier years, health maintenance organization (HMO) plans are more common and fewer preferred provider organizations (PPO) plans are being offered on the federal health insurance exchanges (HIX). PPOs tend to pay for a portion of members’ costs for services provided by out-of-network hospitals and physicians, while HMOs typically only pay members’ costs associated with in-network medical facilities and doctors. In 22 of the 37 states using the federal exchange in 2016, there are fewer or no silver-level PPO plans compared with 2015.
The analysis also looked at the premiums associated with plan offerings and found that both HMO and PPO premiums are higher, on average. The average premium for the least expensive HMO silver-level plan rose from $274 in 2015 to $299 in 2016, a 9 percent increase. For the least expensive PPO or other silver-level open access plan, the average premium increased 17 percent from $291 to $339.
(Source: Julie Appleby & Jordan Rau, Kaiser Health News, “As HMOs Dominate, Alternatives Become More Expensive,” November 25, 2015)
CMS plans to survey long-term care facilities on patient satisfaction
CMS aims to adopt a survey for long-term care hospitals (LTCH), with the goal to provide valuable feedback to help LTCHs improve patient engagement and promote effective communication. CMS released a request for information on November 20, 2015, seeking input from industry on what information should be collected through a long-term care survey. The survey results may eventually be published on a CMS website to help consumers and their family members make informed decisions about their health care.
Background: CMS views patient experience as an important factor in determining care quality. The Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey, which assesses patient satisfaction on hospital care, helps determine hospitals’ star ratings and is a key component of the hospital value-based purchasing program. Some stakeholders are critical of these types of surveys and say they are not valuable or clinically appropriate and can further disadvantage hospitals who care for a greater number of individuals with complex medical conditions.
Moody’s: Cyberattacks could impact health care organizations’ credit ratings
Cyberattacks against health care organizations could cause their credit ratings to drop, according to Moody’s Investors Service. While the company does not incorporate cyber risk into credit ratings today, it recognizes that some cyberattacks can present “material” challenges for organizations, just as a major natural disaster might.
Financial institutions, health care organizations, educational institutions, and retail companies are at the highest risk for experiencing a large-scale cyberattack that might harm the organization’s reputation and financial standing. Organizations in these industries typically hold large amounts of personal data on individuals and customers. According to Moody’s, three major factors can impact a company’s credit rating after a major cyber event:
- The assets or parts of the business that are targeted and how broad in scope they are
- The length of time that service(s) could be disrupted if a cyberattack were to occur
- Time to restore operations after the event
Analysis: A newer source of risk has come from the so-called Internet of Things (IoT) – in health care, applications that promise to help improve and personalize care by making measurement and analysis automatic. As explained in No appointment necessary: How the IoT and patient-generated data can unlock health care value, “not only can IoT technologies help organizations improve health management, the personalization of care and improved patient engagement through IoT technology will make health organizations more competitive and attract more customers in an ever more consumer-driven market.” However, IoT devices can pose great risks for security violations, especially in health care. Increased interconnectivity among devices can also increase the number of vulnerabilities in a system.
(Source: Moody’s Investor Service, “Moody's: Threat of cyber risk is of growing importance to credit analysis,” November 23, 2015)
CBO: Medicare is spending more on skilled nursing and hospice care for older beneficiaries
The Congressional Budget Office (CBO) recently analyzed Medicare data from 1999 to 2012 and found that Medicare spending per beneficiary grew fastest for enrollees age 85 to 94. During that period, average annual growth rate of Medicare spending per beneficiary for individuals age 65 to 74 was nearly half of that for individuals age 85 to 94. The age with the highest spending went from 89 in 1999 to 97 in 2012.
Population aging has been one influence on the upward trend in per beneficiary spending among older beneficiaries, but the CBO analysis found that increases in spending on skilled nursing facility (SNF) services and hospice care in particular drove spending increases in this group. In 1999, spending on SNF and hospice care accounted for 12.7 and 2.3 percent of spending for beneficiaries age 85 to 94, respectively. In 2012, these areas increased to 15.6 percent (SNF services) and 7.9 percent (hospice care). Spending on outpatient hospital care also nearly doubled during the same period, accounting for 5.7 percent of services in 1999 as compared with 10.3 percent in 2012. The proportion spent on inpatient hospital stays declined significantly for this group, however, accounting for 47.3 percent of all spending in 1999 and 34.6 percent in 2012.
