Health Care Current: February 23, 2016

The evolving state of innovation: Are 1332 waivers leading the way?

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.

The evolving state of innovation: Are 1332 waivers leading the way?

The word “innovation” is commonly used these days in reference to consumer and technology trends, retail, business, and even health care. One place you may not immediately think of innovation is in reference to government – especially when it comes to legislation and policy.

However, our state governments have always been incubators of innovation. And, beginning in 2016 they have a new set of tools to develop new models in health care. A trailing, wildcard provision of the Affordable Care Act (ACA) is now beginning to get a great deal of attention: Section 1332 state innovation waivers. Originally envisioned as a way for states to achieve ACA coverage goals by pursuing alternative approaches that might better suit their specific state health care market needs, the waiver provision came about during congressional negotiations on the ACA.

As explained in a recent Deloitte report, State health coverage innovation and Section 1332 waivers, through the 1332 waiver program – perhaps in conjunction with Medicaid waivers under Section 1115 – states have numerous options for revamping their current approaches to providing health coverage to individuals and families.

While the 1332 waiver is a new vehicle for innovation, states are also increasingly leveraging Section 1115 waivers and managed care programs to innovate Medicaid programs. Neither managed care nor the 1115 waiver are new tools for states. Thirty-nine states operate 1115 waivers, and about half of all Medicaid members receive coverage through managed care. What is new is that states are expanding how they use these tools to drive innovation and enhance transparency, quality and access, all while managing costs. For example, several states are using 1115 waivers to push provider-based quality incentive programs and revamping their managed care programs to measure and improve health outcomes, create new risk models and incentive programs, and effectively manage state expenditures.

Waiver programs not only give states the funding, policy innovation, and, in fact, impetus to reconsider their access and coverage equation, but they may also be looked at as a way for parties that traditionally disagree to compromise on fundamental aspects of the ACA. Newt Gingrich and Tom Daschle illuminated this argument in an op-ed published in The Washington Post recently, explaining that states could look to the 1332 waivers as a vehicle to reach a bipartisan agreement on key components of the ACA. Further, they explain that the waivers are flexible enough to accomplish goals of both sides, while continuing to expand coverage, decrease costs, and improve quality.1 And this is true – these waivers could allow states to emphasize the market characteristics that are unique to that state.

Many states are formulating plans and beginning discussions around what considerations they need to make to move forward with a waiver. However, this is complicated by the approaching presidential election. Beginning in 2017, an administration other than the Obama Administration will have stewardship over the ACA and its various provisions, including Section 1332 waivers. Despite this uncertainty, many states are embracing the opportunity and moving forward with a careful approach, monitoring regulations and guidance, and beginning discussions with their stakeholders.

For states that are interested in exploring a Section 1332 waiver, there is a lot of work to be done and many technological and operational factors to navigate. States that begin this process now will be better poised to take innovation into their own hands and take advantage of the opportunity that lies before them.

Email | LinkedIn | Twitter

PS – For more information, contact Russ Pederson, Principal, Deloitte Consulting LLP, or Jeff Burke, Senior Manager, Deloitte Consulting LLP,

Source: 1 Newt Gingrich and Tom Daschle, The Washington Post, “How to make both parties happy through the Affordable Care Act,” February 3, 2016

Back to top

My Take

By Mark Price, Principal and US Public Sector Leader, Deloitte Consulting LLP


Subscribe to receive the Health Care Current via email

Poll finds that consumers and physicians have mixed feelings about genetic testing

While most people say that they would be interested in taking a genetic test to detect their risk for developing certain diseases, very few Americans (6 percent) have, according to a recent STAT-Harvard poll. Another poll found that many physicians (73 percent) have never recommended genetic testing. More than three-quarters of physicians prefer to use family history over genomic sequencing to diagnose and treat patients.

