Perspectives

Health Care Current: February 2, 2016

Navigating the blizzard of health care regulation and legislation

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.

Navigating the blizzard of health care regulation and legislation

Well before the blizzard hit Washington, DC last week, we had plenty of warning. News channels had continuous coverage predicting record snowfalls, which sent people scurrying to grocery stores. For those unconvinced that the city could be paralyzed, a light dusting of snow that fell a few days before the big event turned their afternoon commute into mayhem.

Knowing it was coming, I, of course, had a plan. I had previously arranged to depart on a snowboarding trip with my kids on Friday afternoon—which turned out to be right when the storm was supposed to hit. Consequently, on Tuesday, I switched our flight to early Friday morning and proudly told my wife Kerry that I had managed to get the last few seats.

“My next husband will make better choices,” Kerry slyly replied, highlighting that she would be left to fend for herself in a blizzard with our dog.

Then, we began to prepare. Kerry filled the gas tanks and gathered extra food, water, and cash. I picked up some new lip balm and sunscreen and located my bathing suit in case there was a hot tub at the hotel.

For a city that regularly gets snow, having so much fall so quickly was a huge strain. And, while I was keeping myself busy with vacation preparations and nature was blanketing the city, Washington was hard at work, blanketing health care with a flurry (apologies) of discussion around recent regulation and legislation.

While I was at the J.P. Morgan Annual Health Conference in San Francisco earlier in January, the US Centers for Medicare and Medicaid Services (CMS) acting administrator set the industry abuzz when he said that the federal meaningful use program for electronic health records (EHRs) would be replaced. A few days later, he followed up with a blog post that clarified things a bit more:

“[The] Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)…considers quality, cost, and clinical practice improvement activities in calculating how Medicare physician payments are determined. While MACRA also continues to require that physicians be measured on their meaningful use of certified EHR technology for purposes of determining their Medicare payments, it provides a significant opportunity to transition the Medicare EHR Incentive Program for physicians towards the reality of where we want to go next.”1

MACRA also removed the sustainable growth rate (SGR) methodology from the Medicare physician fee schedule in favor of a system that emphasizes payment updates based on quality and outcomes. Furthermore, while MACRA impacts how physician adoption of EHRs is measured, meaningful use for eligible hospitals remains in place and is not affected by MACRA. Though the details are still being refined, it will work to align measures and move physicians and other clinicians away from fee-for-service payments and toward a more coordinated care system.

Meanwhile, at this year’s Patient Safety Summit, former President Bill Clinton highlighted how the lack of EHR interoperability is hindering patient safety. Using a personal family story, he emphasized that the patient safety movement could achieve large-scale success in reducing medical errors and eliminating preventable patient deaths if interoperability is made a top priority.2  There has been plenty of movement in Washington to see that this is achieved:

  • Last week, the US Food and Drug Administration (FDA) released draft guidance to provide design considerations for interoperable devices, as well as recommendations for labeling. The guidance encourages device manufacturers to disclose their standards as a way to enhance interoperability, patient safety and outcomes.3
  • The Senate Health, Education, Labor and Pensions (HELP) committee has expressed its intent to improve EHR interoperability. Last week, however, it also announced that it would not take up the House-passed 21st Century Cures Act, which calls for significant strides in this area. After more than a year of working on a far-reaching bill that addresses medical innovation, interoperability, and cures, the bill is now stalled in the Senate, mostly over disagreement on how to pay for it.4  The committee instead plans to focus on many of the same goals in less comprehensive legislation.5
  • MACRA also included provisions to move the system toward greater interoperability, setting interoperability as a national priority by 2018 and requiring the US Department of Health and Human Services (HHS) to establish metrics to assess EHR interoperability by July 1, 2016.

As I noted in the April 21, 2015 Health Care Current, I still can’t predict how soon health technology will be interoperable, but pressure from many sectors to achieve it is continuing to rise.

Finally, the impending presidential election has begun to exert a strong influence over policy discussions—in health care and beyond. While the Obama administration likely aims to implement as much of the Affordable Care Act (ACA) as it can prior to leaving office, the candidates are starting to discuss ways that they want to stray from the agenda of the last eight years.

