Blockchain: Coming soon to a health care industry use case near you

Health Care Current | February 7, 2017

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

Blockchain: Coming soon to a health care use case near you

By Greg Scott, Vice Chairman and US Leader, Health Plan Sector, Deloitte Consulting LLP

One of the things I love most about my job is working with colleagues from other industries. I nearly always learn something. And, I’m often able to apply these lessons to my work with our health plan clients and teams and the health care industry more broadly.

My Deloitte colleagues in the financial services industry (especially banking) are applying blockchain technologies in exciting ways that offer clear lessons and encouragement for potential blockchain adoption in health insurance business processes and transactions. While it seems likely that blockchain in health insurance will take a number of years to achieve scale, I’m increasingly confident that blockchain is poised to move beyond the health information technology (IT) hype cycle and into the adoption and impact phases of the emerging technology lifecycle.

We recently published research on blockchain’s potential through a cross-industry collaboration between the Deloitte Center for Health Solutions and the Deloitte Center for Financial Services. In Blockchain in health and life insurance, our researchers used a crowdsourcing approach – bringing together experts in blockchain, cybersecurity, health insurance, and life insurance – to discover how blockchain can help improve value exchange, manage risks, cut costs, and improve customer satisfaction. It identified a number of practical use cases that can positively impact health and life insurance companies—and just as importantly, their customers and business partners. Some of the use cases that we found most compelling were:

  • Enabling truly interoperable electronic health records
  • Supporting claims processing and other administrative transactions through smart contracts
  • Detecting fraud and abuse
  • Improving provider directory accuracy

We found opportunities to leverage blockchain across the insurance value chain – from applications to administration, underwriting to alternative payment models, claims management to fraud mitigation, and cyber security to data privacy.

I’m personally enthusiastic about blockchain as a fundamental enabler of the health care industry’s shift from fee-for-service payment models to value-based care and financial arrangements. While industry leaders and thought leaders seem nearly unanimous in their support for this volume-to-value transformation, the administrative complexity that underlies these new models is daunting. Blockchain technologies can offer promising strategic solutions to the technical complexities of value-based care.

Many government leaders and health care experts and leaders are finding similar promise in blockchain. This past summer, the US Department of Health and Human Services’ (HHS) Office of the National Coordinator for Health Information Technology (ONC) sponsored an ideation challenge to solicit white papers on opportunities for blockchain in the health care industry. The 15 winning papers (including one submitted by Deloitte) identified a range of possibilities that included payment models, privacy, interoperability, claims processing, clinical trials, health information exchange, patient reported outcome measures, and many other topics.1 Meanwhile, the American Enterprise Institute testified before the House Energy and Commerce Subcommittee on Health last May that blockchain incorporates features that would be needed for advanced prospective risk adjustment.2 And, Humana CEO Bruce Broussard published an article that expressed his views on the transformational power of blockchain across the health care industry, with a particular emphasis on how blockchain can help simplify an industry that is simply not user-friendly today.3

Count me among the optimists.

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1 The ONC office for health IT Use of Blockchain in Health IT and Health-Related Research" Ideation Challenges selected 15 winning white papers
2 AEI testimony to Congress, May 2016
3 Bruce Broussard, “Blockchain: Transformational Technology for Health Care,” August 8, 2016

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Implementation & Adoption

CMS proposes 0.25 percent payment increase for Medicare Advantage plans

Last week, the US Centers for Medicare and Medicaid Services (CMS) proposed to increase payments to Medicare Advantage (MA) plans by 0.25 percent in 2018.

In the 2018 Advance Notice, CMS also said it will delay putting more weight on encounter data in the risk adjustment formula.  Risk adjustment raises and lowers payments to health plans to account for differences in health status, measured by diagnoses. Risk adjustment reflects both differences among MA plans and between MA and the traditional Medicare program. In the risk adjustment administration, CMS uses a blend of diagnoses found in encounter data (25 percent) and submitted by MA plans to the Risk Adjustment Processing System (75 percent). These percentages will remain the same for 2018 if the proposal is finalized. MA plans objected to CMS’s original plan to increase the percentage for encounter data, saying it would decrease payments. The Government Accountability Office (GAO) has found that CMS needs to make the encounter data more accurate and complete before incorporating it into the formula (see story below).