Policymakers and other stakeholders are interested in the potential for precision medicine to leverage genetic information in patient care, and many initiatives aim to further advancements in this area. However, the results from these two polls suggest that patients and physicians may not be convinced yet:

Analysis: As explained in The next frontier of patient-centered care, the National Institutes of Health (NIH) began 2016 with a task to move the Precision Medicine Initiative Cohort Program (PMI-CP) ahead by recruiting one million or more Americans to be part of a research cohort. Many say that the initiative has the potential to expand our knowledge of precision medicine approaches that can benefit the nation. And, it may change the way we prevent and treat many of the diseases that today have no cure.

However, the initiative’s success will rely on active and engaged volunteers, as well as strong engagement from health plans, electronic health records vendors, and other stakeholders. The NIH will need to communicate what it is, what potential it has to improve health outcomes, and what the expectations are from each stakeholder. Consumers and providers will be on the front lines of these efforts, and researchers, non-profit advocacy groups, government entities, policymakers, health plans, the life sciences industry, and technology companies will have significant roles. Evidence from this poll suggests that the NIH still has to do more to convince stakeholders about the value of this initiative.

(Source: Sharon Begley, STAT, “Consumers aren’t wild about genetic testing – nor are doctors,” February 12, 2016)

Back to top

Implementation & Adoption

Health Leadership Council offers recommendations for comprehensive care planning, interoperability, and health information flow to support health care transformation

Last week, the Healthcare Leadership Council (HLC), a coalition of chief executives from across the health care industry, released a report that outlines results from its National Dialogue for Healthcare Innovation initiative. The report, produced in partnership with NORC at the University of Chicago, synthesizes thinking from providers, health plans, drug and device manufacturers, patient advocacy organizations, federal government, and academic health policy experts. The goal of the initiative has been to identify legislative, regulatory, or voluntary actions that can be taken by health system stakeholders to enhance the quality, cost-efficiency, and sustainability of health care.

The report recommends:

  • Comprehensive care planning: The participants agreed to three principles that could be the foundation for government reimbursement of targeted care coordination activities. Comprehensive care planning should: 1) look at individual and community level issues; 2) reflect co-morbidities and other complex care needs; and 3) consider the entire continuum of care.
  • Medication therapy management (MTM): The group says that current incentives in Medicare’s program are misaligned and have prevented the MTM program from achieving results. It suggests that the Enhanced MTM model should be accelerated and expanded to all Medicare Part D members. It also encourages CMS to include health plans in developing quality measures, educate providers and pharmacies on the Enhanced MTM model, and allow health plans and pharmaceutical manufacturers to collaborate.
  • Interoperability: Less than two-thirds of hospitals can exchange information with providers outside of their organization. The group says that the private sector should drive interoperability initiatives, with a limited role for government. All of the organizations that are involved in the initiative have called for a December 31, 2018 deadline for interoperability.
  • Federal anti-kickback and physician self-referral laws: Many stakeholders have said that federal fraud and abuse laws inhibit greater adoption of value-based care models. The report suggests many regulatory changes to these two laws, including creating a waiver for certain accountable care organizations.
  • Health information flow improvements: The group called for a national health privacy standard to reduce the variation in state laws and regulations.

(Source: HLC and NORC at the University of Chicago, “Viable Solutions: Six Steps to Transform Healthcare Now,” February 17, 2016)

Back to top

AHRQ: 25.9 percent of adults drive more than half of health care expenditures

An Agency for Healthcare Research and Quality (AHRQ) analysis of the Medical Expenditure Panel Survey (MEPS) results found that 25.9 percent of US adults over age 18 have two or more chronic conditions. Health care expenditures for this group account for 57 percent of all US health care expenditures.

As expected, the older individuals get, the more chronic conditions they have. In addition, adults with four or more chronic conditions reported the highest average expenditures per person.

However, the results differ by race/ethnicity for many of the age groups:

Background: The estimates are derived from the MEPS 2012 Full Year Consolidated File and the 2012 Medical Conditions File. A person was considered to have multiple chronic conditions if they had two or more treated conditions from a list of 20 conditions during the year.