Stakeholders may now need shift attention toward any new requirements that come in future legislation and regulation, such as limiting cost-sharing on prescription drugs or requirements around plans networks and how that may affect premiums. Additionally, the Administration has said it will provide final updated guidance on the requirements of the 340B drug pricing program by September 2016, after releasing draft guidance in August 2015. These regulations could affect eligibility for organizations, drugs, and patients alike.

In “Top regulatory trends for 2016 in life sciences and health care: A forward look,” my colleague Anne Phelps, Deloitte Advisory principal and US Health Care Regulatory leader, Deloitte & Touche LLP explained that the Cadillac tax on employer health plans, Medicare payment reform, Medicaid managed care regulations, and life sciences issues are just a few of the issues that will likely have a significant impact on the health care market in the year ahead.

Regulation and legislation in health care is nothing new, but what may be unprecedented is the amount falling at once. Managing it requires careful planning, proper preparation, and thoughtful prioritization. One should also consider unintended consequences and long-term implications of overlapping or inconsistent guidance.

When the storm hit, Kerry was ready. After hunkering down overnight, her first objective was to create a way for the dog to go outside. Next was to clear the 25 to 30 inches of snow from the front door, and uncover the drain in front of the garage so the melting snow would not create enormous sheets of ice overnight. Then came the grueling work of shoveling the driveway.

Meanwhile, the boys and I grappled with our own decisions, namely navigating the buffet at the resort. Ever-mindful of our long-term goals, just before heading to the airport we stopped in a jewelry store and said, “We’re looking for something that says ‘We’re sorry we abandoned you in a blizzard, but also respect your desire for us not to spend too much.’”

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1Andy Slavitt and Karen DeSalvo, The CMS Blog, “EHR Incentive Programs: Where We Go Next,” January 19, 2016
2The 2016 World Patient Safety, Science & Technology Summit
3FDA, “Design Considerations and Pre-market Submission Recommendations for Interoperable Medical Devices,” January 26, 2016
4Modern Healthcare, “Senate won't take up House's 21st Century Cures Act,” January 19, 2016
5Senator Lamar Alexander, “Chairman Alexander Announces Committee Schedule for “Step by Step” Consideration of Biomedical Innovation Bills,” January 19, 2016

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My Take

By Harry Greenspun, MD, Director, Deloitte Center for Health Solutions, Deloitte LLP

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HHS: Average tax credit on federal exchange covers approximately 72 percent of premium

Eighty-three percent of the more than 8.5 million health insurance exchange enrollees receive financial assistance to help pay for premiums in 2016, according to a recent report from the Office of the Assistant Secretary for Planning and Evaluation (ASPE) at HHS. The average amount of financial assistance is $294 per person per month, which covers 72 percent of the average enrollee’s premium. The analysis evaluated data from consumers who enrolled between November 1 and December 26, 2015 in the 38 states using the HealthCare.gov platform.

The analysis revealed that enrollees who returned to the exchanges for 2016 saw lower monthly premiums; 60 percent of active enrollees switched to a different plan from what they had in 2015. Enrollees who changed plans saved an average of $43 per month, or $516 a year, after applying premium tax credits.

According to the report, many consumers had the option of enrolling in an exchange plan with low monthly premiums after applying premium tax credits. Seventy-two percent had access to a plan that cost them $100 or less; 48 percent of enrollees ended up in a plan with a premium at that level. Although fewer people could select a plan with even lower premiums, 59 percent had access to a plan that cost them $50 or less per month, and nearly one-third selected such a plan.

(Source: ASPE, “Health Insurance Marketplaces 2016: Average Premiums after Advance Premium Tax Credits in the 38 States Using the HealthCare.gov Eligibility and Enrollment Platform,” January 21, 2016)

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Implementation & Adoption

Study: One percent of physicians account for one-third of malpractice payments

A study published in the New England Journal of Medicine found that about one percent of physicians represents approximately 32 percent of malpractice suits that result in claims payments to patients. Researchers evaluated data from the national practitioner data bank, a repository established by Congress and managed by HHS that includes all malpractice claims that ended with the patient getting a payment. For their analysis, the researchers used a sample of more than 66,000 paid claims from 2005 to 2014 filed against approximately 54,000 physicians.

Physicians with one paid claim are more likely to have another, and risk increases with the number of previously paid claims. Physicians with two paid claims have almost twice the risk of having another one; physicians with three previously paid claims carry three times the risk of recurrence. Risk also varies widely by specialty. Neurosurgeons and orthopedic surgeons have double the risk of a having a recurring claim compared with internal medicine physicians. Previous claims increase risk of recurrence regardless of specialty, however.