(Source: Congressional Budget Office, “Changes in Medicare Spending per Beneficiary by Age,” November 2015)
WHO survey finds widespread misinformation about antibiotics and drug resistance
The World Health Organization (WHO) recently reported about global widespread antibiotic misuse. WHO surveyed 10,000 people in 12 countries and found that consumers generally do not understand important antibiotic protocols. WHO says that this misunderstanding has led to the rise of antibiotic-resistant superbugs, which may slow gains in life expectancy.
The survey found that many of the respondents do not understand the problem, how antibiotic resistance works, and what effect antibiotic overuse has on health and health care. Some key findings include:
The survey found that people are open to innovative ways to combat antibiotic resistance. Nearly 75 percent of respondents said farmers should cut back on the use of antibiotics in food production. Denmark, the Netherlands, and other countries have already stopped using antibiotics for livestock. Dr. Keiji Fukudu, WHO’s special representative for antimicrobial assistance, said that if that more countries adopt sustainable antibiotic use practices, antibiotic resistant infections that cause hospitalizations and deaths would decline.
Related: WHO surveyed people in two countries from each of its six regional divisions. It did not survey people in the US. However, according to the US Centers for Disease Control and Prevention (CDC), antibiotic resistance causes 23,000 deaths and more than 2 million illnesses in the US annually. The federal government has grown increasingly concerned about the growth in drug resistance in the US. The White House has formed the National Action Plan for Combating Antibiotic-Resistant Bacteria, which aims to address this problem by engaging a diverse group of stakeholders including public health agencies, agricultural industry leaders, regulators, and veterinarians (see the November 17, 2015 Health Care Current).
(Source: WHO, “Antibiotic Resistance: Multi-Country Public Awareness Survey,” 2015)
Senate passes reconciliation package that repeals provisions of the ACA
Last week, the Senate voted (52-47) to pass a reconciliation package. The bill differs from the version that the House of Representatives passed in October, so it will return to that chamber for another vote where it is expected to pass. President Barack Obama has indicated that he will veto the legislation.
The bill would repeal several provisions of the ACA:
While most expect the White House to veto the bill once it passes the House, the measure sets up a potential approach for Republicans in Congress to pass repeal of specific ACA provisions. Analysts have predicted that, if the Republican Party has power of both chambers of Congress and the White House in 2017, these may be the provisions of the ACA first slated for repeal.
On the Hill & In the Courts
CMS lays out assumptions behind two-midnight payment cuts
CMS recently published an explanation of its decision to instate a 0.2 percent payment cut to hospitals related to the two-midnight rule. CMS established the two-midnight policy in 2013 to standardize how hospitals decide whether a patient is admitted to the hospital or is treated as an outpatient. In its initial calculations, CMS expected more stays would be billed as inpatient because hospitals receive higher payments for these services than outpatient services. CMS established the payment reduction to offset this projected increase in spending on inpatient services. The cuts have not taken effect due to a number of delays in the two-midnight rule implementation.
In September, a federal court required CMS to justify hospital payment reductions and reopen the rule to public comment (see the September 29, 2015 Health Care Current). The judge required CMS to further justify its calculations. CMS stated that analysts used 2011 claims to estimate that approximately 400,000 claims would move from outpatient to inpatient, while 360,000 would move from inpatient to outpatient status. CMS concluded that these shifts would lead to an increase in spending of $220 million in 2014.
In the notice, CMS stated that it is not proposing to reconsider the 0.2 percent cut at this time. It will continue to analyze more recent claims to better understand the effect of the two-midnight policy on hospital behavior.
Analysis: Readmission rates declining, but observation status increasing
The Wall Street Journal recently found that while many acute-care hospitals have reduced readmissions rates, rates of patients staying under observation status have increased. The Journal analyzed Medicare billing data to find that readmission rates for 10 percent of acute care hospitals in the US declined 14 percent from 2010 to 2013. In the meantime, observation stays increased 156 percent, which accounted for an estimated two-thirds of the reduction in readmission rates. This has brought up concerns that some of the reduced readmissions results are not due to better care quality, but rather a shift in the way that hospitals are billing for services.