(Source: Frances M. Chevarley, AHRQ, “Health Expenditures for Adults by Number of Treated Chronic Conditions, Race/Ethnicity, and Age, 2012,” December 2015)

Back to top

Emergency department use has not declined despite increases in insurance coverage

Approximately one-in-five US adults visited the emergency department (ED) in 2014 according to the US Centers for Disease Control and Prevention (CDC). Using data from a national survey, the CDC found that 18 percent of American adults said they visited the ED at least once in 2014, and about 6.5 percent said they had two or more visits to the ED.

The CDC study provides insights into people’s reasons for visiting the ED, as well use patterns by demographics and type of insurance coverage. Some highlights include:

  • Most (77 percent) individuals said they went to the ED because they had a serious medical condition. Rates differed by insurance coverage, however; uninsured adults were less likely than adults with private coverage or Medicaid to cite seriousness of the medical problem as the reason for the visit.
  • Approximately 12 percent of surveyed individuals said that their doctor’s office or clinic was not open when they went to the ED. 
  • Only 7 percent of individuals said they came to the ED because they did not have access to other providers. The percentage was significantly higher for uninsured than for those with private coverage or Medicaid.

Analysis: From 2013 to 2014, approximately 7.9 million adults gained health care coverage, yet ED use remained relatively unchanged. Mitch Morris, MD, Vice Chairman, National Health Care Providers Lead, Deloitte LLP, highlighted in Old habits die hard: Accommodating the newly insured that how individuals access care can be difficult to change. People often continue acting on old habits, seeking care where it is familiar to them, until they learn about other options. Health insurance does not equal health literacy, so stakeholders should now build on coverage expansion and better educate patients to access care in the most appropriate settings.

(Source: Renee M. Gindi et al., CDC, “Reasons for Emergency Room Use Among US Adults Aged 18-64: National Health Interview Survey, 2013 and 2014,” February 18, 2016)

Back to top

Study: EHRs help catch undiagnosed cases of diabetes

Analysis of electronic health records (EHRs) may improve patient diagnosis and medical care, according to a recent study. A team of researchers at UCLA recently developed an algorithm to identify undiagnosed Type 2 diabetes patients using data in EHRs. The findings were published in the Journal of Biomedical Informatics and showed that the algorithm could identify 400,000 undiagnosed patients with Type 2 diabetes nationwide.

According to their findings, factors that can increase the risk of Type 2 diabetes include:

  • Having sexual and gender identity disorders – increased risk by 130 percent
  • Having viral infections and chlamydia – increased risk by 82 percent
  • A history of intestinal infections, including colitis, enteritis, and gastroenteritis – increased risk by 88 percent

A history of migraines and use of anti-anxiety and anti-seizure medications decreased an individual’s risk.

Clinicians typically rely on a limited set of factors, including blood pressure, BMI, age, and gender, to determine which patients receive diabetes screening. This study found that when the algorithm was applied to the larger set of clinical information in EHRs, it outperformed the traditional method of identifying patients with and without diabetes.

The researchers used half of the electronic records to develop an algorithm that they then used to test and identify undiagnosed patients with Type 2 diabetes in the other half of the records. Additional research that investigates the underlying factors that lead to higher diabetes risks may be needed in the future.

(Source: Ariana Anderson, Wesley Kerr, April Thames, Tong Li, Jiayang Xiao, & Mark S. Cohen, Journal of Biomedical Informatics, “Electronic health record phenotyping improves detection and screening of type 2 diabetes in the general United States population: A cross-sectional, unselected, retrospective study,” 2016)

Back to top

CMS proposes to increase Medicare Advantage rates and make changes to the risk adjustment model and Star Ratings program

Last Friday, the US Centers for Medicare and Medicaid Services (CMS) proposed to raise rates for Medicare Advantage (MA) plans by 1.35 percent on average.