This study could be an important first step toward better understanding what physician characteristics contribute to malpractice claims. By better understanding factors that increase the risk of patient complaints and malpractice claims, institutions may begin to systematically identify and intervene with physicians at high risk for future claims. More work will need to be done to link such characteristics to measures of quality and patient safety.

(Source: David M. Studdert, Marie M. Bismark, Michelle M. Mello, Harnam Singh, and Matthew J. Spittal, New England Journal of Medicine, “Prevalence and Characteristics of Physicians Prone to Malpractice Claims,” January 28, 2016)

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CMS details process for meaningful use hardship exceptions for hospitals and physicians

CMS released details on the more streamlined meaningful use hardship exceptions following congressional action requiring the change (see the January 12, 2016 Health Care Current). Hardship exceptions exist to help providers and professionals avoid penalties if they have not yet met meaningful use requirements.

On the last day of the 2015 session, Congress passed the Patient Access and Medicare Protection Act to allow HHS to consider hardship exceptions for whole categories of providers and professionals, in addition to individual ones. The new application process allows multiple types of providers (eligible professionals and eligible hospitals) to apply for an exception on a single application. Critical access hospitals still have to complete a separate application. Eligible professionals and groups of eligible professionals and hospitals must submit hardship exception applications by March 15, 2016. Eligible hospitals and critical access hospitals have until April 1, 2016 to submit.

Background: Providers can apply for hardship exceptions if they can prove they lack infrastructure, have low patient interaction, or due to extreme and uncontrollable circumstances. Last year, many lawmakers pushed to make the hardship exception process easier because CMS released a final rule surrounding meaningful use later than originally scheduled, leaving providers with less time to make changes necessary to avoid penalties.

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Study: Health plan competition holds steady on state exchanges in 2016

A recent study conducted by Georgetown University’s Center on Health Insurance Reforms found that health plan participation among the 17 state-based marketplaces has been stable over the last three years. From 2015 to 2016, nine states experienced no change in the number of participating health plans, three had a net gain, and five reported a small decline.

Some health plans exited the state-based marketplaces after failing to gain sufficient market share, engaging in unsustainable pricing behavior, and receiving higher than anticipated medical claims, according to the report. Some consumer-operated and oriented plans (CO-OPs) also left some of the exchanges after setting premiums below market prices and finding that approach to be unsustainable long term.

Many of the state-based exchanges have implemented policies to encourage health plan participation. For example, some states have waiting periods for health plans that did not participate the first year, which may have encouraged many to join right away. Most health plans that operate in Maryland’s individual market outside of the exchange must also offer products in the state-based exchange. As a result, Maryland continues to maintain strong participation from a mixture of health plans. In the future, HHS may adopt state-based practices to improve participation in the federally facilitated exchange.

(Source: Emily Curran, Justin Giovannelli and Kevin Lucia, Commonwealth Fund Blog, “Insurer Participation in State-Based Marketplaces in 2016: A Closer Look,” January 21, 2016)

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KFF: Most individuals with private health insurance are satisfied with their provider networks

Last week, the Kaiser Family Foundation (KFF) released results from a Kaiser Health Tracking Poll of 1,204 adults age 18 and older surveyed from January 13-19, 2016. The poll analyzed issues that may impact Americans’ voting decisions in the upcoming election.

KFF asked how individuals feel about having plans with narrow networks and limited provider choices. Around 87 percent of the respondents are satisfied with the selection of doctors provided under their plan. Meanwhile, only a fraction (12 percent) recently switched doctors because their doctor was not in their plan’s network. Almost three-quarters of insured non-elderly Americans agree that the value they receive from their plan justifies the costs.

A majority of respondents that remain uninsured have not sought more information on their enrollment options, determined their eligibility for Medicaid or other financial assistance, or educated themselves on key components, including the enrollment deadline and penalty fees. Moreover, only one percent of the uninsured said they understand that they may be required to pay a fine for remaining uninsured in 2016.

Finally, the researchers found that 23 percent said they felt that the ACA is extremely important, but only four percent selected it as the most important issue in this election. Across all issues included in the poll, terrorism and the economy/jobs are the top two issues for voters in the upcoming election.

