Health Care Current: January 27 2015 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: January 27, 2015
The urgent need 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.
- My Take
- Implementation & Adoption
- On the Hill & In the Courts
- Around the Country
- Breaking Boundaries
The urgent need in value-based care
Two weeks ago, I spent a full day talking to private equity companies, venture capitalists and others at the J.P. Morgan Healthcare Conference in San Francisco. The meetings gave me the opportunity to share what I’m seeing around Washington and the changes in the health care system I am seeing in our research. They also gave me some time to learn about pressing issues for some of the top investors in the health care industry.
Until recently, the value-based care conversation has centered on traditional players—hospitals, health plans and physicians. Many health plans are partnering with hospitals to share insurance and care functions, and many hospitals are working to align incentives and to clinically integrate with physicians—physicians from the practices they have acquired and physicians in the community.
The conversations I had in San Francisco echoed a question that many investors have been weighing: What does value-based care mean for other types of providers in the health care system? We know that accountable care and value-based care models call for performance on total cost of care, quality outcomes and patient experience measures. How does this translate to a new business model for outpatient providers?
Take urgent care clinics as an example. The Urgent Care Association of America estimates that 83 percent of these centers saw growth in utilization in 2013. They had nearly 14,000 patient visits in 2013, and handled an average of 40 visits per day.1
How do urgent care clinics, pain centers and others fit into health care’s value-based care future?
On the one hand, these organizations might be at a disadvantage in value-based care contracts if they are freestanding entities. Hospitals and their associated physicians might be more prone to direct patients to their own facilities so they can have better control of their patients’ care. Doing so might ensure they get the information they need about what services the individual got and allow them to easily follow up and coordinate care after procedures.
On the other hand, outpatient care providers – whether they are urgent care, retail or other clinics – that approach value-based care payers (health plans, health systems or others) might be able to show a value proposition that allows them to win business and competitive advantage. After all, most of the patients that are seen in urgent care clinics have a regular primary care physician.2
The business case for urgent care clinics has traditionally been rooted in two areas:
- Price: Obviously, providers that offer discounts for procedures (including for implantables and other high ticket items) below what they cost in other settings can help lower the overall cost of care.
- Patient experience and convenience: Many patients are attracted to the convenience outpatient provider settings offer – they may be closer to home, easier to find and easier to park at than hospital-based facilities. Deloitte’s 2012 Survey of U.S. Health Care Consumers found that 58 percent of consumers chose to visit retail clinics for their convenience, and 50 percent chose them so they could get in and out quickly and because they were available after normal business hours.3
As health care transitions toward a system based on value, I believe that both of these factors will likely continue to be important. But, I think the future could require more:
- Volume and appropriateness: “Cracking the nut” of total cost of care must go beyond getting lower prices for services. Providers that focus only on providing necessary services and helping patients choose the right procedures (even if that means choosing the less high tech or intensive ones sometimes) might help accountable care organizations (ACO) succeed in meeting performance goals.
- Safety: For outpatient surgery in particular, providers that can demonstrate low rates of infections, punctures and other errors could be more likely to be targeted for strategic relationships.
- Care coordination: ACOs and their associated physicians might be more successful if they have the ability to share clinical and other relevant information with outpatient providers that informs appropriateness and surgical risks before a procedure is conducted. ACOs also will likely want to receive information about how the surgery went and be able to follow up with the patient after he or she gets home to take the recommended steps for recovery, including medications as needed. This type of information requires not only technology, but a work process to use the information.
The real winners in the outpatient provider and retail health space may be those who can approach health systems and investors with information that shows they can deliver on the new business case and that they are prepared to make the transition with them to value-based care.
Supporting evidence for this case may need to come from clinical information systems that let outpatient providers analyze trends in financial and clinical performance on individual patients and physicians as well as the overall indicators that matter. A robust strategy for performance improvement – starting with measuring current baseline performance, working on identifying barriers to improvement and surmounting them – may also need to be part of the strategy, especially as other competitors also start demonstrating their value proposition. Finally, to deliver on coordination, the outpatient providers’ systems will likely need to collaborate with physicians and health systems.
1 Urgent Care Association of America, “2014 Benchmarking Survey”
3 Deloitte 2012 Survey of Health Care Consumers
By Sarah Thomas, Research Director, Deloitte Center for Health Solutions, Deloitte Services LP
President Obama gives State of the Union; health care not a prominent topic in the speech
In his sixth annual State of the Union address last week, President Barack Obama largely focused on economic proposals, ranging from free community college to paid sick leave. He also briefly touched on achievements in health care that have come out of the Affordable Care Act (ACA). In the official Republican response to the president’s speech, newly elected Senator Joni Ernst declared the GOP’s resolve to continue to repeal and replace the ACA, which she maintained has harmed many Americans. Five highlights from the State of the Union address:
Analysis: The Precision Medicine Initiative aims to spur innovation and research through closer collaboration among patients, providers and researchers. Analysts believe that the effort will complement the 21st Century Cures Initiative (see the January 20, 2014 Health Care Current). The initiative will focus on designing health promotion and treatments around individuals’ genetics, environmental exposure and lifestyle. Advances in medical imaging and information technology are expected to accelerate knowledge and help develop new treatments.