Additionally, the proposed rule:

  • Delays new requirements for MA employer retiree plans: In the 2017 Advance Notice, CMS said it was going to start setting payments rates for MA employer group waiver plans rather than accept the pricing arrangements that MA plans reach with employers. After health plans said this would significantly reduce revenue, CMS decided to create a transition period for this policy. In the 2018 Advance Notice, CMS asks if it should continue the transition policy it adopted for 2017.
  • Lays out improvements to the Star Ratings program, cost-sharing requirements, and drug utilization: CMS proposes to continue adjusting MA Star Ratings based on the share of dual-eligible individuals in a plan. It also proposes to prohibit plans from making enrollees share in the cost for the first 20 days in a skilled nursing facility. Finally, CMS proposes several policy updates intended to reduce utilization of opioids in Medicare Part D.

CMS is accepting comments on the proposals until March 3, 2017. The final notice is expected to be released by April 3, 2017.

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Health care leaders urge President Trump to support value-based care and MACRA

In a recent letter to President Trump, a group of health care organizations said the administration should continue supporting value-based care and the implementation of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The organizations said they have significantly invested in the implementation of alternative payment models that promote value-based care and health care innovation.

The organizations provided what they consider to be 10 essential principles for a sustainable and modernized health care system. The principles center on the key elements that drive a value-based care system.

On the Hill & In the Courts

President Trump signs new executive orders on regulation and immigration

Last week, President Trump signed two executive orders that would have an impact on the health care industry. The first aims to reduce the number of regulations for all industries, and the second aims to put stricter control on immigration into the US.

The executive order on reducing regulation would require executive branch agencies to remove two existing regulations in order to issue a new one. It is unclear how agencies will administer this policy. The federal government implements laws affecting health plans, life sciences companies, and health systems through many regulations. Many industry stakeholders generally favor less regulation but do not want to hold up implementation of laws like 21st Century Cures, which hold the promise for faster drug and device approvals. On Friday, February 3, the White House issued interim guidance to implement this requirement, saying that it applies to significant regulations. Generally, a regulation is deemed “significant” if it has more than $100 million in annual costs to the economy.

The executive order on immigration has the potential to affect health care stakeholders both in terms of labor (including physicians) and patients who travel to the US for treatment.

(Sources: Adam Rubenfire, ‘Healthcare industry celebrates ‘one-in, two-out’ executive order despite unknowns’ Modern Healthcare, January 30, 2017; Elizabeth Whitman and Steven Ross Johnson, ‘Hospitals feeling the early effects of Trump immigration ban’ Modern Healthcare, January 31, 2017)

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House Energy and Commerce Committee holds hearings on public exchanges and Medicaid

Last week, several House Energy and Commerce subcommittees held hearings on the future of Medicaid and the public exchanges.

The hearings on Medicaid focused on program oversight and opportunities to protect the program from fraud, waste, and abuse. Testimony from the GAO said that improper payments made up an estimated 10.5 percent ($36 billion) of total federal Medicaid expenditures in fiscal year (FY) 2016. This is an increase from 9.8 percent ($29 billion) in FY2015. The HHS Office of the Inspector General (OIG) recommended that CMS:

  • Enact state-based provider screenings, including background checks, site visits, and comprehensive vetting for providers participating in the Medicaid program
  • Improve the accuracy and timeliness of claims data to assist in identifying potential fraud
  • Improve managed care organization (MCO) oversight by working with states to maintain accurate rosters of providers that participate in Medicaid MCOs
  • Provide technical assistance to providers on reconciling their payments with patient records
  • Give State Medicaid Fraud Units the authority to investigate potential abuse in home and community-based settings