(Source: Bianca DiJulio, Jamie Firth, Ashley Kirzinger, and Mollyann Brodie, Kaiser Family Foundation, “Kaiser Health Tracking Poll: January 2016,” January 28, 2016)

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CBO raises Medicaid enrollment estimate and lowers that for exchanges in latest budget and economic outlook

Earlier this week, the Congressional Budget Office (CBO) published its Budget and Economic Outlook for 2016-2026. The latest report includes new projections for health care spending in several state and federal programs:

Health insurance exchanges: CBO projects that in 2016, 13 million individuals will be insured through the health insurance exchanges. Eleven million of those enrollees are projected to receive premium tax credits. This is a significant change from the CBO’s March 2015 baseline report, which projected that 21 million would be covered through the exchanges by 2016. CBO says the new projection takes into account lower numbers of unsubsidized enrollees entering the marketplace.

Medicaid: CBO projects 2016 Medicaid spending to increase by 9 percent over last year as the program is expected to enroll an additional 1 million people every month. CBO increased its 2025 Medicaid enrollment projection from 11.5 to 14.5 million enrollees. This is expected to increase spending from $97 to $114 billion over that time period.

Medicare: CBO projects that the Hospital Insurance (HI) trust fund will be exhausted by 2026. Although the fund’s non-interest income is projected to increase annually by five percent, from $285 billion this year to $450 billion in 2026, expenditures are expected to grow faster at six percent each year. If Congress does not pass laws to reduce spending or increase revenues, the shortfall is projected to rise to $54 billion in 2025 before the fund is drained.

Spending deal reached in Congress: At the end of last year, Congress reached a spending deal that delayed the Cadillac tax and suspended the tax on health plans and medical devices (see the December 22, 2015 Health Care Current). CBO projects that these delays could reduce federal revenue by $256 billion over the next 10 years.

Budget deficit: Finally, the report estimates that the federal budget deficit will increase for the first time since 2009 in 2016, growing to an estimated $544 billion (a $105 billion increase from 2015). CBO expects the economy to expand from increases in demand for goods and services through 2016 and 2017. The unemployment rate is projected to fall to 4.5 percent in 2016, offsetting any reduced labor force participation resulting from ACA policy changes.

(Source: Congressional Budget Office, “The Budget and Economic Outlook: 2016 to 2026,” January 2016)

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On the Hill & In the Courts

New ACO benchmarking methodology would incorporate regional comparisons

Last week, CMS published a proposed rule to change the way it measures performance (financial and quality) for accountable care organizations (ACOs) in the Medicare Shared Savings Program (MSSP). The overarching goal is to move away from measuring MSSP ACOs based solely on national spending and to add in regional comparisons.

CMS will phase the changes to the benchmarking methodology in slowly. Beginning next year, the new benchmarking methodology will be available to MSSP ACOs that renew three-year contracts.

CMS also proposed ways to allow ACOs in the program to more easily transition from Track 1, the bonus-only track, into higher risk-sharing agreements that include opportunities for bonuses and penalties. CMS also would allow ACOs to add a fourth year onto their current three-year agreement, deferring the timeline for signing an agreement in one of the higher-risk tracks.

Analysis: As explained in Medicare accountable care organizations: Balancing risk and opportunity, benchmarking is the first step that CMS takes to determine a health care organization’s shared savings or losses. At the end of each year, CMS compares the organization’s costs to the benchmark to determine whether or not it has saved money and, as a result, will receive bonuses or penalties, as appropriate. CMS establishes MSSP benchmarks before the start of each agreement period using data from three historical years.

Many ACOs have said that the current methodology for benchmarking penalizes organizations that already had efficient operations before they entered the MSSP. Because bonuses are calculated based on savings achieved by the ACO, those that were already high performing (and thus had lower savings) received lower payments or did not reach savings benchmarks as a result. At the same time, other health care stakeholders have said that the CMS ACO programs have been slow move the health care cost needle because so few organizations have agreed to accept downside risk. Finally, ACOs that operate in parts of the country where spending patterns are more efficient are not doing as well, so adding regional data into the methodology may help correct for this potential bias. The proposal aims to address all of these issues.

