Health Care Current: February 24, 2015

A new chapter in value-based care

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.

A new chapter in value-based care

In early February, the U.S. Department of Health and Human Services (HHS) announced that it will accelerate the shift toward payments based on value over volume (see the February 3, 2015 Health Care Current). HHS aims to have 90 percent of all payments in the traditional program tied to quality and value and 50 percent of all Medicare payments tied to quality or value through alternative payment models such as accountable care organizations (ACO) by 2018.

In the same week, a group of health systems, health plans, consumer groups and policy experts announced the formation of the Health Care Transformation Task Force. The Task Force aims to have 75 percent of their business based on value by 2020.

Maybe it’s just me, but I think the road ahead could be challenging. Not impossible, but challenging.

We’ve identified some of the barriers:

This last point is particularly salient to many health systems. While some payers are actively moving forward and testing new payment models in the value-based care space, others remain firmly rooted in their fee-for-service (FFS) ways. The road ahead could be especially difficult for health care providers that are trying to straddle the two canoes.

But, most agree that value-based care is going to happen. For many physicians, the current volume-based care mentality is going to be replaced by the sense that the better you do, the better your patients do and the more the population will benefit. That is going to be something worth paying for.

These ambitious goals represent a signal from the administration that the federal government may be moving more quickly than some had anticipated. This pace is creating some anxiety around whether the policies the government will use to make this move will be fair, systematic and flexible enough for health systems to respond without going under and patients to have even better outcomes than before.

How can it be done?

Pay attention earlier: Incentives in our current system have helped build a culture of fixing patients only when they are broken. Now, that culture is shifting. More and more, physicians are realizing that the culture needs to be one of helping patients maintain their health and catching problems early so the solution is minimally invasive.

Widen the focus on the patient: In the past, a doctor may have focused only on solving a very narrow problem. If a patient’s knee hurt, then a knee replacement was ordered to alleviate the pain. And the same was true for outcomes: If a patient had surgery, success was getting them discharged from the hospital in two days. Now, the scope has widened. That patient may be focused on the pain and also the fact that they cannot play golf. Now the desirable outcome is not only that they are discharged within a reasonable time, but that they can also return to the golf course within six months of their surgery.

Purchase the right tools: With the new dynamic of outcomes-focused care, organizations should invest in analytics and big data and the information technology to support them. You cannot pay for value if you can’t measure it. I worry that it could be very difficult to measure outcomes when so many patients – especially those on Medicare – have complex co-morbidities that muddy the waters. This reality may lead us back to full capitation where providers assume the full risk of a population sooner rather than later.

Look across the whole value chain: Care needs to become team-based and interdisciplinary. Health systems and physicians will need to look across the health care ecosystem for opportunities to help improve care and reduce spending. The typical knee replacement involves more than a surgeon. It also involves radiologists, anesthesiologists, occupational therapists, medical technology companies and more.

High costs and misaligned incentives are not a uniquely American issue. You might think that other countries are doing this better than we are in the U.S. It is true that many countries have national health programs. But, many do not focus on outcomes, and paying for value is not common. Having worked with health systems in many other developed economies in the past year, it is clear that population health management has not taken hold across the globe the way some may think it has.

There is a great deal of anxiety around how fast and how far value-based care will evolve. But some things won’t change: people will still get sick and they will still need health care. We have a shortage of health professionals that will probably get worse as the population ages. Even as the incentives in health care change, there always will be patients, work and opportunities for nurses and physicians.

Health care organizations looking to deliver on the promise of value-based care can begin to position themselves to win in the market now. Organizations that learn to manage risk, develop core competencies around the new provider-driven care management model, understand and act on data and define a strategic vision and business model with collaboration partners could be in a better position to successfully navigate this transformation.

The value-based care story is still unfolding. But, through HHS and private sector market forces, there is now an opportunity to join in and help write the ending.