The comments in President Obama’s speech around cyber threats also drew attention from cybersecurity experts and stakeholders in health care. Since the Health Insurance Portability and Accountability Act (HIPAA) Breach Notification Rule was published in 2009, more than 800 large-scale breaches, defined as those affecting 500 or more individuals, have been reported. It is prime time for health care hackers. With the advent of big data and a sharp rise in the amount of health care data being collected, stored and exchanged, opportunities to steal sensitive information and wreak serious damage across the health care spectrum are escalating. A recent blog post, “Secure, vigilant, and resilient: three pillars of health care cyber risk protection,” identified three main types of threat actors in health care and explained how health care leaders might address cyber risks in their organizations.
Implementation & Adoption
Study: ACA has led to lowest uninsured rates and greatest affordability in more than a decade
The national uninsured rate is the lowest it has been in over a decade, according to a recent survey by The Commonwealth Fund. The survey also found that fewer individuals said they delayed seeking treatment or experienced financial strain due to medical costs:
(Source: Collins, Sara R., Rasmussen, Petra W., Doty, Michelle M., Beutel, Sophie, The Commonwealth Fund, “The rise in health care coverage and affordability since health reform took effect – findings from the Commonwealth Fund Biennial Health Insurance Survey, 2014” January 2015)
CDC reports improvements in hospital infections
The U.S. Centers for Disease Control and Prevention (CDC) found that hospitals have improved their rates of health care-associated infections (HAI) in many areas. The HAI Progress Report drew data from more than 14,500 hospitals and other health care facilities and analyzed the prevalence of common infections that threaten patients. Most types of infections have declined:
Despite the small increase in the CAUTI rate, initial evidence from 2014 indicates this rate could be declining. This report is the first to include state-specific data for MRSA bloodstream and C. difficile infections. Despite the marked decreases in most HAI categories, the U.S. did not meet 2013 goals.
(Source: CDC, "Healthcare-associated Infections (HAI) Progress Report,” January 13, 2015)
Seven out of the 10 busiest emergency rooms saw patient visits increase from 2012-2013
In 2013, seven out of the 10 busiest emergency departments (ED) across the U.S. saw an increase in patient visits over 2012. New York-Presbyterian Hospital, the second busiest ED in the country, saw patient visits increase more than 13 percent during that period:
The 24 busiest EDs in the U.S. had 18.7 percent more patient visits during this time period. And, according to Modern Healthcare, many of these hospitals continue to report higher volumes for 2014.
Analysis: To some, the continued increase in patient visits to the ED seems to be in direct contradiction to the decreasing rate of uninsurance during the same time period. Many observers might have expected that with better coverage, people would seek care from physicians rather than EDs.
The rates of ED use could begin to decrease if the newly insured population—whether covered by Medicaid or private insurance through the marketplaces—begins to understand and take advantage of their health insurance coverage and switch to physicians for some of their care they might be used to getting from EDs. However, it could take time for them to be educated about the availability and value of getting care from physicians.
Even so, some increases in ED use might be expected. First, some of the care may indeed represent emergency care. Second, people who have recently gotten health insurance might be the most likely to have low wage jobs without much flexibility to take time off and thus use the ED because it is open before or after work.
The emergence of retail clinics and urgent care clinics could disrupt the traditional physician-patient relationship as well as the pattern of ED use. For some primary care services, retail clinics do not require an appointment, are open after hours and do not require a pre-existing relationship. Furthermore, in cities with many urgent care centers, these facilities may be more convenient and welcome people with coverage for urgent care.
(Source: Modern Healthcare, “By the numbers: Busiest emergency departments,” January 19, 2015)
House E&C holds SGR hearing
The House Energy and Commerce Committee held a hearing on January 21 and 22 concerning the Medicare sustainable growth rate (SGR), which governs fee-for-service physician payment. On the first day, former Senator Joe Lieberman, former Congressional Budget Office (CBO) Director Alice Rivlin, and Marilyn Moon, Institute Fellow at the American Institutes for Research testified. Many of the attendees agreed that the SGR needs to be repealed and replaced with a “permanent fix,” but differed on how to pay for doing this. Senator Lieberman previously co-sponsored a Medicare reform bill, which – in addition to addressing the SGR – would have raised the Medicare eligibility age and Part B premiums and cut $600 billion in spending. Lieberman said that these reforms could both pay for an SGR fix and secure Medicare’s future solvency.
