Health Care Current: February 9 2016 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: February 9, 2016
Academic medical centers: Making innovation a core competency
This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.
- My Take
- Implementation & Adoption
- On the Hill & In the Courts
- Around the Country
- Breaking Boundaries
Academic medical centers: Making innovation a core competency
Few would dispute the importance of academic medical centers (AMCs) to the US health care ecosystem. They prepare the next generation of clinicians for the workforce and are among the greatest sources of discovery and medical innovation in the world.
Yet, even fewer would say that business innovation is a core competency of AMCs.
As the US health care system undergoes dramatic change – converging, consolidating, responding to cost pressures, and moving from volume to value-based payment models – AMCs are at particular risk. Challenged by complex models of governance and funds-flow, high unit costs, larger proportions of uninsured and under-insured patients, and, often, the most complex and sickest patients, many AMCs struggle to adapt in an increasingly competitive environment.
However, rather than circling the wagons, a significant group of AMCs has been quietly innovating away, creating scale through mergers and acquisitions (M&A) and creative alliance models, diversifying revenue, embracing value-based care (VBC), and reducing costs.
The Deloitte Center for Health Solutions examined this trend in a recent report, Academic Medical Centers: Joining forces with community providers for broad benefits and positive outcomes. The core question was, as industry consolidation continues to increase in its pace, can an isolated AMC survive financially and with its mission in tact?
M&A trends from 2007-2013 showed some interesting findings. AMCs who purchased at least one hospital in 2009 or 2010 had improved performance at their core location. Financial performance improved, costs were reduced (associated with increased scale), and case mix rose (likely due to more appropriate use of community facilities allowing the “mother ship” to take care of the more complex patients with their higher reimbursement).1 The takeaway: AMCs can be successful with consolidation, and it does not have to dilute the mission.
In addition to M&A, many AMCs looked for other sources of revenue. For example, the Mayo Clinic formed the Mayo Clinic Care Network, which exports expertise and care models to other organizations in the US and worldwide. The Cleveland Clinic has opened a facility in the Middle East and plans to open one in London. And, Duke has partnered with LifePoint to open 12 community health systems throughout the US.
These trends indicate that AMCs across the country are accelerating the transition to VBC. For example, University of California, Los Angeles and Cedars Sinai have formed a venture with other California hospitals and Anthem to form Vivity, which offers a shared risk health maintenance organization (HMO) product. The new Dell Medical School at the University of Texas, Austin is being designed from the ground up to create innovative models of VBC and has integrated innovation into the new curriculum.
Finally, many AMCs are taking on ambitious projects to improve operating performance. Lowering unit cost and improving efficiency is difficult and can be contentious, but it can be accomplished successfully.
The status quo is not an option for our nation’s AMCs. Much has been done already by leading organizations, and the fast followers are making progress. Those who fall in the “laggard” category should be concerned. The health care environment is rapidly changing, and unless they embrace change, they run the risk of mission failure.
Source: 1 Deloitte analysis of hospital acquisition deals from Modern Healthcare M&A Trends Database (2007-2014) and financial metrics from Truven Health Medicare Cost Report data (2007)
By Mitch Morris, MD, Principal and Global Leader of Life Sciences and Health Care, Deloitte LLP
Former Senate and House leaders say that 1332 state innovation waivers could help stakeholders reach bipartisan agreement on the ACA
In an op-ed published last week in The Washington Post, Newt Gingrich, former speaker of the House of Representatives and Tom Daschle, former Senate majority leader, said that Republicans and Democrats have a vehicle to reach a bipartisan agreement on health insurance coverage under the Affordable Care Act (ACA): Section 1332 state innovation waivers. The article points to a recent report published by the two and the Bipartisan Policy Committee, which says that the 1332 waivers are flexible enough to accomplish goals of both sides, while continuing to expand coverage, decrease costs, and improve quality.
The report outlines four recommendations for moving the discussion around this waiver program forward.
Analysis: As explained in State health coverage innovation and Section 1332 waivers, states can pursue numerous alternative and innovative strategies under these waivers, but must meet certain requirements. Specifically, the waivers must ensure that coverage:
- Is at least as comprehensive and affordable as coverage provided without a waiver
- Is held by a comparable number of the state’s residents as coverage provided without a waiver
- Does not increase the federal deficit
If approved, the waivers can go into effect beginning January 1, 2017.