Another hearing at the Subcommittee on Health focused on proposals to stabilize the exchanges while Congress repeals and replaces the ACA. The witnesses said that the Congress should include concrete steps to protect beneficiaries and the solvency of the industry in repeal and replace plans. The three witnesses also said that Congress should keep the guaranteed coverage provisions of the ACA, especially for consumers with preexisting conditions. Additional recommendations from the witnesses included:


Related: The Senate committee on Health, Education, Labor and Pensions (HELP) also held a hearing last week on stabilizing the individual market. Marilyn Tavenner, president and CEO of America’s Health Insurance Plans (AHIP), presented short- and long-term policies to lower costs and keep health plans in the exchanges. Tavenner said two immediate priorities should be continuing the financial support established under the ACA (e.g., subsidies and cost-sharing reductions) and paying the full reinsurance amounts due to health plans for 2016. A policy that would encourage more young adults to participate is to calculate financial assistance based on age and income. In the long term, Tavenner said that Congress should expand the use of health savings accounts, give states more flexibility to operate their health care markets, improve the risk adjustment program, and encourage consumers to buy and have continuous coverage.

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GAO: CMS should ensure encounter data are accurate and complete

The GAO recently found that CMS has room to improve in having accurate encounter data for adjusting payments to MA health plans.

GAO did this analysis as a follow up to a 2014 audit where it recommended that CMS assess the quality of MA encounter data before using it to adjust MA payments. Through this recent audit, GAO found that CMS still needs to:

  • Establish requirements for collecting and submitting encounter data
  • Conduct statistical analyses to verify the data are complete and accurate
  • Review medical records to verify encounter data
  • Summarize findings and provide recommendations for improvements to MA plans

CMS responded that it plans to fully transition to using MA encounter data by 2020. In 2015, CMS began phasing in encounter data diagnosis information in its risk adjustment process. In addition, CMS is compiling statistics on the volume and consistency of data submissions to help detect data validity issues. This report came shortly before CMS published the 2018 Advance Notice for MA plans, in which it said it is considering delaying the move to use more encounter data in the risk adjustment formula.

(Source: GAO, “Limited Progress Made to Validate Encounter Data Used to Ensure Proper Payments,” January 2017)

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Around the Country

Minnesota governor signs bill to reduce premiums for plans in the individual market

Late last month, Minnesota Governor Mark Dayton signed a bill authorizing $326 million in subsidies to Minnesotans who are facing health insurance premium increases of 50 percent or more. The subsidies will cut premiums by 25 percent for roughly 125,000 consumers who purchase coverage on the individual market.

The measure is expected to be the first of several on stabilizing the individual market. The subsidies are for individuals with incomes above 400 percent of the federal poverty level. This equates to an annual income of $47,520 for an individual or $97,200 for a family of four. These individuals do not qualify for the federal tax subsidies through the exchanges.

The subsidies authorized in Minnesota will be available for plans bought on MNsure, the state’s insurance exchange, or for coverage purchased directly from health plans. The state will pay health plans after they reduce premiums for eligible members. The law allocates an additional $15 million to reimburse insurers for any added administrative costs plans incur for providing this benefit.

The law also seeks to help people with serious medical conditions keep their provider networks after enrolling in a new plan. It would allow people with certain conditions, life-threatening diseases, or are pregnant beyond the first trimester to keep their networks for 120 days into 2017.

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Maryland’s all-payer model reduced hospital spending

According to a blog published in Health Affairs, Maryland has saved Medicare a net of $319 million since it implemented its hospital all-payer model four years ago. From 2013 to 2016, the hospital spending growth rate in Maryland was more than 4 percent below the national growth rate and lower than the growth rate of the state’s economy.

In 2014, Maryland worked with CMS to modify its all-payer system and cap payment growth for hospitals at the long-term growth rate of the state’s economy (3.58 percent per year). Since then, hospital spending per Medicare beneficiary rose slower than it did nationwide, and hospital spending for other payers (outside of Medicare) was comparable, suggesting that the costs are not shifting to the private sector. However, as hospitals used care management strategies and referred more patients to home health and skilled nursing facilities, non-hospital utilization rose in 2015. This partially offset the total savings to Medicare.