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Final Medicaid outpatient drug rule defines AMP and Best Price for the drug rebate program

In late January, CMS finalized the Medicaid covered outpatient drugs rule, which addresses key areas of Medicaid drug reimbursement and finalizes changes made by the ACA to the Medicaid Drug Rebate Program.

Notable provisions include:

Analysis: The rule comes during a time of increasing focus on drug prices and their contribution to total health care spending in the US. CMS estimated that the changes will save the federal government and states $2.7 billion over five years. It may also improve beneficiary access to costly drugs.

As discussed in the recent CIS by Deloitte post, Initial takeaways on the AMP final rule, the effective date of the rule is generally April 1, 2016. This gives manufacturers a short implementation timeframe: only 71 days until April 1, 2016 and only 100 days until the April 30, 2016 reporting deadline for AMP, Best Price, and related data.

The new rule could have significant implications for drug manufacturers. For example, CMS estimates that it could cost companies more than $300 million to make updates to their pricing systems and for other start-up costs. The new definitions for AMP and Best Price will also require manufacturers to pay out billions more in rebates, as well.

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Vermont publishes all-payer proposal draft

Under Vermont’s proposed “all-payer” demonstration with the Center for Medicare and Medicaid Innovation (CMMI) at CMS, the state would set reimbursement rates for hospitals and physicians for Medicare, Medicaid, and private insurance and cap health care cost growth for five years. The waiver framework is a population-based approach similar to CMS' Next Generation ACO model. If it is approved, Vermont would be the first state to have an all-payer demonstration that applies to all health care providers in the state (Maryland’s demonstration only applies to hospitals).

Last week Vermont Governor, Peter Shumlin, released the draft proposal outlining how the state would keep annual health care spending at 3.5 percent growth per capita and reduce cost growth for Medicare by 0.2 percent relative to the national growth trend. This spending goal is roughly one percent higher than Vermont’s economic growth of roughly 2.5 percent.

Vermont hopes to move Medicaid, Medicare, and private health plans away from fee-for-service to pay doctors and hospitals a set payment for each patient attributed to them. This may help limit unnecessary tests and procedures and enhance care coordination. The waiver would not apply to federal employees, Tri-Care and other military coverage, or self-insured employers.

The Vermont Medical Society, the trade group representing physicians, said it opposes the proposal. Noting the state’s already low per-capita spending in Medicare ($8,719 per capita relative to the national average of $10,635 per capita), the group said that, compounded with a proposed new tax, this proposal, could limit enrollees' access to care.

The terms of the proposal are still in draft form and under negotiation with CMS. If enacted, the demonstration would run from 2017 to 2021.

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Around the Country

CHIME announces call for health IT innovators through patient matching challenge

The College of Healthcare Information Management Executives (CHIME) is launching a global challenge to capture the best ideas for accurately matching patients to their electronic medical records. Patient matching has the potential to prevent medical errors and reduce health care costs. Through the National Patient ID Challenge, CHIME, the professional association of hospital chief information officers, will award one million dollars to the team who can create a patient ID that is private, secure, and safe. CHIME is collaborating with HeroX, an online platform to promote technology challenges, to launch the challenge.

CHIME will announce the winner of the challenge early next year. To win, the proposal will need to accomplish the following:

  • Easily and quickly identify patients
  • Achieve 100 percent accuracy in patient identification
  • Protect patients’ privacy and identities
  • Achieve adoption by the vast majority of patients, providers, insurers, and other stakeholders
  • Scale to handle all patients in the US

In 1996, the Health Insurance Portability and Accountability Act (HIPAA) called for national patient identifiers (NPI), but privacy advocates voiced concerns about privacy and security. As a result, Congress banned federal funding to create NPIs until these issues were resolved. Some advocates are pushing to reverse that ban in next year’s budget cycle to enable the Military Health System, the Veterans Health Administration, and CMS to use any solution identified by the challenge.

Analysis: Health information technology experts envision NPIs working much like a license plate or Social Security number. NPIs could allow physicians to access and enter patient information quickly, with the potential to prevent medical error. NPIs could also improve data analytics and align with the goals of precision medicine – to help with appropriate dosing and ensuring the right patient gets the right treatment at the right time. While many stakeholders believe giving every American a unique patient identifier may help reduce errors and medical fraud and protect privacy, some fear organizations could collect medical information about patients without their consent.

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Breaking Boundaries

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