Moon and some committee Democrats expressed concern about shifting more cost sharing to Medicare beneficiaries. Most Medicare beneficiaries live on fixed incomes, and medical costs are already a significant burden. Rivlin suggested Medicare could mean-test premium increases and waive deductibles for physician visits to encourage regular care.
Day two of the hearings directed the focus to stakeholder perspectives. The witness panel included representatives from AARP, the American Hospital Association (AHA), the American Medical Association (AMA) and representatives from several provider specialties. These witnesses favor permanent repeal of the SGR; the differences among them lie in how to pay for this policy. In their testimonies, Richard Umbdenstock from AHA and Eric Schneidewind from AARP offered different options:
- Umbdenstock proposed redefining Medicare structures by combining Parts A and B and creating a unified deductible and co-insurance benefit structure. He also outlined limits to Medigap coverage, increasing income-related Medicare premiums and reforming the malpractice system.
- Schneidewind urged Congress to look to prescription drugs for cost-savings. He proposed requiring drug manufacturers give rebates to Medicare for the drugs paid for dual-eligibles and prohibiting pay-for-delay agreements among drug manufacturers.
Background: Last year, an SGR bipartisan repeal bill was supported by both the Senate and House of Representatives but was ultimately not passed because lawmakers could not agree on financing policies. The legislation called for improving the payment system through incentives for better quality, care coordination and innovation. If Congress does not reach consensus on a repeal and replace plan by March 31, 2015, another temporary patch may need to be enacted (see the January 6, 2015 Health Care Current).
On the Hill & In the Courts
SCOTUS hears oral arguments for Armstrong v. Exceptional Child Center, Inc.
Should providers (and other stakeholders such as patients) be able to sue states and/or the federal government if they feel that Medicaid rates are too low to cover their costs? This was the question before the U.S. Supreme Court as they heard oral arguments on Armstrong v. Exceptional Child Center, Inc. last week. The original case centered on the argument from five centers that serve individuals with intellectual and developmental disabilities that the Idaho state Medicaid agency was keeping reimbursement rates too low, even though several studies showed that care costs had increased. Idaho officials arguing in opposition to the centers claim that neither providers nor patients should be able to use the courts to gain higher reimbursement rates. The Obama Administration and 27 states support Idaho’s position on the matter.
Throughout the day, the justices posed questions on both sides of the argument. They debated whether a decision in favor of giving providers this leeway could give the courts too much power over state budgets, while other questioning looked at whether providers have other ways to contest reimbursement rates at the state level.
HHS OIG to CMS: Step up oversight of hospital relationships with compounding pharmacies
Most acute care hospitals use compounded drugs and many contract with compounding pharmacies to purchase those products. Since the 2012 outbreak of meningitis that resulted from a compounding pharmacy that held contaminated injections, policymakers, regulators and other industry stakeholders have called for increased oversight of these entities and their products.
Generally, the U.S. Food and Drug Administration and state agencies oversee compounding pharmacies. But CMS and four hospital accreditors oversee the safety of compounded drugs in hospitals that participate in Medicare. The U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) recently found CMS may need to enhance oversight practices in this area. For example, the OIG found that only one oversight entity is consistently reviewing hospitals’ contracts with compounding pharmacies. Part of the problem is that the entities may lack sufficient staff. The OIG said that CMS should make sure that hospital surveyors are trained on safe compounding practices and should have updated guidelines that address hospitals’ contracts with compounding pharmacies. CMS agreed with the OIG’s recommendations and said it will explore making revisions to the guidelines and developing online training materials for hospital surveys.
More than 7.1 million individuals enrolled in coverage through FFM
On January 21, HHS released its ninth consecutive weekly report on enrollment in private health plans through the federally-facilitated marketplace (FFM). More than 7.1 million consumers have selected or were automatically re-enrolled into plans on the FFM. More than 400,000 signed up in week 9 (January 10-16). Weeks 4 and 5 (the last two weeks that individuals had to sign up for their coverage for it to begin on January 1, 2015) had the most enrollments so far:
CuidadoDeSalud.gov saw 152,385 users during week 9, which brings the total number of users of the Spanish-language FFM to 774,789 during this open enrollment period. Florida and Texas have recorded the most plan selections of states using the FFM so far, at almost 1.3 million and 918,890 respectively.
Background: Open enrollment began on November 15, 2014 and ends on February 15, 2014. HHS announced target enrollment figures of 9 to 9.9 million just prior to the start of open enrollment, but the CBO originally predicted earlier in 2014 that total enrollment would reach 13 million. These projected figures include both state-administered marketplaces and the FFM, while HHS’s weekly updates only include data for the FFM.