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My Take

By Mitch Morris, M.D., Vice Chairman and National Health Care Provider Lead, Deloitte LLP


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11.4 million enroll in health insurance marketplace plans

HHS exceeded its goal for 2015 enrollment in the health insurance marketplaces. Last week, HHS Secretary Burwell told President Obama that enrollment in plans offered through the marketplaces reached approximately 11.4 million as of the February 15 deadline for enrollment. This includes 8.6 million individuals who enrolled through the federally facilitated marketplaces (FFM):

More than 1 million consumers selected plans offered in FFMs in week 13. Though the regular open enrollment period closed, the total enrollment number is likely to grow, but then may decline over the year. The administration allowed individuals who started their applications but did not complete them by the deadline to finish them over the weekend. Many analysts predict that enrollment numbers will start to fall once many individuals get the bill for their first month’s premiums and each month thereafter.

On Friday, CMS announced a six-week special open enrollment period this spring. The period will last from March 15 to April 30. It is mainly for individuals who learn they must pay for not having coverage when they file tax returns. CMS officials stressed that they only intend to hold this special enrollment period this year. While this announcement applies only to the FFMs, states are creating similar opportunities for enrollment. For example, Washington state extended its enrollment deadline to April 17 and Minnesota will have a special enrollment period from March 1 to April 30.

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Implementation & Adoption

HHS issues final rule on benefit and payment parameters for 2016

Late last Friday, HHS published the final rule that outlines changes and additional implementation of major provisions of the health insurance marketplaces. The rule covers a broad set of topics and finalizes the following:

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CMS issues proposed Medicare Advantage and Part D 2016 rates and call letter

Last Friday, CMS proposed changes to Medicare Advantage (MA) and Part D in the 2016 call letter. CMS proposed to cut MA rates by 0.9 percent in 2016. However, CMS projects growth in plans’ risk scores would make the overall rate change a net growth of 1.05 percent. This is higher than the final rate changes for 2015, which amounted to a net increase of 0.4 percent. CMS also proposed revisions to other areas of the program:

  • Value-based contracting to reduce costs and improve health outcomes: Consistent with CMS’s efforts in FFS Medicare, the agency will ask plans to share information about their adoption of alternative payment models. 
  • Star rating system revisions: CMS is exploring creating an integrated star rating system for plans that enroll dual eligibles in the Financial Alignment Initiative. The system would consider special needs of the dual eligible population and judge health plans’ performance against those measures. Last year, the National Association of Medicaid Directors commented in a letter to CMS that plans that serve duals have lower MA and Part D star rating scores because of the challenges in providing care to this population (see the December 9, 2014 Health Care Current). CMS also proposes adding to the 2016 star ratings system measures of:
    • Breast cancer screenings
    • Call center responsiveness
    • Issues found during Medicare’s review of health plans, including whether the agency found access problems
    • The percentage of people who complete a medication therapy management program
  • Contracting with plans that have fewer than three stars: CMS terminates contracts with organizations that fail to achieve at least three stars for three years in a row. This year, CMS has changed the timeline to reduce the impact on beneficiaries enrolled in plans that must leave MA. 
  • In-home assessment process enhancements: MA plans perform annual health risk assessments, usually through questionnaires sent to enrollees. CMS has seen an increase in in-home health risk assessments. CMS alluded to concerns that health plans are using in-home assessments to collect diagnoses, which in turn can increase risk adjustment scores and payments. In the proposal, CMS encourages health plans to use best practices for performing in-home assessments, making sure that they are a tool for care management and improvement. During 2015, CMS will also track and analyze care provided after in-home visits. 
  • Provider network information requirements: CMS requires MA organizations to establish and maintain an updated provider directory. The call letter outlined what CMS considers to be an effective process, including regular contact with providers to update their lists and protocol for enrollees that are denied care from any provider on the plan’s directory. CMS will monitor compliance with these regulations. 
  • How CMS will work with health plans that offer access to preferred cost-sharing pharmacies (PCSP): CMS reviewed beneficiaries’ access to PCSPs to find that beneficiaries in all areas face access problems, but the problems are most widespread among people who reside in urban areas. CMS is not proposing standards for PCSP access, but outlined two steps it will take to help beneficiaries access up-to-date information. CMS will publish information for beneficiaries so they have more information about plans with preferred cost-sharing benefit structures and will work with plans that have too few PCSPs or prevent them from marketing preferred cost-sharing plans in those areas.