Maryland generated $429 million in total Medicare hospital savings to date, exceeding the five-year target of $330 million. Although this was partially offset by $110 million in increased non-hospital spending, the state is on track to meet or exceed all five of the program’s requirements:

  • Limit all-payer hospital per capita spending in Maryland to 3.58 percent
  • Reduce total Medicare hospital spending in Maryland by $330 million over five years
  • Limit per beneficiary growth in Maryland to no more than national Medicare growth
  • Bring the readmissions rate down to the national average within five years
  • Reduce infections and other hospital-acquired conditions by 30 percent within five years

If Maryland meets these requirements, the agreement with CMS will expand to other care settings beginning in 2019. In exchange for global budgets, individual physicians will be expected to assume more responsibility for improving quality, meeting population health goals, and reducing spending.

(Source: Nelson Sabatini, Joseph Antos, Howard Haft, and Donna Kinzer, “Maryland’s All-Payer Model—Achievements, Challenges, And Next Steps,” Health Affairs, January 2017)

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Breaking Boundaries

Bringing the laboratory into the home: Innovations in at-home testing

With the shift from volume to value and emerging technologies that enable remote monitoring, getting care and health care services at home rather than in a medical facility is becoming increasingly common. As the obesity epidemic has risen, tests for sleep apnea are in higher demand, with thousands of sleep clinics around the country poised to help diagnose and treat the condition. A recent study published in the Annals of Internal Medicine shows that at-home testing may be as effective in diagnosis as laboratory testing and may help cut costs.

Obstructive sleep apnea causes the muscles in the throat to relax too much, momentarily cutting off airflow during sleep and leading to disruptive, restless sleep patterns. The study in Annals included nearly 400 patients with suspected sleep apnea. Researchers randomized the patients into two groups – one group received full laboratory sleep testing, and the other received home testing (simulated in a lab). The study showed that the proportion of patients diagnosed with sleep apnea was roughly the same across groups. This study adds to the research literature and growing evidence that in-home sleep tests and monitoring are effective.

The number of private accredited sleep clinics peaked in 2014 but have slightly declined since then, possibly in part due to increased acceptance of at-home testing. At-home tests appeal to many consumers, who may prefer the comfort of their home. And, since they are significantly less expensive, many health plans are interested as well.

EverlyWell, a startup out of Texas, is aiming to meet the health care system’s demand for more convenient, accessible in-home testing. It provides a platform for consumers to order lab tests online, provide samples (either blood, urine, or saliva), and receive results in an easily readable format. The company works with four certified lab partners to provide home testing in areas including food sensitivity, thyroid, metabolism, female fertility, cholesterol and lipids, heavy metals, sleep, and stress. Rather than diagnosing anyone, the company provides evaluation information for consumers to take to their physician. Company founders point to the popularity of the at-home pregnancy test, as well as the rise in at home genetic tests, and activity, fitness, and sleep trackers as to how they identified the opening in the market.

Analysis: Health care professionals continue to debate the future of consumer-ordered lab tests. Some argue that patients may be confused by test results they have to interpret at home and may receive false positives or negatives that they cannot interpret. Others argue that the testing is not replacing the physician’s role, but supplementing the role of the physician in a way that helps to inform the patient and makes health care more accessible.

Deloitte’s 2016 report “Technology-enabled home health: Are consumers ready?” presented findings from focus groups that aimed to better understand consumer expectations and preferences for receiving health care services in the home. The focus groups showed that younger consumers are more open than older consumers to certain self-service options, such as using lab kits to perform lab tests, while older consumers showed a preference for house calls from a nurse or lab technician. Many consumers also like the idea of having access to a mobile clinic, where clinicians could perform basic lab and diagnostic services at or near their home.

(Source: Ching Li Chai-Coetzer, et al, “Physician decision making and clinical outcomes with laboratory polysomnography or limited-channel sleep studies for obstructive sleep apnea: A randomized trial, Annals of Internal Medicine, January 24, 2017)

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