Implementation & Adoption
Study: Medicare Advantage HMO plans in 25 counties spent 93 percent of what traditional Medicare would have spent
In 25 counties, Medicare Advantage (MA) health plans spent $5.2 billion less than traditional Medicare would have spent to provide the same benefits, according to recent research from the Commonwealth Fund. Researchers compared total costs for MA plans with what it would have cost to provide the same services under traditional Medicare for each county in 2012.
In the 25 counties where MA plan costs were significantly lower, the difference was only found in health maintenance organization (HMO) plans.
HMO plans usually exert more control over the provider network, with beneficiaries mainly seeing providers in the network. In contrast, PPO plans usually allow beneficiaries to go out of network, charging members more to see out-of-network providers. Private fee-for-service plans usually place few restrictions on beneficiaries, and they are not allowed to restrict the network to certain providers. On average, HMO plans spent 93 percent of what traditional Medicare would have spent in 2012. However, other plan arrangements – Local PPO (118 percent), PPO (112 percent), and private fee-for-service plans (112 percent) – spent $3.8 billion more than traditional Medicare would have in 2012.
(Source: The Commonwealth Fund, “Does Medicare Advantage Cost Less Than Traditional Medicare?” January 28, 2016)
Study: Communication failure was a primary factor in 30 percent of malpractice claims
According to a recent report published by CRICO Strategies, better communication between medical professionals and their patients could have saved nearly 1,800 patient lives and $1.7 billion in malpractice costs. Researchers analyzed clinical and legal records for more than 23,000 malpractice cases from 2009 to 2013 and found that communication failures were a factor in 30 percent of cases.
The report cites many root causes, including high-burden workloads, hierarchical workplace culture, difficulty with electronic health records, and interruptions in workflow. The Joint Commission estimates that 80 percent of serious medical errors come from miscommunication between medical personnel while handing patients off to another medical professional. CRICO’s report also found that in some cases electronic medical records fail to deliver critical information to medical staff.
Some health care providers are implementing solutions to address issues around miscommunication. For example, in 2008, Boston Children’s Hospital implemented a program called I-PASS, which aims to systematically relay patient information during doctors’ and nurses’ shift changes. As more hospitals implemented the program, it led to a 23 percent reduction in medical errors.
(Source: CRICO Strategies, “2015: Malpractice Risks in Communication Failures,” 2016)
AHRQ: Potentially preventable inpatient hospital admissions on the decline
The Agency for Healthcare Research and Quality (AHRQ) recently released a Healthcare Cost and Utilization Project (HCUP) Statistical Brief analyzing potentially preventable inpatient hospital admissions and emergency department (ED) visits from 2005 through 2012. The study found that the rate of potentially preventable inpatient stays decreased over this period, while the rate of potentially preventable treat-and-release ED visits for the same conditions increased.
Some of the key findings include:
Even as inpatient hospital stays declined over this period, ED visits grew. Many of the ED visits and hospitalizations were for conditions, including asthma, urinary tract infections, and complications from diabetes, that might have been prevented with better primary care.
Background: Health care providers are trying to reduce potentially preventable hospitalizations, improve the quality of care, and minimize medical costs in response to initiatives that penalize hospitals for high readmission rates. For example, under the Hospital Readmissions Reduction Program (HRRP), Medicare financially penalizes hospitals with higher than average readmission rates for heart attacks, heart failure, or pneumonia. In 2016, more than 2,600 US hospitals will see reductions in their Medicare payments due to their amount of excess 30-day readmissions.
(Source: Kathryn R. Fingar, Marguerite L. Barrett, Anne Elixhauser, Carol Stocks, and Claudia A. Steiner, “Trends in Potentially Preventable Inpatient Hospital Admissions and Emergency Department Visits,” November 2015)
CMS proposed rule would expand access to Medicare, private health plan claims data
In late January, CMS proposed to allow organizations certified under the Qualified Entity program established by the ACA to sell or share analyses of Medicare and commercial health plan claims data with providers, employers, and other groups. The Qualified Entity program gives certain organizations access to Medicare Part A and B claims data and Part D drug event data. Combined with data from commercial health plans, the data can be used to examine provider and supplier performance.