Analysis: Observation stays are paid under the outpatient payment system, not as inpatient care. One reason for the rise in observation stays may be concerns about Medicare recovery audit contractors or RACs denying claims for short inpatient stays. The Medicare Payment Advisory Committee gives this as one reason why hospitals have increasingly put patients in outpatient observation status instead of admitting them. Observation stays can be costly for patients who go to SNFs because they may not have had the required three-day inpatient stay so may end up needing to pay for the SNF care.
(Source: Christopher Weaver, Anna Wilde Mathews, & Tom McGinty, Wall Street Journal, "Medicare Rules Reshape Hospital Admissions,” December 1, 2015)
FDA approved most high-risk medical devices submitted last year
The US Food and Drug Administration (FDA) approved 98 percent of all high-risk medical devices submitted during fiscal year 2015, including heart valves, cancer tests, spinal implants, and other devices. This is the highest rate of approvals in 15 years and exceeds the previous year’s rate by 12 percent. The FDA also approved 85 percent of all lower-risk devices in 2015, which is the highest approval rate since 2010.
The medical devices were submitted through the FDA's premarket approval process. FDA uses this process to review the riskiest types of devices (e.g., heart valve replacements). In the premarket approval process, manufacturers benefit from earlier and more frequent feedback about issues that may cause a device to be rejected.
AHRQ: Decline in hospital-acquired conditions has saved 87,000 lives
The Agency for Healthcare Research and Quality (AHRQ) reported last week that hospital-acquired conditions (HACs) and health problems associated with them declined 17 percent from 2010 to 2014. The decline saved an estimated 87,000 lives and reduced health care costs by nearly $20 billion. The Secretary of the US Department of Health and Human Services (HHS) credited the ACA and new financial incentives for quality care given to hospitals. However, 10 percent of patients still get at least one infection after a hospital visit, and the rate of decline did not change over last year.
HACs and associated conditions include adverse drug events, catheter-associated urinary tract infections, central line-associated bloodstream infections, pressure ulcers, and surgical infections. Over the four year period:
- Catheter-associated urinary tract infections decreased 38 percent, saving an estimated $150 million.
- Adverse drug events declined about 16 percent, saving an estimated $1.3 billion.
- Pressure ulcers decreased almost 23 percent, saving $5.2 billion.
HHS aims to reduce HACs by 40 percent through quality programs such as offering technical assistance through Quality Improvement Organizations and the Partnership for Patients initiative. AHRQ has also helped to create evidence-based practices that help hospitals make care safer.
(Source: AHRQ, “Saving Lives and Saving Money: Hospital-Acquired Conditions Update”)
Analysis: Large insurance company mergers could have varying impact on competitiveness across states
The proposed mergers of six large insurance companies into three larger companies could have varying impacts on the health care industry, according to a study published in Health Affairs. Researchers projected how market concentration – or how many health plan companies consumers in any given area can purchase coverage from – may change if the three mergers are approved.
Market concentration after the mergers would vary across different markets.
Market competition is just one of the factors that influences how the mergers could impact insurance markets. With greater market share, the health plans could have more influence to encourage providers to enter into risk-sharing agreements tied to value and ultimately lower health care costs while improving quality. Greater operational and technological efficiencies that result from the mergers might also reduce costs and encourage other, smaller health plans to do the same.
Though they will be evaluated individually, if the mergers are approved by the Federal Trade Commission and state regulatory agencies, three health plans would control more than half of the Medicare Advantage market and 45 percent of the commercial market. In the commercial market, three health plans would still see competition from Blue Cross Blue Shield plans, which collectively manage approximately 37 percent of that market.
Background: The researchers used the Herfindahl-Hirschman Index (HHI) to calculate changes in market concentration. The index measures competiveness and is a commonly used measure of market concentration. A monopoly would have an HHI of 1 while a perfectly competitive market would have a HHI approaching zero.
