Health Care Current: January 13 2015 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: January 13, 2015
The opportunity in do-it-yourself health 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.
- My Take
- Implementation & Adoption
- On the Hill & In the Courts
- Around the Country
- Breaking Boundaries
The opportunity in do-it-yourself health care
Like many people, I got caught up in the DIY movement of the 1990s. But I had a somewhat unusual motivation. One day during my neurosurgery rotation, I spent 12 hours in the operating room assisting a complex brain tumor case. As I was driving home that night (in the middle of winter), my car's heater stopped working while the temperature gauge continued to rise. I called a friend, and he immediately diagnosed that the car was low on coolant. I was really impressed, but he said, “It’s not brain surgery.” Having just done it, I knew he was right.
After that, I learned basic auto mechanics so I could do my own preventive care and simple repairs. Still, one day my check engine light came on, forcing me to bring the car to the dealer. For $100, they hooked it up to their computer to read the codes I could not access and told me about the $900 repair they could do for me. I was completely at their mercy.
Over the years, my cars have become increasingly more sophisticated and the data held within them even more elusive. At the same time, however, consumer technology has come much further. Driving home last week, my check engine light came on. Instead of taking my car directly to a mechanic, I plugged a $20 scanner into the port under my steering wheel, connected my phone to it via Wi-Fi, read the code and diagnosed the problem.
Consumerism in health care appears to be following a similar trend. Early emphasis on educating individuals about prevention and wellness is helping to empower them with data to make better choices about the health care providers they choose and the care they receive. Patient advocates have long called for greater participation in their care through access to their own health information (somewhat infamously captured in the music video “Gimme My DaM Data,” in which I was honored to perform).
More recently, consumers have gained access to more sophisticated diagnostic tools: genomics sequencing, home laboratory testing and wearable devices that measure everything from cardiac function to brain activity. A wide array of these new devices were on display at the Consumer Electronics Show last week. This week, companies and investors convene in San Francisco for the annual J.P. Morgan Healthcare Conference—an event that some have coined the Super Bowl or mecca of the biotech and medical device industry.1
The last several weeks have seen a whirlwind of press releases and announcements from companies leading up to the conference, which comprises a myriad of educational and “speed dating” sessions. For those wanting to know where health care is going, this is an opportunity to follow the money. And there is a lot of it to follow. Recent data from Startup Health reflect a 125 percent increase in investment in digital health from 2013-2014, with emphasis on population health and big data/analytics (see the January 6, 2015 Health Care Current).
As innovation marches forward, some interesting – and important – opportunities could come to the surface at the intersection of patients and providers:
- New and disruptive care models: Innovation expands capabilities, freeing consumers from their exclusive reliance on providers and providers from their reliance on traditional delivery settings and roles. As the industry shifts toward value, new concepts could require big bets, but they might also result in new ways to achieve greater quality and service.
- Tools combined with expertise: As any mechanic will tell you, simply knowing how something is done does not mean you are capable of doing it. Similarly, simply having access to information does not mean you are able to process it. Providers go through decades of training to help them separate the spurious or benign data point from the serious. It is important for consumers to have access to this information, but that information should be accompanied by context.
Amid the excitement and deal making, one should not lose sight of the context in which these companies operate. As consumers have gained access to increasingly sophisticated devices, the regulatory waters have become murkier. Stakeholders will be looking to the U.S. Food and Drug Administration (FDA) and other government agencies to provide clear guidance amid rapidly evolving technologies—this is no easy task. Moreover, investors and innovators will likely need patience and diligence to navigate the complex regulatory environment while achieving impact and assuring safety. Innovation stems from many industries—some that are less familiar with health care’s unique requirements and business model challenges.
Armed with diagnostic codes from my car, I can often assess what work needs to be done and what repairs I should not tackle myself. But when I cannot tackle it myself, I can use available tools to determine what a repair should cost and who would be able to do it. Down the road, I expect to be able to do the same thing with my doctor, and I’m excited to see this week who is up to that challenge.
