Perspectives

Health Care Current: January 6, 2015

Can health care meet great expectations for 2015?

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.

Can health care meet great expectations for 2015?

For many, the start of a new year brings renewed energy and optimism around resolutions and self-improvement. It is also a time for performance appraisals and goal setting for many businesses and their employees—a time to look back over the previous year and celebrate successes as well as identify areas for improvement. This year, in addition to my personal resolutions, I am focusing on what I’d like to see happen in 2015 that I think could move the health care industry forward and help surpass stakeholder expectations for delivering on value.

Some of last year’s big stories underscored system discontent across the stakeholder spectrum. Headlines like “Out-of-pocket spending continues to burden consumers,” “Hospital Value-Based Purchasing Program has not affected hospital quality performance” and “ICD-10 delayed: What’s next for stakeholders?” rattled the health care industry. As Deloitte surveys have found year after year, too many physicians, employers and consumers grade the U.S. health care system a “C” on its performance. This is not good enough.

At the same time, there was some good news in health care last year. Certainly the continued slow growth in health care spending was one, as was the robust enrollment in health care marketplaces and Medicaid, which helped reduce the rate of uninsurance. Hospitals reduced readmissions across the country.

So in the spirit of the new year and setting expectations for the months ahead, here are some expectations I’d like to see met in 2015:

Value-based care initiatives become overwhelmingly successful
I would love to hear about how accountable care organizations (ACO) are working to improve quality, delight patients and slow the growth in health care spending. I would like to learn what the secret is behind the success stories. Is it analytics? Clinical integration? Patient engagement? My guess is that it may be all of the above and possibly more, but it would be very exciting to see delivery on the promise of value-based care, especially now that 89 more ACOs signed on to the Medicare Shared Savings Program.

Physician payments reformed; Congress passes permanent solution
We most likely will see a “patch” to the sustainable growth rate problem in Medicare; it is certainly what we have seen year after year. Last year, Congress got pretty close to a fundamental change not only to the formula but to physician payment policies. There would have been more incentives for physicians to provide excellent care by working in teams. Although the legislation was supported by both parties in both chambers, it fell by the wayside when it came time to find the budget cuts to offset the increases in spending associated with overturning the update formula.

National health care spending continues trend of slow growth
In 2012, spending grew only 4.1 percent over 2011. It slowed even more in 2013, at 3.6 percent over 2012.1 Many expected spending growth to start picking up as we emerged from the recession, but the continued slow growth has persisted. Experts have attributed the slower growth to different reasons (e.g., the rise in out-of-pocket spending, value-based care initiatives), but I think the jury is still out. The bottom line is that slow growth is good for consumers, employers and taxpayers.

Obesity rate drops; public health efforts show progress
It would be great to see rates of obesity turn around and fewer people experiencing chronic disease. For example, I would love to see the Million Hearts™ initiative deliver on the promise of saving lives and reducing morbidity and mortality. Success might come from consumer engagement efforts, physician focus on exercise and diet discussions with patients or even wider use of wearables. Effective disease management and workplace wellness programs might also lead to positive results.

Next generation of health care tools target consumer behavior
We have excellent platforms that help consumers find restaurants, flights and hotels. Health care is a lot more complicated and people think about it differently than other services. New tools could help consumers choose health plans (e.g., through the insurance marketplaces and private exchanges) and to find doctors, low-cost scans and tests and good deals on prescription drugs. Developers are working on these tools already, but it would be great to see consumer adoption increase. Then we may see an increase in respondents who say they have the programs, online tools and incentives that help them monitor their health and/or make health care decisions.

Supreme Court rules on health insurance subsidies in the federal and state marketplaces; administration and new Congress work together on health issues
This spring, the U.S. Supreme Court will hear King v. Burwell, a major case that could impact the availability of subsidies through the federally facilitated marketplace (FFM). The plaintiffs in King v. Burwell challenge the government’s authority to issue tax subsidies through the FFM and argue that the ACA only allows the government to provide subsidies to individuals who purchase insurance through a state-based marketplace. While I don’t pretend to be an expert on the legal nuances of the case, I do know that the ruling will make a difference to the millions who are getting access to care this way and to the health plans, providers and life sciences companies who are seeing more customers with this type of coverage.