(Source: Douglas Hervey, David Muhlestein, and Austin Bordelon, “How might proposed payer mergers impact state insurance markets?” Health Affairs, December 2015)
Around the Country
SCOTUS hears case on whether self-insured employers can be required to submit data to state claims databases
Last week, the US Supreme Court heard oral arguments for a case that could decide whether self-insured employers can be required to submit data to state all-payer claims databases. After a lower court ruled in favor of a 2011 law requiring health insurers, providers, facilities, and governmental agencies to submit claims information to the Vermont Department of Financial Regulation, the US Supreme Court agreed to hear the case (see the October 13, 2015 Health Care Current).
During the arguments, the Justices’ questioning focused on two key questions:
- Is data collection a core function of ERISA? If it is, then the state law may be preempted. The ACA added a provision to ERISA that gives the Administration power to collect similar kinds of data.
- Is Vermont’s data collection requirement burdensome to insurers? The defendant argued that much of the information is already collected by the insurer’s administrator, and it is collected in a standardized way. However, if more states establish similar all-payer claims databases and have different standards and requirements, it may become burdensome to collect all of the required information, several of the Justices noted.
Background: In 2011, Vermont established an all-payer all-claims database. Because the state defines health insurer broadly, it included third party administrators, pharmacy benefit managers, health insurance companies, and self-insured benefit plan administrators in the reporting requirements. When a self-insured company barred its third party administrator from sending medical and pharmacy claims to the state for the database, it argued that the ERISA prevents states from requiring them to provide data on the costs of their services. A lower court ruled in favor of Vermont and the Supreme Court decision is expected in June. The outcome of the decision could impact a number of state efforts to collect health care claims data.
Crowd-sourcing to spur health care innovation
Thomas Jefferson University and Independence Blue Cross recently teamed up to host their first health hackathon. The goal is to bring together a diverse group of individuals to come up with scalable solutions to the most pressing issues in health care. The event featured three tracks: Reducing Readmissions, Wearables, and Drone-based Healthcare Delivery. Participants were tasked with testing their ideas and competing for prizes. The winner of each track has the opportunity to move their idea forward with the help of the track sponsors.
The hackathon featured rotating workshops to teach skills such as delivering a pitch to investors and app development strategies. Mentors were available throughout the weekend to give feedback and serve as judges. The event drew 250 participants working on 60 different ideas. Eight teams received top recognition and the chance to continue working through their ideas with sponsors.
- The three award winning teams in the Reducing Readmissions category focused on improving home health care and the use of mobile health.
- One winning team in the Wearables group put forward a strategy to empower amputee patients to build their own adjustable prosthetic limbs, and the other winning team focused on optimizing clinical delivery tools through wearables.
- The three Drone-based Healthcare category winners targeted the use of real-time actionable date to key decision makers in worldwide health crises such as the Ebola outbreak and in disaster preparedness.
Analysis: Hackathons have become a popular strategy in recent years to generate innovative ideas to help solve complex problems using limited resources. While the format was made popular by software developers, other industries such as health care have adopted hackathons as a way to spur innovation. One goal of the hackathon was to let patients and those traditionally outside the health care system come together with health care insiders such as clinicians and other health care professionals, engineers, technology developers, and others to see what new ideas could come out as a result.
Each of the three categories represent areas that have the potential to change the health care landscape. The Robert Wood Johnson Foundation recently reported that one-in-eight Medicare patients are readmitted to the hospital within 30 days of a surgical procedure, and CMS funding is now tied to readmissions metrics in the ACA. The time is right for innovative processes and procedures to keep patients healthier after hospitalization.
Many organizations are experimenting with the use of drones as a faster, less expensive, and more efficient method to get to hard-to-reach patients in rural areas, areas hit by a disaster, or remote areas in other countries. And results from Deloitte’s 2015 Survey of US Health Care Consumers found that the use of digital tools and mobile technology for health improvement and monitoring health conditions is on the rise and consumers are becoming more accustomed to relying on technology to track their activity. In the future, they may begin to expect more sophisticated wearables that go beyond fitness tracking.
(Source: Robert Wood Johnson Foundation, “The Revolving Door: A Report on U.S. Hospital Readmissions,” February 2013)