Source: 1Motley Fool, “3 Biotech Stocks We're Watching Closest Ahead of the JPMorgan Healthcare Conference,” http://www.fool.com/investing/general/2015/01/05/3-biotech-stocks-were-watching-closest-ahead-of-th.aspx
By Harry Greenspun, M.D., Director, Deloitte Center for Health Solutions, Deloitte Services LP
Value-based payments make up 40 percent of commercial payments in 2014
An estimated 40 percent of payments made to health care providers in commercial plans are based on value, according to the Catalyst for Payment Reform. This is an increase from 11 percent in 2013. Most (15 percent) of value-based payments are paid under full capitation arrangements, and 12.8 percent are fee-for-service payments with pay-for-performance built into the contracts. Slightly over half (53 percent) of value-based payments have performance risk built into the contracts – providers could lose or gain financially depending on how they score on quality and/or performance measures.
A separate analysis by researchers from the Commonwealth Fund suggests that value-based payment models could use improvement. The fields of behavioral economics, psychology and organizational management sciences could help providers who are new to these payment models meet improvement goals and help health plans design more effective incentives. The researchers outlined some common pay-for-performance models and ways in which they could be improved:
Implementation & Adoption
Study: ACA has had “no effect” on employer-sponsored coverage thus far
Most people get their health insurance coverage through their employer, but the Affordable Care Act (ACA) makes it easier for individuals to obtain health insurance coverage outside of the workplace. The new marketplaces and Medicaid expansions in applicable states have given employees new alternatives to employer coverage. At the same time, the ACA includes policies intended to encourage employers to continue offering health insurance coverage. For example, the ACA kept the preferential tax treatment of employer-sponsored insurance, which prevents employers and employees from having to pay taxes on those benefits. It also includes a mandate for employers of a certain size to provide coverage, tax credits for certain small employers to provide coverage and a new Small Business Health Options Program (SHOP) marketplace. The individual mandate was also meant to encourage employees to sign up for their employer’s offerings.
Using data from the Health Reform Monitoring Survey, researchers from the Urban Institute published findings in Health Affairs that estimated changes in employer-sponsored insurance offerings, coverage and take-up rates. The results from early September 2014 compared with June 2013 suggest that offer rates during that period did not change:
Related: The mandate for large employers (100 or more employees) went into effect on January 1, 2015. Large firms that do not provide coverage to at least 70 percent of their employees who work an average of 30 hours per week will be subject to a penalty. The mandate begins in 2016 for employers with 50-99 employees. The ACA required the mandate to begin in 2014, but the administration delayed it for all employers in 2013 and for mid-size employers in early 2014 (see the February 18, 2014 Health Care Current).
(Source: Fredric Blavin, Adele Shartzer, Sharon K. Long and John Holahan, Health Affairs, “An Early Look At Changes In Employer-Sponsored Insurance Under The Affordable Care Act,” December 2014)
More new Medicare beneficiaries enrolling in MA than in prior years; 52 percent of 2011 MA enrollees switched from traditional Medicare
A study published in Health Affairs found that more Medicare Advantage (MA) enrollment is coming from people new to Medicare. Even though the majority (78 percent) of newly eligible Medicare beneficiaries are enrolling in coverage under traditional Medicare, the share of those choosing MA has increased since 2006. In 2011, 22 percent of new Medicare enrollees opted for MA coverage over the traditional program, compared with 15 percent in 2006.
The researchers also found that 52 percent of MA enrollees in 2011 had switched from traditional Medicare, a decline from 78 percent in 2006. The study looked at switching from MA to the traditional program and at the characteristics of markets associated with enrollment changes. It found that dual eligible individuals were more likely than non-dual eligibles to switch from MA plans into traditional plans (10.1 percent annually). It also found that MA market penetration affected rates at which individuals switched between MA and traditional Medicare plans—the higher the penetration, the more likely new Medicare enrollees were to switch from traditional Medicare into an MA plan. Finally, looking to the future, the study suggests that if this trend continues, the number of Medicare beneficiaries enrolled in MA will continue to grow as newly eligible Baby Boomers age into the program.