The final rate announcement and call letter will be published on April 6, 2015.

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EMR adoption rates higher in rural practices

Electronic medical record (EMR) adoption in 2012 was higher in rural practices than in urban practices, according to a study published in the Journal of the American Medical Informatics Association. This contrasts with earlier adoption trends. The researchers analyzed survey data from more than one million physicians in more than 270,000 office sites to find:

  • Overall, rural practices had a 56 percent EMR adoption rate compared with 49 percent in urban practices
  • The difference was observed in 29 states
  • Only two states had higher adoption rates in urban areas than in rural areas
  • Results did not vary based on specialty or practice size; rural primary care practices and most specialties had higher adoption rates than urban ones

The shift may be due to outreach and incentive efforts from the federal government through Regional Extension Centers (RECs) developed by the Office of the National Coordinator for Health Information Technology (ONC). RECs aim to assist physicians with EMR adoption and are focused on underserved areas and areas with high uninsured rates.

(Source: Whitacre, Brian E., Journal of the American Medical Informatics Association, “Rural EMR adoption rates overtake those in urban areas”, February 2015)

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FDA approved more orphan drugs in 2014 than prior years

The FDA Office of Orphan Products Development (OOPD) approved more orphan drugs in 2014 than any year prior, according to analysis done by the FDA Law Blog. That year, OOPD approved 49 orphan drugs, 53 percent more than in 2013. Orphan drugs are designed to treat rare diseases. The definition of rare is a two-part test: 1) The condition the drug treats must affect fewer than 200,000 people in the U.S. or 2) If more than 200,000 people have the condition, a drug can be considered orphan if the drug manufacturer is not expected to recover the costs of developing and marketing a treatment drug. The FDA’s Orphan Drug Designations and Approvals database tracks orphan drugs in the U.S.

Since 1983, FDA has approved 511 drugs under the Orphan Drug policy. The National Institutes for Health and the National Organization for Rare Disorders lists approximately 6,800 rare diseases; they collectively affect nearly one in 10 Americans.

Analysis: The Orphan Drug Act has been a model for more recent legislation. For example, the draft discussion guide for the 21st Century Cures initiative included provisions related to dormant therapies. Dormant therapies are drugs and biological products that meet unmet medical needs. The provisions of the 21st Century Cures bill were pulled from Senator Orrin Hatch’s Dormant Therapies Act of 2014. They would create a protection period of 15 years for drugs and biological products that are approved as dormant therapies. For more information about the 21st Century Cures draft discussion guide, see the February 3, 2015 Health Care Current.

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On the Hill & In the Courts

CMS defers reconciling cost-sharing subsidies

CMS announced that it will wait until April 30, 2016 to reconcile payments health plans made to consumers in 2014 for cost-sharing subsidies in the marketplaces. Originally, CMS was going to reconcile the 2014 payment reductions health plans made to consumers with payments they received from the federal government this year (in April 2015).

The ACA allows health plans to select two methods to calculate the payments they make to consumers to make up for some of the money spent on cost sharing:

  • Standard methodology: Health plans adjudicate beneficiaries’ claims for the year through standard plan cost-sharing parameters, which CMS calls the “standard methodology.” This approach estimates actual costs more accurately.
  • Simplified methodology: Health plans use a formula based on the actuarial value (AV) estimates of the cost-sharing assistance provided to calculate the average cost-sharing subsidy. This approach is less accurate than the standard methodology. In addition, health plans that chose the simplified method and did not have sufficient enrollment (fewer than 12,000 enrollees) in a qualified health plan (QHP) are required to use the AV methodology.

Many health plans that chose the simplified methodology did not reach sufficient enrollment in their QHPs. Because these health plans are required to use the AV methodology, they could have inaccurate estimates of the cost-sharing reductions they gave to enrollees. According to CMS, the new date will give insurers more time to gather information. CMS will also allow health plans to switch from the simplified to the standard methodology.