The midterm elections stirred the pot around Washington. A new Congress with both chambers held by the same party is likely to mean that more bills make it to the president’s desk. But, it’s too early to tell what such legislation might look like. It’s my hope that both parties can come to agreement on some of the major issues facing health care.

Health care makes enormous strides in Ebola outbreak
Last year, the headlines were riddled with concern, heartbreak, a bit of panic and many accusations surrounding the Ebola outbreak in the U.S. and abroad. This year, despite recent flare ups causing worry about more infections to come, I hope that the many efforts surrounding the control and prevention of Ebola pay off and that we begin to see Ebola drop off the news wires. This could come quickly in the new year as policymakers, scientists, researchers and many other stakeholders watch with bated breath as early vaccine trials are completed.

ICD-10 implementation goes off without a hitch in October
Hospitals, states and health plans have worked hard to put new systems into place through training and running simulations. It might be best for policymakers and others to stay the course. I recognize this has been challenging for some physician practices, but ICD-10 could help create a platform for higher quality information that helps stakeholders better understand health care and solve its problems.

New technologies, drugs and products help solve health care’s toughest problems
I saw many promising ideas at TEDMED (see the September 23, 2014 Health Care Current) and heard of many more at Singularity University’s Exponential Medicine conference last month. Deloitte’s surveys of U.S. physicians and consumers are finding that the market is demanding these products, and consumers and physicians are beginning to catch on to the value of mHealth. These ideas have great potential, and I hope many of them catch fire.

Health care industry moves closer to interoperability
Early last year, I attended a briefing on health IT that featured hospital chief information officers. I was struck by how often the theme of interoperability came up. There has been an enormous investment in building up the health IT infrastructure, and health care could benefit from technology that facilitates sharing and communicating information across systems and settings.

If all these expectations come to fruition, it might do a lot to shift course toward a better health care system. I look forward to a year of policy and research, where we continue to learn from the success stories as well as the wrong turns and setbacks.

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Source: 1Micah Hartman, Anne B. Martin, David Lassman, Aaron Catlin, the National Health Expenditure Accounts Team, Health Affairs, “National Health Spending In 2013: Growth Slows, Remains In Step With The Overall Economy,” December 2014 http://content.healthaffairs.org/content/early/2014/11/25/hlthaff.2014.1107.full?sid=9e390584-c485-43a4-b818-221e66681afe

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My Take

By Sarah Thomas, Research Director, Deloitte Center for Health Solutions, Deloitte Services LP

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HHS releases figures for the first month of marketplace open enrollment; nearly 1.8 million are new consumers, 1.6 million re-enrolling in the FFM

From November 15 through December 15, nearly 1.8 million new consumers enrolled in coverage through HealthCare.gov, according to the U.S. Department of Health and Human Services (HHS). Last week, HHS released its first enrollment update for the second open enrollment period. Many of the figures describe enrollment in the 37 states using the FFM, but several figures are available for states running their own marketplaces.

A total of 4 million individuals enrolled in coverage through the health insurance marketplaces during the first month – 3.4 million through the FFM and more than 600,000 in the 14 states that run state-based marketplaces (SBM). Plan selections in the FFM increased during the last days before December 15, the date by which individuals had to select a plan to get coverage starting on January 1. From December 7-15, nearly 60 percent of the first month enrollees (2 million people) selected a plan, and during the last three days, one fourth of the first month enrollees (approximately 1 million people) selected a plan.

The characteristics of the FFM enrollee population are fairly similar to last year:

*The race/ethnicity for nearly one-third of FFM plan selections is unknown

HHS provides estimates of state-level enrollment across the country, though some state-specific numbers may be more accurate (e.g., California and New York’s numbers only include figures for plan selections by new consumers, so they are lower than the actual figures).

(Source: HHS, “Health Insurance Marketplace 2015 Open Enrollment Period: December Enrollment Report,” December 30, 2014)

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Implementation & Adoption

 

Medicare Shared Savings Program added 89 new ACOs

The Medicare Shared Savings Program (MSSP) will add 89 new ACOs and 23,000 health care providers to the program this year, bringing the total number of MSSP ACOs to 405. While beneficiaries are free to seek care elsewhere, the number attributed to MSSP ACOs increased from 4.9 million to 7.2 million. MSSP ACOs can choose between two models: Track 1 allows ACOs to share in savings without being at risk for losses; Track 2 includes shared savings and losses. All of the new ACOs elected to participate in Track 1. Only five of the current participants chose Track 2.