(Source: Jacobson, Gretchen A., Neuman, Patricia, and Damico, Anthony. Health Affairs, “At Least Half of New Medicare Advantage Enrollees had Switched from Traditional Medicare During 2006-11,” January 2015)
ACA silver-level family plans have widely varying deductibles
USA Today found wide variation in deductibles in the health plans offered in 37 states through the federally facilitated marketplace (FFM) for coverage in 2015. Looking at insurance offerings at the county level, the reporters found that more than one in 10 counties experienced increases in deductibles over 2014. According to the analysis, consumers have chosen health plans with higher deductibles in exchange for lower premiums. In some counties, enrollees only can choose plans with high deductibles. Health plan availability and premium costs vary across state lines, for instance:
- The lowest deductible for a silver-level family plan in New Castle County, Delaware is $500 more than the highest deductible equivalent plan in nearby Salem County, New Jersey.
- Texas plans have the widest variation in deductibles in the country, ranging from $0 to $12,700 for a silver-level family plan. The amount of choice varies by county: in Dallas County, residents can choose from 26 plans offered by seven health plans. Meanwhile, Van Zadt County only has one health plan offering six plans; consumers can choose either a $9,000 or $12,700 deductible for a silver-level family plan.
- In Kansas, consumers in most counties are losing a low deductible plan that had been offered in 2014. In Topeka County, the only plans available have high deductibles that start at $5,000 for a silver-level family plan.
(Source: Hoyer, Meghan. USA Today, “ACA plan deductibles vary wildly, challenging consumers,” December 29, 2014)
Hospital quality reporting may be linked to lower hospital pricing
Public reporting of hospital quality data may be linked to lower hospital prices, according to new findings published in Health Affairs. Researchers analyzed prices for two common and costly cardiac procedures over a five-year period and found that the introduction of Hospital Compare – the public reporting initiative for Medicare – is associated with slower price increases in states where hospitals had not been reporting on quality. The researchers say the findings suggest that publicly-reported quality data helps private insurers negotiate payment with hospitals, intensifying price competition.
The researchers acknowledged that some are concerned that current quality reporting initiatives place more pressure on hospitals and not enough on health plans. However, private insurers participating in the marketplaces may become more aware of their own quality scoring when the Centers for Medicare and Medicaid Services (CMS) Quality Rating System begins in 2017.
Background: In 2007, CMS launched the Hospital Compare initiative to require hospitals to report outcome-based quality scores. The initiative was intended to give consumers the tools to select high-quality hospitals and encourage hospitals to improve care. Research has shown, however, that public quality information has done little to influence consumers’ choice of hospitals.
(Source: Dor, Avi, Encinosa, William E., Carey, Kathleen, Health Affairs, “Medicare’s Hospital Compare Quality Reports Appear to Have Slowed Price Increases for Two Major Procedures,” January 2015)
Study: Physicians are less confident than other hospital staff in their department’s ability to resolve Meaningful Use issues
A study of 400 physician and advanced practice provider participants at the University of North Carolina Health Care System indicates that physicians are less confident than other staff in their department’s ability to resolve Meaningful Use (MU) implementation problems. The researchers aimed to understand physicians’ perceptions of and their willingness to implement MU. They found that specialists are more likely to believe MU diverts focus away from other patient-care activities than their primary care counterparts (12.6 percent “strongly agree” vs. 4.4 percent). Moreover, physicians are less willing to change work practices for MU than are nurses and other staff (57.9 percent “very willing” vs. 83.3 percent).