Background: The ACA provided cost-sharing subsidies for certain consumers in health care exchanges in addition to premium tax credits. The cost-sharing subsidies reduce out-of-pocket spending for low-income consumers in marketplace plans. Generally, this form of assistance is available to consumers who earn too much to qualify for Medicaid but earn less than 250 percent of the federal poverty level (FPL, about $29,425 for an individual). The assistance lowers certain cost-sharing measures (e.g., deductibles) in silver-tier plans sold on the exchanges. Only consumers that elect silver plans can receive the cost-sharing subsidy.

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CMS updates Nursing Home Compare 5-Star Quality Rating System

Last Friday, CMS announced updates to the 5-Star Quality Rating System. The rating system provides nursing home quality scores for the Nursing Home Compare website. CMS aims to strengthen the online resource to help residents and families compare quality among nursing homes in their state. The modifications include:

  • Adding two new quality measures: Both measures pertain to antipsychotic medication use. One measure is for short-stay residents. The second is for long-stay residents. Both of these measures show antipsychotic medication use in individuals that are not diagnosed with schizophrenia, Huntington’s disease or Tourette syndrome. 
  • Raising performance expectations: Nursing homes will have to meet higher performance levels to achieve high quality ratings. Now, approximately 25 percent of nursing homes will be awarded 5 stars, 20 percent will achieve 2, 3, or 4 stars each, and 15 percent will receive 1-star ratings. 
  • Adjusting staffing ratings: Quality thresholds are higher for measures related to staffing levels. 
  • Increasing the number of onsite surveys: CMS will perform more frequent specialized, onsite surveys with the aim of assessing accuracy of the quality data that come from residents.

Background: CMS established the initial quality scoring system in 2008. In 2011, CMS set a goal of reducing use of antipsychotic drugs in nursing homes by 15 percent. After reaching this goal in 2013, CMS recently increased the goal to 30 percent by the end of 2016. A fourth major revision to the website’s quality rating system is scheduled for 2016.

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Study: Kentucky Medicaid expansion has benefited beneficiaries and economy

According to a recent report, Kentucky’s Medicaid expansion will increase the state’s economy by $30.1 billion between state fiscal years (SFY) 2014 and 2021. The report examines enrollment data, Kentucky’s overall economy and savings and expenditures during the first twelve months of expansion (January 1, 2014 to December 31, 2014). The report also compares estimates made before the program was expanded with actual 2014 experience. Deloitte Consulting LLP prepared the report, which was an update to a 2013 study conducted by the Commonwealth’s Cabinet for Health and Family Services. Kentucky’s experience exceeded estimates of the pre-expansion report in many areas:

In his speech about the report, Governor Steve Beshear said that the Medicaid expansion has improved early screenings and preventive care in the state. In 2014, 46,000 individuals were screened for diabetes, and 26,000 women received mammograms.

Related: Many states that chose to expand Medicaid via the alternate program have begun to see results from the first year. Arkansas was the first state to receive approval from CMS in September 2013. Since January 2014, Arkansas has been using the ACA’s Medicaid expansion funds to purchase qualified health plans (QHPs) through the health insurance marketplace for newly eligible adults. 210,000 individuals have enrolled in Arkansas’ alternate expansion plan, and the uninsured rate in the state has dropped 10 percent. In 2014, CMS approved Michigan’s waiver program, Healthy Michigan, which includes copayment and cost-sharing requirements for all newly eligible individuals and gives enrollees discounts for healthy behavior. The program began enrolling the new Medicaid population in April 2014. Today, Healthy Michigan has enrolled more than 546,000 beneficiaries. See the February 17, 2015 Health Care Current for more information on the status of the various alternate expansion programs.

(Source: Deloitte, “The Commonwealth of Kentucky report on Medicaid expansion in 2014,” February 2015)

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Around the Country

Survey of state CHIP directors: States believe Congress will continue federal funding

A survey from the National Academy for State Health Policy (NASHP) found that most state Children’s Health Insurance Program (CHIP) directors believe that Congress will renew the program before it expires in September 2015. At the same time, state officials are also considering options if Congress does not reauthorize CHIP. One option includes closing enrollment or transitioning children from CHIP to traditional Medicaid. NASHP surveyed CHIP directors in all 50 states and the District of Columbia and received responses from 46 directors. They answered basic questions on their state budgets for the next year. Thirty-three directors responded to open-ended questions on their plans and timelines. Key findings include:

  • 73 percent of the respondents reported the proposed budget for the 2016 state budget assumed Congress will continue federal funding for the program. The remainder was unsure. None of the respondents reported that they were planning on the federal government ending funding.
  • Only three indicated that they have started plans to transition beneficiaries out of CHIP if federal funding expires. 
  • Most estimated that their states have sufficient CHIP funds to continue operating through December 2015. Some estimated they could do so into early 2016.