The new ACOs are in 40 states; about one-fourth will operate in two or more states. One ACO will serve beneficiaries across eight states. Currently, all but two states – Alaska and Hawaii – have ACOs participating in the MSSP. Several states, including Florida, California, New York, Texas and Illinois, have more than 25 ACOs participating in the program. In November, the Centers for Medicare and Medicaid Services (CMS) estimated that the MSSP has saved Medicare more than $417 million and ACOs have qualified for shared savings payments of $460 million.

Background: CMS proposed updates to the MSSP in early December 2014. Many of the changes reflect feedback that CMS has received from health care providers and other stakeholders. The proposal includes changes to regulations for Track 1 ACOs, including allowed time in Track 1, beneficiary assignment, and data-sharing policies. The proposed changes to Track 1 came after approximately two-thirds of the ACOs indicated they would leave the program if CMS required them to participate in shared losses as well as savings. See more about the proposal in the December 9, 2014 Health Care Current.

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New investments in digital health doubled in 2014

Investments in digital health more than doubled in 2014, as $6.5 billion – compared to $2.9 billion in 2013 – was funneled into digital health companies throughout the year. While investments increased, investors funded only 459 companies in 2014 as compared with 590 in 2013. StartUp Health analyzed seed, venture, corporate venture and private equity funding to identify trends in digital health over the year. According to the findings, several trends are spurring this growth:

  • Health care providers and plans are looking for solutions to react to health care reform, which changed incentive structures and created new penalties
  • Increased prevalence of chronic disease and population aging have led patients to become consumers in their health care as the costs associated with their conditions becomes more salient
  • Disease treatments are changing with the increasing use of clinical decision support tools and personalized medicine and genomics
  • Clinical settings rely on technology for practice management
  • Innovation is globalizing, with more than 7,500 digital health startups around the world, many of which are outside of the traditional start-up areas

StartUp Health analyzed the type, number and size of investments that were made in 2014 and found that big data/analytics and population health had the largest share of funding:

(Source: StartUp Health Insights, “Annual Report: 2014: The Year Digital Health Broke Out,” December 2014)

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Employer mandate goes into effect; could be target for new Congress

On January 1, the Affordable Care Act (ACA) mandate for employers to provide health insurance to full-time workers went into effect for firms with 100 or more employees. Starting last week, firms of that size 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.

Employer groups and lawmakers have tried to change the law so that it only applies to workers who work at least 40 hours. Many commentators have speculated that this legislative change will be a top priority for the new Congress, as some Republican and Democratic lawmakers have hinted that they might be willing to change the policy. Companies who have many part-time employees (e.g., retailers, chain restaurants and hotels) are particularly affected by the requirements.

Background: The ACA employer mandate requires employers of a certain number of employees to provide health coverage or be subject to a fine of $2,000 per full-time equivalent employee after the first 30 employees for an employer with greater than 50 workers. The fine will begin in 2015 for employers with 100 or more employees and in 2016 for those 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).

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HHS, Labor and Treasury propose updates to summary of benefits and coverage rules

HHS and the Departments of Labor and Treasury proposed updates to the summary of benefits and coverage (SBC) requirements under the ACA in late December. Once finalized, the following changes would go into effect for plans starting on or after September 1, 2015:

  • Coverage examples: Currently, SBCs include two coverage examples (“having a baby” and “managing type 2 diabetes”). The proposal would add a third example that explains cost-sharing requirements for a foot fracture and emergency room visit. 
  • Length requirements: The current SBC forms are limited to four pages, which was interpreted in the final regulations to mean four double-sided pages. The proposal would streamline the requirements for the template and it would shorten the standard group health form to 2.5 double-sided pages. 
  • SBC and uniform glossary content: The proposal would change content requirements for SBCs and the uniform glossary. For example, it would remove SBC references to annual limits for essential health benefits and pre-existing conditions to reflect insurance market reforms imposed by the ACA. It would also revise some of the definitions in the uniform glossary and add definitions for terms like “claim,” “screening,” “referral,” “individual responsibility” and “minimum value.”
  • Duplication: The proposal would exempt health plans from having to provide an SBC form in certain cases, such as when an individual will receive it from another source.