Related: Deloitte’s 2014 Survey of U.S. Physicians monitors attitudes and expectations for health information technology and MU implementation. The latest findings suggest that most of the 56 percent of physicians who have met MU stage 2 intend to achieve MU stage 3, and less than one out of every six have no future plans to achieve the next stages of MU. Among physicians whose primary work-setting has an electronic health record (EHR) that currently meets MU stage 1 or 2, over half report value/benefits of MU on the practice of medicine. However, around three in four report that EHRs increase costs and do not save time:
(Source: Shea, Christopher M., Reiter, Kristin L., Weaver, Mark A., McIntyre, Molly, Mose, Jason, Thornhill, Jonathan, Malone, Robb, Weiner, Bryan J., “Stage 1 of the meaningful use incentive program for electronic health records: a study of readiness for change in ambulatory practice settings in one integrated delivery system,” December 14, 2014)
HHS: Enrollment grows to nearly 6.6 million as of January 2
On January 7, the U.S. Department of Health and Human Services (HHS) released its seventh weekly update on plan selection in the second open enrollment period for the FFM:
- Nearly 6.6 million consumers have selected plans since open enrollment began on November 15, 2014; more than 102,000 selected plans during the seventh week (December 27 through January 2)
- More than 51,000 users visited CuidadoDeSalud.gov, the Spanish-language FFM, during the seventh week; this bought the total to 571,220 users
Related: The latest Gallup poll on insurance coverage in the U.S. found that 12.9 percent of the U.S. adult population is uninsured – the lowest rate ever documented by Gallup. The uninsured rate declined from 13.4 percent since the last quarter of 2014, and has fallen 4.2 percentage points since the individual mandate went into effect. Black and Hispanic Americans have seen larger gains in insurance coverage than White Americans:
(Source: Jenna Levy, Gallup, “In U.S., Uninsured Rate Sinks to 12.9%,” January 7, 2015)
FDA proposes rule requiring electronic transmission of certain prescription data
Last month, the FDA released a proposed rule to change prescription drug and biological product labeling regulations (including those for blood products) to no longer allow prescribing information to be distributed in paper form. Specifically, the FDA proposes to make electronic transmissions of certain prescription data necessary for all health care professionals (e.g., prescribers and pharmacies), a move intended to reduce health care errors by ensuring prescription data is current and accessible to health care professionals. The rule would only be applicable to information distributed by manufacturers to health care professionals and would not apply to information distributed to patients (e.g., packaging inserts). Instead, patients would need to rely on the FDA’s labeling repository website, Labels.FDA.gov, to obtain the most up-to-date information. The proposed rule is estimated to yield industry-wide cost savings of about $52 to $164 million over a 10-year period, including anticipated savings as a result of decreases in adverse reactions. The FDA seeks to make the rule effective six months after and compliance date two years after the final rule is published.
Reaction: The Generic Pharmaceutical Association (GPhA) issued a statement shortly after the proposed rule was released in support of the proposed changes. GPhA acknowledges that the new format would allow pharmaceutical manufacturers to send updated information on drugs to health care professionals in weeks, rather than the months and years it currently takes for paper labels to be updated. This can help reduce prescribing errors, is environmentally sustainable and can produce supply chain savings for companies that would no longer need to store, ship and print paper labels.
On the Hill & In the Courts
FDA Oncologic Drugs Advisory Committee recommends approval of first biosimilar application
The FDA Oncologic Drugs Advisory Committee (ODAC) voted unanimously (14-0) this month to approve a biosimilar version of Filgrastim made by Sandoz. If the FDA elects to follow the committee’s recommendation, it would be the first biosimilar to be approved in the U.S. The FDA accepted Sandoz’s application for the biosimilar version of the drug in July 2014, and it was the first drug to be reviewed under the biosimilar pathway created by the Biologics Price Competition and Innovation Act of 2009 (part of the ACA). According to the FDA, biosimilarity is defined as “highly similar to the reference product notwithstanding minor differences in clinically inactive components; and there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product.” In recommending that the FDA approve the drug, ODAC found that the biosimilar has no significant clinical difference from the biologic product it will compete with.
In early December, Sandoz announced that evidence from the Phase III clinical trial (during Phase III, the drug is given to large groups of people to confirm effectiveness, identify side effects, compare it to commonly used treatments and collect additional information) indicated that the drug “demonstrated similarity” to Amgen’s Neupogen®. Sandoz has sold the biosimilar version of Filgrastim in European markets since 2009.
Analysis: For many developers and researchers this is an exciting moment in the follow-on biologics / biosimilars industry. It represents the first proof of the FDA biosimilar approval pathway and the first opportunity to define the viability of the business case. That being said, the finding of similarity may not be fundamentally surprising to many; Sandoz would not have made it to this point without clear, scientific evidence in place. One question now is to what degree will physicians and health plans (primarily physicians) accept the biosimilar therapy as a true alternative to the original biologic for both existing and recently diagnosed patients? At the same time that the scientific and medical community is questioning how similar is similar enough, others will be interested to see how patients answer to the question, “Is it similar enough to put into my body?” Patient attitudes toward biosimilars, in addition to the perspectives of providers, payers and pharmacies, will likely play an important role in substituting products.