Background: Originally established in 1997 as a ten-year program, CHIP was last renewed by Congress in 2009. Under a Democratic majority in 2009, the measure passed through the House of Representatives (290-138) and the Senate (66-32). That most recent authorization expires on September 30, 2015.

Related: The National Governor’s Association sent a letter to the Senate Committee on Finance and House Committee on Energy and Commerce last week urging Congress to continue funding for CHIP. The letter cited research from the Kaiser Family Foundation that found the uninsured rate has dropped significantly since 1997. Only 7 percent of U.S. children were uninsured in 2012, compared with 14 percent in 1997. The letter was signed by Kentucky Governor Steve Beshear and Tennessee Governor Bill Haslam.

(Source: NASHP, “Summary of NASHP’s 2015 Survey of State CHIP Directors,” February 17, 2015)

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Use of HIE may reduce overuse of medical imaging

Research studies and some specialty societies have raised concerns that medical imaging is overused. Overuse of imaging drives up medical costs and can harm patients by exposing them to unnecessary radiation. Although repeat imaging may be appropriate if used to determine a change in a patient’s clinical condition, repeat imaging is also ordered because providers do not have access to previous images. A recent study in the American Journal of Managed Care found that electronic health information exchange (HIE) can reduce the frequency of unnecessary repeat medical imaging.

Researchers looked at the question of whether physicians might reduce the frequency of repeat imaging if they use HIEs to obtain clinical information, including images and radiology reports, for their patients. The researchers analyzed records of more than 34,000 patients who had at least one imaging procedure over a two-year period in the Rochester, New York region. Sources included data from two commercial health plans and from the Rochester Regional Health Information Organization (RHIO). RHIO is a nonprofit organization that collects and shares electronic health information among more than 70 healthcare organizations in western New York. They found that physicians repeated only 5.2 percent of imaging procedures when they accessed the HIE system within 90 days of the first procedure. This compares with 8 percent of procedures repeated when the HIE was not accessed. When adjusted, this means the odds of a repeat imaging procedure decreased by 25 percent after HIE access.

Half of the repeated procedures occurred within the first 30 days after the first medical image. Eighty percent of the repeated procedures occurred within 60 days. The rate of repeat imaging was highest for ultrasounds (15.5 percent), while 8.6 percent of radiographs, 4.7 percent of mammograms, 3.8 percent of CTs and 2.5 percent of MRIs were repeated.

Analysis: Radiology represents another dynamic area for the HIE market. The exchange of images holds the promise of improved care delivery and reduction in health care delivery costs. Radiology imaging is a significant cost in the delivery of care due to the specialized nature of maintaining and operating Picture Archiving Systems (PACs) within a facility. Facilities also need specialized technical staff to manage the systems and interpret the results.

For some health care systems, reducing use of imaging could result in revenue loss and reduced need for staff. Facilities may also need fewer specialized radiologists skilled at working on PACs systems and handling the analysis of radiology images. This shift in how radiological expertise is used has already begun to occur as radiology images are more closely integrated with electronic health records (EHRs) and existing PACs become more sophisticated in providing clinical decision support functions directly to clinicians.

However, health care systems pursuing value-based care arrangements that create incentives to reduce total cost of care may want to identify ways to reduce utilization of repeat imaging.

(Source: Joshua R. Vest, Rainu Kaushal, Michael D. Silver, Keith Hentel, and Lisa M. Kern, American Journal of Managed Care, “Health Information Exchange and the Frequency of Repeat Medical Imaging, January 14, 2015)

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Breaking Boundaries

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