Background: The ACA requires health plans to send an SBC form to each consumer that describes coverage in plain and concise language. The SBC forms also allow consumers to easily compare plans. Key features in the SBC include covered benefits, cost-sharing and exceptions and limitations to coverage. Consumers must receive a new SBC at the start of each plan year and be allowed to request one at any time and must receive within seven days.

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On the Hill & In the Courts

IRS, Treasury finalize regulations for charitable hospital and community health needs assessment requirements

Last week, the Internal Revenue Service and Treasury Department finalized rules for charitable hospitals – which are non-profit, tax-exempt organizations – in an effort to curb “aggressive debt collection practices, including allowing debt collectors to pursue collections in emergency rooms.” The ACA established the following requirements for charitable hospitals, which make up more than half of the hospitals in the U.S., in order for them to keep their tax-exempt status:

  • Charge no more for emergency or medically necessary care to individuals who are eligible for financial assistance than they charge for privately insured individuals or Medicare beneficiaries. 
  • Establish financial assistance policies that explain the criteria for eligibility and how consumers can apply; these policies must be “widely” publicized. 
  • Make “reasonable efforts” to determine whether an individual is eligible for financial assistance under the policy before they resort to financial collection methods. 
  • Perform community needs assessments once every three years and explain annually how they address their community’s needs. 
  • Translate financial assistance policies into the native language of any group that makes up 5 percent or more of the community’s population or when there are 1,000 individuals in that group – whichever is less.

The rules stipulate that charitable hospitals must act in good faith to update their financial assistance policies, but also allows “adequate time” to implement the changes above.

Related: The Missouri Hospital Association (MHA) issued a report on the status of charity care in the state to find that 122 hospitals provided more than $588 million in 2013. The MHA said this is the equivalent of 657,121 free emergency department visits, or 8,693,272 free physician office visits or 5,149,906 free mammograms. Five hospital systems in the state provided more than $35 million each in charity care that year, and 62 rural hospitals provided a total of $183 million in uncompensated care. Uncompensated care includes charity care that hospitals provide and bad debt from individuals who are unable to pay back the care they were provided.

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CMS: Latest ICD-10 testing was successful

In November, CMS conducted a round of acknowledgement testing where providers submitted Medicare fee-for-service claims to the system using ICD-10 codes to receive an electronic acknowledgement that their claims were accepted. Testers from 500 providers, suppliers, billing companies and clearinghouses submitted nearly 13,700 claims during the testing week. CMS said that nationally 76 percent of the total test claims were accepted throughout the week, and acceptance rates on Friday were as high as 87 percent.

CMS is conducting the testing in preparation for the implementation of ICD-10 on October 1, 2015. The testing allows providers and CMS to identify issues in claims processing ahead of time so they can be fixed before the transition happens. Many providers intentionally included errors in their testing claims to ensure that errors are identified and claims are rejected – this is known as negative testing. CMS will conduct two additional testing weeks in March and June before the transition occurs.

Related: Last month, House Energy and Commerce Committee Chairman, Fred Upton, and House Rules Committee Chairman, Pete Sessions, issued a statement in support of the current deadline for ICD-10 implementation. They emphasized that the Energy and Commerce Committee has worked continuously with CMS to ensure the deadline will be met and described ICD-10 implementation as “an important milestone in the future of health care technologies,” but indicated they are prepared to hold a hearing in the 2015 to discuss the issue. See more in the December 16, 2014 Health Care Current.

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Senate Special Committee on Aging recommends changes to Medicare Part D program

Greater use of generic drugs by Medicare beneficiaries could save the Part D program and beneficiaries even more money than it already has, according to a recent report by the Senate Special Committee on Aging. The Congressional Budget Office estimates that in 2007, use of generics saved the Part D program around $33 billion. More than one-fourth of those savings ($9 million) went to beneficiaries. The Medicare trustees recently found that 84 percent of Part D drugs are generics, and this has increased from 81 percent in 2012. Finally, according to Prime Therapeutics, a 1 percent increase in generics use could save 1.5 percent on drug spending without harming care and in some cases helping improve adherence among beneficiaries.