CMS issues last round of grant funds for marketplaces
On January 5, CMS awarded more than $110 million in the final round of grants to six states and the District of Columbia for setting up health insurance marketplaces under the ACA. The recipients applied for the last round of funding by November 14 and received funding for the following areas and amounts:
Coupled with the funding announced on December 15, 2014 (see the December 23, 2014 Health Care Current), the final round of federal funding for the marketplace is nearly $300 million. States can use these grants for design, development and implementation of their marketplaces, but not for regular operating costs. All state-run marketplaces must be financially self-sustaining as of January 1, 2015.
House passes bill exempting many veterans from ACA employer mandate
On January 5, the U.S. House of Representatives unanimously (412-0) passed the Hire More Heroes Act, which would exempt many veterans from the calculation used in the employer mandate policy. If the bill passes the Senate and becomes law, veterans who served since 9/11 and already have Tricare or other military health insurance sources will not need to be included in businesses’ employee counts. The bill was originally introduced in early 2013, but failed to pass the Senate.
Background: The penalty begins in 2015 for employers with 100 or more employees and in 2016 for those with 50-99 employees. Also last week, the House also passed (252-172) a bill to change the definition of full-time from the current 30-hour threshold to 40 hours per week. The Obama Administration has indicated that it would veto the bill, and the House’s vote fell short of the 290 votes needed to override a veto from the president.
Medicaid physician pay “bump” expires
Earlier this month, the ACA’s mandatory increase of primary care physician payments in Medicaid to match Medicare levels expired, leaving states to decide whether to continue the match program. The Urban Institute looked at Medicaid physician fees in 49 states and the District of Columbia (Tennessee was excluded from the analysis because all Medicaid enrollees are in managed care organizations) to find that primary care services fees would be reduced by an average of 42.8 percent starting in 2015 unless states take action. The results varied by state, with physicians in states like Montana, North Dakota, Maryland and Alaska seeing no reduction in fees, and those in seven states seeing fee reductions of more than 50 percent.
According to research that was cited in this study, 23 states have indicated they have no intention to continue the increased payment level after 2014. Those states have tended to be the ones where the difference between Medicaid and Medicare rates are the highest; thus, rates there will fall even more than the average, at more than 47 percent. These states provide coverage to more than 71 percent of Medicaid enrollees. Fees in the remaining states – both those that are undecided about plans for 2015 and those that might use state funds to continue the increase – would fall around 31 percent. States that have indicated they will extend the increased match cover approximately 15 percent of all Medicaid enrollees. The researchers did not find that states that decided to expand Medicaid were either more or less likely to extend the payment policy into 2015.
(Source: Stephen Zuckerman, Laura Skopec, and Kristen McCormack, Urban Institute, “Reversing the Medicaid Fee Bump: How Much Could Medicaid Physician Fees for Primary Care Fall in 2015?” December 2014)
Around the Country
States have customized ACA rules on premium rating
Policies in the ACA limit how insurers may vary health plan premiums based on enrollee characteristics. The Center for Health Insurance Reform at Georgetown University analyzed states’ implementation of these rules to find that most have implemented additional policies to minimize market disruption or protect consumers. Insurers may only consider individual vs. family coverage, age, tobacco use or place of residency as factors to adjust premiums. States have some leeway to choose how they regulate the non-group marketplace to conform to federal regulations; in particular, they can create greater limitations on premium variation. Some examples include:
- Age rating: Two states kept their pre-ACA policy and prohibited all age rating. In most states (45), the federal standard applies. Three states plus the District of Columbia modified the federal standard to regulate how much premiums may increase annually due to age.
- Tobacco rating: Federal law permits tobacco rating of up to 50 percent (insurers can charge smokers a premium 1.5 times higher than a nonsmoker), but some states chose to prohibit varying premiums for tobacco use or permit it but have a lower percentage increase allowed for smokers. Some of the states that chose to prohibit tobacco rating already had this policy in their insurance regulations before the ACA.