Around the Country
Arkansas governor announces plans for Medicaid “Private Option”
Arkansas’s newly elected governor, Asa Hutchinson, spoke before an audience at the University of Arkansas for Medical Sciences last week to announce that he aims to continue the state’s alternate Medicaid expansion program – also known as the “private option” – until it expires in 2016. Governor Hutchinson said that the private option has benefited the state in many ways so far: the uninsured rate has declined by 10 percent because more than 210,000 individuals gained insurance, and urban and rural hospitals have seen uncompensated care costs drop by $69 million. Arkansas’s budget has also shrunk by $88 million, partially because some people who had Medicaid are now getting care under the private option plan, which is currently paid for entirely by the federal government. Several state agencies (e.g., Departments of Correction and Health) also have seen reduced uncompensated care costs. Hutchinson said that the state funding match will reach 10 percent in 2021, costing the state $200 million to continue the private option program. The governor provided details on the characteristics of the 210,000 individuals in the program:
- 40 percent were unemployed when they applied for the program, but 70 percent were “employed at some point in time”
- Enrollees age 45 and older were less likely than younger enrollees to be employed, and women were more likely than men to be employed
- 10 percent of the enrollees are considered “medically frail”
Hutchinson also asked the state legislature to create a Health Reform Task Force which will make recommendations for future options for the Arkansas Medicaid program.
Reaction: The Arkansas Hospital Association claims that the private option plan has helped the state’s hospitals. The association surveyed the state’s hospitals to find that uninsured outpatient and emergency visits and inpatient admissions have all declined significantly from 2013 to 2014. In 2014, total inpatient admissions in the state increased 0.7 percent, but declined 46.5 percent in the uninsured population. This has caused uncompensated care losses to decline by more than 50 percent over the same period, from $122.6 million in 2013 to $53.4 million in 2014.
Background: Since January 2014, Arkansas has been using the ACA’s Medicaid expansion funds to purchase qualified health plans (QHPs) on the health insurance marketplace for newly eligible adults. More recently, CMS allowed Arkansas to amend its Section 1115 Waiver to include new cost-sharing requirements for enrollees of the private option plan. Beneficiaries will now make monthly contributions into new health independence accounts, which are similar to health savings accounts.
Fighting the flu through improving vaccine technology
Researchers are getting closer to developing a “universal” influenza vaccine thanks to a newly discovered class of antibodies. Currently, flu vaccines are developed every year based on the best predictions of which strains will circulate during that flu season. Unfortunately, the system is not perfect. In some flu seasons the available vaccines are not well matched to the circulating strains because vaccine developers must identify the strains that the vaccine will protect against months before the start of the flu season. This can result in high rates of flu. Even in young, healthy people, the flu can be debilitating and cause missed work and school. In young children, older adults and people with chronic conditions or other risk factors, the flu can lead to hospitalization and even death.
A “universal” flu vaccine could stave off all (or at least most) strains of the virus, for years at a time. Researchers at McMaster University and the Icahn School of Medicine at Mount Sinai in New York City are developing a flu shot that could prevent what we are currently experiencing this year’s flu season: the annual flu shot does not accurately match the predominant influenza strain. The team has isolated universal-type antibodies and found that these antibodies are as effective against the flu as strain-specific antibodies. The data show that the subtype of antibodies located in the lungs and upper respiratory system are particularly effective at fighting the flu, which means that inactivated virus (as opposed to live-attenuated virus) would be the best fit for a universal flu vaccine. Their findings appear in this month’s Journal of Virology.
It is unclear when a universal flu vaccine will become widely available, but the study’s authors believe that a universal flu vaccine could become a reality in the next five to seven years.
Analysis: Since 2010, the CDC has recommended that everyone 6 months and older get a flu vaccine. This year the CDC reported that the vaccine is only 23 percent effective against H3N2, the predominant strain that is currently circulating. Although the strain has mutated since the vaccine was created and has made the vaccine less effective, the CDC still recommends people get the flu shot. The vaccine’s effectiveness is higher in children age 6 months to 17 years than it is in adults age 18 to 49.
Innovation in flu vaccines has mostly focused on incremental improvements, such as giving people a choice between a nasal spray, skin patch or shot and protecting against four strains rather than three. In addition to focusing on producing a universal flu vaccine, scientists and pharmaceutical companies are also working to improve seasonal flu production in the short term. The current technology to produce the seasonal flu vaccine is decades old. If scientists and pharmaceutical companies can advance the production and distribution process, vaccine manufactures would be able to wait longer to make the vaccine, which would give them more time to identify and target the strains that will be most predominant in the upcoming flu season.
Given the seriousness of the flu and the resources it takes to promote vaccination every year, improved production of the seasonal flu would represent major advancements in public health until the milestone of a universal flu vaccine could be realized.