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) expanded the Qualified Entity program, allowing qualified entities to provide or sell the analyses produced out of this data. The proposed rule CMS issued in January is the first step in expanding the program. To date, 13 organizations have applied to be qualified entities under the original program, and CMS projects that number could grow to 20 organizations when the rule is finalized.
The MACRA provision that expands the original program is intended to improve quality and lower health care costs. CMS said that the expanded program could help improve transparency across the system, especially around provider and supplier performance. CMS acknowledged the need for privacy and security protections in the program.
On the Hill & In the Courts
Bipartisan bill seeks to expand telemedicine services
Last week, Congressional lawmakers introduced a bipartisan, bicameral bill to expand telehealth and remote patient monitoring services in Medicare. The Creating Opportunities Now for Necessary and Effective Care Technologies (CONNECT) for Health Act would remove constraints, such as requirements that patients be located at specific clinical sites and in specific rural geographic areas, limitations on use of store-and-forward technology, and which providers can provide the service.
The bill would:
HHS study: Prices for two-thirds of generic drugs decreased in 2014
A recent report from the HHS Assistant Secretary for Planning and Evaluation (ASPE) found that generic drug prices are not contributing to increases in overall prescription drug spending. An analysis of drug pricing data shows that, while some specific segments of the generic drug market experienced substantial price increases, prices for two-thirds of generic products decreased in 2014.
Some additional findings include:
- Generic drugs made up approximately 81 percent of Medicaid prescriptions and 26 percent of expenditures between July 2013 and June 2014
- Nearly 65 percent of Medicaid generic prescriptions dispensed during that time period were for generic drugs with price decreases
- In 2012, generic drug prices decreased 14.5 percent; from 2006 to 2013, prices for the drugs most commonly used by older adults in the US decreased
Recent prescription drug pricing trends, economic factors, and market dynamics have affected generic drug prices. The price of a drug is often determined by its medical value, the availability of therapeutic substitutes, and overall industry competition. The study found that generic drugs with the largest increases in prices were mostly in segments of the market that were highly concentrated and have fewer patients. Prices in some of these segments increased after firms decided to temporarily or permanently exit the market space.
The report comes during a time of increasing scrutiny on drug pricing in the US. In 2014, health care spending increased 5.3 percent after several years of slower growth. Retail prescription drug spending was a large part of this growth, increasing 12.2 over 2013 to $297.7 billion. However, much of the growth was due to high spending on a few new medications, fewer patent expirations, and brand-name drug price increases.
(Source: HHS ASPE, “Understanding Recent Trends in Generic Drug Prices,” January 27, 2015)
Obama Administration says that the National Cancer Moonshot initiative will depend on data sharing
White House Press Secretary Josh Earnest said last week that enhanced data sharing is a major priority of Vice President Joe Biden’s “Moonshot” to cure cancer initiative, which President Obama called for him to lead during his State of the Union Address in January. According to Earnest, improving data sharing and organization will be a critical first step to making progress on this front. As a result, the cancer initiative will encourage data sharing and help develop tools that can leverage information gained about genetic abnormalities, as well as long-term patient outcomes.
The administration released a fact sheet proposing $1 billion to fund the National Cancer Moonshot. The National Institutes of Health (NIH) will receive $195 million to support the new activities using funding that was included in the 2015 omnibus spending bill (see the December 22, 2015 Health Care Current).
President Obama plans to request an additional $755 million in mandatory funding. The funding would support a number of research opportunities.
(Source: The White House Office of the Vice President, “Fact Sheet: Investing in the National Cancer Moonshot,” February 1, 2016)
Arkansas governor seeks changes to Private Option plan
Governor Asa Hutchinson is discussing the future of Arkansas’ “private option” Medicaid expansion as the state’s waiver expires at the end of the year. The waiver, crafted by former Governor Mike Beebe, uses federal funds for Medicaid expansion to purchase private health insurance plans for that population. Governor Beebe garnered support from a Republican-controlled legislature to get approval from CMS to implement the proposal, which was considered one of the first alternative Medicaid expansion plans.
Governor Hutchinson now plans to seek CMS approval for Arkansas Works, a plan that would charge small premiums, add cost-sharing for some beneficiaries, add employment requirements, encourage healthy behavior, and promote employer-sponsored insurance plans. His proposal would require employed Medicaid beneficiaries to choose employer-sponsored insurance if they have it, and the program would pay the difference in costs to beneficiaries and cover Medicaid benefits not offered by the employer-sponsored plan.