- Geographic rating: States widely vary in their approaches to policies around how insurers can vary premiums for geographic areas within the state. The federal method allows different premiums for different metropolitan statistical areas (MSAs), but does not specify the degree to which premiums may vary within a state. In the federal approach, all rural areas outside its MSAs are combined into one region. Only seven states use the federal method. The vast majority of states (37) chose to allow rating based on smaller units of geography than MSAs, such as ZIP codes or counties. Six states and the District of Columbia prohibited all geographic rating.
Analysis: The ACA changed the insurance market by limiting premium rate-setting factors. But it also granted leeway to the states to implement the new policies. Many states have taken advantage of this leeway to help minimize disruption to their health insurance markets. Previous insurance marketplace reforms have shown that regulators and policymakers can help provide oversight of market reform so that it does not inhibit health plans from continuing to participate and so that consumers do not experience premium shock.
(Source: Justin Giovannelli, Kevin W. Lucia, and Sabrina Corlette, The Commonwealth Fund, “Implementing the Affordable Care Act: State Approaches to Premium Rate Reforms in the Individual Health Insurance Market,” December 2014)
Large employers spur innovative health care system change
More than half of Americans get health insurance through their employers, so it is no surprise that large employers influence health care. In Seattle, one of the healthiest regions in the country, this influence is even more pronounced. Some of Seattle’s large employers such as Boeing, Starbucks and Costco, are managing medical systems as they might other key suppliers and demanding standardized processes to increase efficiency and access. As a result, the companies have seen increased access, better outcomes in certain conditions for employees and reduced overall costs.
Virginia Mason is among several medical centers in Seattle that have implemented innovative changes in response to employer demands. When a group of Seattle-area employers threatened to stop using the regional health care system because it was too expensive, Virginia Mason began working with them to redesign the services that were the greatest concerns: treatments for back pain, sinusitis and other common conditions that kept employees out of work. Starbucks worked with Virginia Mason on spine care and helped spur straightforward improvements in service, including same-day access for employees and targeting unnecessary medical care.
Back pain is one of the most common reasons employees go to the doctor or miss work and is a major health care cost driver. Because of these factors, it is not surprising that the Seattle employers identified this common condition as a cost driver and an access challenge for their employees. It was not uncommon for patients with back pain to wait a month or more before getting an appointment at Virginia Mason. Across the country patients with back pain often get unnecessary tests or specialist referrals when physical therapy would have been the optimal course of treatment. To address some of these challenges, the spine clinic began reserving slots in the schedule for same-day appointments for patients with acute pain. Physicians also created a new form for ordering MRIs that required patients to meet one of eight criteria. This process cut down on unnecessary imaging that can drive up costs and expose patients to potentially harmful radiation.
Better use of therapists has made the process more efficient for patients. A therapist can listen to a patient’s concerns, assess his or her mobility and do basic diagnostic testing. A physician comes in after the patient has spent 30 minutes with the therapist, is briefed and develops a care plan with the patient and therapist. Fewer unnecessary tests and increased use of therapists – which the medical center calculated the cost to be about $1 a minute, compared with $4 a minute for a doctor – have led to lower costs and higher quality care. Virginia Mason patients with back pain typically need four to five visits to recover, compared with 10 visits nationally. According to survey data, the clinic's patients also return to work more quickly, missing two days on average compared with five elsewhere.
Employers in other states are beginning to push health care system improvements using similar strategies. As employers increasingly move employees to high-deductible health plans that increase out-of-pocket costs, collaborations between businesses and local health systems may become more common.
Analysis: Achievements in value-based care such as these illustrate some of the innovative thinking around changing incentives and care practices that started before, and even inspired, policies in the ACA. Some key elements contributing to the initiative’s ability to increase quality while reducing costs are that providers and employers worked together to identify high priority opportunities and that providers are able to learn from employers’ manufacturing process improvement systems. Better care does not necessarily need to be more expensive. In examples such as these, the better outcomes (less pain, fewer missed work days) are achieved for less money.