CMS proposed revisions to other aspects of payment and policies affecting MA plans:

  • Risk adjustment model changes: CMS proposes to change the CMS-Hierarchical Condition Category (HCC) risk adjustment model to more precisely predict costs for health plans that enroll larger populations of dual eligibles. The model would reflect whether a beneficiary had partial dual benefits, full dual benefits, or was not dual eligible. 
  • Encounter data: CMS proposes shifting further away from the Risk Adjustment Processing System (RAPS) toward using encounter data from MA plans to calculate risk scores to make the risk scores more accurate. In 2017, CMS would blend the two even more, using 50 percent RAPS-based scores and 50 percent encounter data-based scores. 
  • Star Ratings: CMS proposes to change the Star Ratings program to account for MA plans that enroll large numbers of dual eligible enrollees. Many health plans have said that the current system disadvantages plans with large numbers of dual eligible enrollees. CMS research conducted last year confirmed this, finding that health plans that enroll more low-income and disabled individuals score worse on certain measures in the star rating system. The Medicare Payment Advisory Commission (MedPAC) has also found that plans with more young, disabled enrollees have lower ratings. 
  • Drug utilization: CMS proposes to allow health plans flexibility in their drug benefit design to discourage waste in the system. It also proposes policies aimed at reducing overutilization of opioids.

Background: MA enrollment has increased significantly in recent years, growing by 50 percent since the ACA passed in 2010. Today, more than 17 million individuals are in MA, representing nearly one-third of all Medicare beneficiaries. Most MA plans (71 percent) have four- or five-star quality ratings.

Federal policies, initiatives, and regulations such as those announced in the notice can influence MA plans’ VBC strategies. According to Deloitte’s 2015 Study of MA Health Plans and Providers, most health plans and providers are experimenting with value-based care in MA. Aspects of the MA program that help health plans optimize revenue (e.g., quality bonuses and risk adjustment) are important drivers of VBC strategy in MA. Changes to the quality bonus program, Star Ratings system, and risk-adjustment model will likely continue to pose great regulatory challenges and opportunities for health plans.

Back to top

On the Hill & In the Courts

New CMS and AHIP core quality measures for physicians aim to align public and private efforts

Last week, CMS and America’s Health Insurance Plans (AHIP) released a set of core quality measures for physicians. The measures are a product of the Core Quality Measures Collaborative, an initiative involving health plans, providers, CMS, and consumers. The goal of the common system of quality measures is to reduce administrative burden and reporting complexity for physicians while improving quality of care for patients.

Today, most health plans use their own quality measures to assess physician performance, so physicians must report numerous and sometimes inconsistent measures, often causing confusion and frustration. CMS sees the initiative and the core quality measures as a critical step to helping physicians focus on proven quality measures and driving payment systems toward paying for value rather than volume.

The core quality measures are designed to be meaningful to consumers, physicians, and payers (health plans as well as the federal government). The alignment of these core measures across public and private health insurers may help to:

The core quality measures are in the following seven sets: 1) accountable care organizations, patient-centered medical homes (PCMH), and primary care; 2) cardiology; 3) gastroenterology; 4) HIV and hepatitis C; 5) medical oncology; 6) obstetrics and gynecology; and 7) orthopedics. CMS uses measures from each of these sets. It plans to add new core measures across various quality programs as appropriate, while eliminating others that prove to be redundant or unreliable.

The Collaborative is also working with the Health Care Payment Learning and Action Network to align the measures with work going into the Draft Measure Development plan under the Medicare Access and CHIP Reauthorization Act of 2015.

Back to top

Alabama's Section 1115 waiver approval moves the state toward Medicaid managed care

CMS has approved Alabama's Medicaid 1115 waiver, which will allow the Medicaid program to contract with regional care organizations (RCOs) to provide services to most of the state’s Medicaid beneficiaries at a set, monthly fee. Under the waiver agreement, the federal government will provide $328 million over the first three years to pay for transitioning the program from the current fee-for-service model to RCOs. After that, the state could qualify for up to an additional $420 million in federal funding over five years to further support the transformation.