Several of Governor Hutchinson’s requests may be difficult to get approved. The plan proposes charging Medicaid beneficiaries with substantial assets – for example, a house valued at or above $200,000 or cash-equivalent assets of $50,000 or more – a fee to stay enrolled. The Governor is expected to present Arkansas Works to a health reform task force on February 17, 2016.
Background: Arkansas is one of several states with an alternative expansion plan. These states aim to keep the federal funding that goes with Medicaid expansion, but change the policies for higher-income individuals. To date, 31 states and the District of Columbia have expanded Medicaid and 19 states have not. Six of the 19 expansion states have alternative plans.
Around the Country
Report: Massachusetts health care costs exceed benchmark, Commission provides recommendations to improve efficiencies
A recent report found that health care spending in Massachusetts grew 4.8 percent in 2014, exceeding the 3.6 percent benchmark set in state law. The Massachusetts Health Policy Commission (HPC) published its 2015 Cost Trends Report, providing an overview of health care spending trends, progress in key areas, and recommendations to increase quality and efficiency in the Commonwealth.
The report recommended the state:
- Implement safeguards against out-of-network billing practices and reduce variation in prices between providers, including between services offered at hospital outpatient departments and physician offices
- Continue to enhance community-based, integrated care, reduce unnecessary use of acute care settings, and promote the use of technologies to advance care delivery transformation through expansion of health information exchange, telehealth, and other health care innovations
- Develop a coordinated quality strategy that is aligned across public agencies and market participants, and develop alternative payment models to promote delivery system reform in MassHealth (the state’s Medicaid program)
Recommendations to other stakeholders are that:
- Health plans and employers continue to advance strategies that enable consumers to make high-value choices, including increasing transparency of comparative prices and quality of services, providers, and drugs
- Health plans and providers align technical aspects of their global budget contracts, such as quality measures, risk adjustment methods, and reports, to providers
- The state legislature remove scope of practice restrictions for Advanced Practice Registered Nurses
- Health plans and providers increase utilization of APMs in promoting high quality, efficient care
(Source: Commonwealth of Massachusetts Health Policy Commission, “2015 Cost Trends Report")
Dissolvable brain sensors may reduce risks for patients
A team of neurosurgeons and engineers have developed a brain sensor that monitors pressure and temperature in patients with traumatic brain injuries and then dissolves into the body. Every year, more than one million people in the US go to the emergency room with traumatic brain injuries – bullets, blunt force trauma, and blood clots are some of the most common causes. These injuries often cause swelling in the brain that constricts the flow of blood and oxygen and can lead to permanent damage. Large sensors that can monitor the brain are in use now, but they are invasive and can impede physical therapy. They also must be removed after the patient has recovered and carry risks of allergic reactions, infection, and hemorrhage.
The new sensor is smaller than a grain of rice and incorporates dissolvable silicon technology developed by researchers at the University of Illinois at Urbana-Champaign. The sensor is designed to function for a few weeks and then dissolve away completely in the body's own fluids. The team worked with clinical experts in traumatic brain injury at the Washington University School of Medicine to test the sensors in rats. They found that the temperature and pressure readings were as accurate as conventional monitoring devices. Currently, the materials are 85 percent dissolvable, and researchers believe they can achieve 100 percent dissolvability with more development. While the sensor now lasts several days in the body, further refinements may get it to last four to five weeks. Findings from the study were published in last month’s issue of Nature.
Analysis: This new class of electronic biomedical sensors has the potential to closely monitor conditions and transmit signals wirelessly, whether they are implanted or ingested, and then be reabsorbed into the body. The researchers note that this type of technology can be applied to postoperative monitoring in other parts of the body. With the potential to provide clinicians with more information about the body’s healing process, the sensors could become integral in guiding therapy. Their ability to possibly reduce infections and other complications could potentially decrease readmissions and curb health care costs. The SSI sensors have the potential to guide therapy, improve outcomes, and reduce readmissions, revisions, and costs associated with implant-related infections. The next step in testing this technology is human trials, possibly in the next three to five years.
(Source: Seung-Kyun Kang et al, Nature, “Bioresorbable silicon electronic sensors for the brain,” January 18, 2016)