In 2013, the state legislature approved Senate Bill 340, which began the state’s transition away from fee-for-service and toward a managed care model. The law calls for the Alabama Medicaid Agency to contract with newly established, non-profit RCOs, which would provide services to patients at set costs. The state and stakeholders began work with CMS to apply for an 1115 waiver and develop a system that would restrain costs and improve care.

The Governor will take 30 days to finalize the agreement with CMS and then work with the legislature to ensure all of the requirements are met. The five-year agreement with CMS will begin April 1, 2016.

Background: Section 1115 waivers under the Social Security Act allow states to put in place novel experimental, pilot, or demonstration projects, while still meeting Medicaid or CHIP program objectives. More than half of states use some type of managed care model for their Medicaid programs.

Back to top

Around the Country

Minnesota’s health care home initiative saved Medicaid and Medicare $1 billion over five years

Clinics participating in a health care home initiative reduced costs and outperformed non-participating clinics on quality and cost measures, according to a recent University of Minnesota report. In 2008, Minnesota offered additional funding to clinics that became certified health care homes (HCH), where clinics provide primary and comprehensive care for patients including preventive care, acute and chronic condition care, and end-of-life care, when appropriate.

Using Medicare and Medicaid claims data, the report evaluated differences in cost, utilization, and disparities between health care homes and regular clinics from 2010 through 2014. The researchers found:

Background: When Minnesota authorized the use of health homes to improve quality and reduce costs in 2008, policy analysts were discussing the concept of PCMHs at the national level as one approach to improving primary care. Today many groups are experimenting with PCMHs. At the time that Minnesota began testing health home models, there were relatively few PCMH programs.

(Source: Douglas Wholey et al., “Evaluation of the State of Minnesota’s Health Care Homes Initiative: Evaluation Report for Years 2010-2014,” Submitted to the Minnesota Department of Health by the University of Minnesota, December 2015)

Back to top


Social media may shed light on medical errors

Many health care researchers are interested in examining how social media can improve health outcomes. A study published in last month’s Journal of Patient Safety shows that social media has the potential to help providers collect data and gain patient perspectives on medical errors.

The research team examined data on tweets that matched a highly relevant set of phrases related to patient safety and medical errors over a seven month period. The team collected about 1,000 publicly accessible tweets and found that 83 percent identified the type of medical error:

  • 26 percent were procedural errors
  • 23 percent were medication errors
  • 23 percent were diagnostic errors
  • 14 percent were surgical errors

The team found that of the 84 percent of tweets that identified a source of the tweet, approximately 90 percent were by the patient and approximately 9 percent by a family member. The results suggest that social media can be a data source for understanding the patient perspective on medical errors. Further research is needed to assess use of social media to provide opportunity for health systems and providers to identify and communicate with patients regarding medical errors.

Analysis: Social media may be a rich source of health care information that could be valuable to patients, researchers, policy makers, and hospital administrators. A 2015 study in BMJ Quality and Safety showed that sentiment on Twitter was not associated with Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) ratings, but higher sentiment scores on Twitter were associated with lower 30-day readmission rates.

Studies have shown mixed evidence regarding the link between patient experience and quality of care. This study on social media and medical errors suggests that social media could help fill in the gaps in measuring quality. Free communication between patients and physicians can improve medication adherence, reduce errors, and improve outcomes. Better patient experience also can support shared-decision making. Previous research has shown that many patients are willing to share their social media data related to their experience with the health care system.

(Sources: Atul Nakhasi et al, “The potential of Twitter as a data source for patient safety, Journal of Patient Safety, January 11, 2016; Jared B. Hawkins et al, “Measuring patient-perceived quality of care in US hospitals using Twitter,” BMJ Quality and Safety, October 13, 2015)

Back to top

Breaking Boundaries

Did you find this useful?