While there are challenges to greater use of generics in the Part D program, the committee suggested several ways to address these challenges:

  • Part D plans should promote greater use of generics by offering more generic options as alternatives to brand names
  • The Part D program should have mechanisms to encourage and reward plans that have developed successful strategies for increasing use of generics
  • Stakeholders should consider strategies to increase generic drug use among beneficiaries who receive Low Income Subsidy benefits, where the cost-sharing structure is equal across generic and brand drugs
  • Educational efforts should focus on helping beneficiaries and health professionals understand the efficacy of generic drugs 
  • The Office of Inspector General at HHS and the Government Accountability Office should develop more program integrity efforts aimed at pharmacies that may have questionable billing practices

Analysis: As the report notes, generic drugs account for 84 percent of drug use in the Medicare program. But there are still ways that CMS, Congress and others could increase the use of generics to produce savings for the Part D program. Step therapy – widely used in commercial plans – can help promote therapeutic alternatives. Part D plans could offer mandatory generics to require beneficiaries to pay the cost difference when they choose a multi-source brand drug which has a chemically equivalent generic available. Behavioral economics, cost transparency tools and other educational interventions could be leveraged from the commercial lines of business to improve use of generics and reduce confusion among beneficiaries. The Office of the Inspector General at HHS recently investigated the use of copay coupons in Medicare Part D to find that the safeguards that pharmaceutical manufacturers, health plans and individual pharmacies have implemented are not sufficient to prevent their use in these programs. OIG could work with the manufacturers and pharmacies to prevent their use. This topic was also covered in a recent Health Affairs article (see the November 25, 2014 Health Care Current).

(Source: U.S. Senate Special Committee on Aging, “Medicare Part D Prescription Drug Benefit: Increasing Use and Access of Affordable Prescription Drugs,” December 2014)

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D.C. uninsured rate decreased from 2013 to 2014

The uninsured rate in Washington, D.C. has dropped significantly from 2013 to 2014 according to DC Health Link, the health insurance marketplace. In 2013, about 6.7 percent of individuals were uninsured in the District. Approximately 18,000 residents in D.C. who were previously uninsured enrolled in a qualified health plan (QHP) through the marketplace or were deemed eligible for Medicaid through DC Health Link.

Last year, approximately 43,000 individuals enrolled in insurance coverage through DC Health Link and Medicaid. One in four of marketplace enrollees and 55 percent of Medicaid eligible individuals reported that they were previously uninsured. During open enrollment in 2014, DC Health Link enrolled more than 10,000 residents in private insurance coverage, and nearly 40 percent of those were eligible for financial assistance.

Related: During the second open enrollment, which began on November 15 and ends on February 15, the marketplace reported that 15,000 individuals have enrolled in coverage – most of whom were individuals re-enrolling in previous coverage. Fewer than 2,000 of the enrollees thus far are new. The deadline for coverage beginning January 1 was December 15.

(Source: Leighton Ku, Health Benefit Exchange Authority, “Covering the Uninsured Through DC Health Link: Report on the First Year,” December 2014)

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Around the Country

NORC report to ONC finds states face challenges with health information exchanges

NORC at the University of Chicago conducted case studies on the progress of health information exchange (HIE) programs in six states to find that each face different challenges. The researchers followed the efforts of HIE programs in Iowa, Mississippi, New Hampshire, Utah, Vermont and Wyoming, all of which received a portion of the $564 million in funding for state HIE from the Office of the National Coordinator for Health Information Technology (ONC).

Each state approaches HIE differently. Two of the states lead the efforts, while four of them have a state-designated entity (SDE) lead the HIE efforts. For the most part, funding comes through Departments of Health or Public Health, and in Wyoming the Governor’s Office handles the funding. There are two types of information exchange – directed exchange (“push”) and query-based exchange (“pull”) – and each state varies in its capacity to offer each function:

HIE stakeholders face many difficulties in developing a robust information exchange program. HIE organizations often have unique governance and oversight needs that impede further development and sustainability. Interoperability remains a challenge across the states, as many developers view it as contrary to their business interests. States can play important roles in advancing HIE efforts, particularly in the area of coordination between the affected stakeholders, such as providers, developers and policymakers. States could also benefit from federal standards and priorities around interoperability and information exchange, as states face challenges with buy-in from multiple angles.

HIE efforts have increased since the passage of the Health Information Technology for Economic and Clinical Health Act (HITECH), which funded the State HIE Program. States have successfully engaged providers, developers and other stakeholders to adopt greater use of information exchange. However, barriers exist, and states can continue to leverage insights from efforts across the U.S. to continue advancing HIE efforts.

Related: Last month, in report language that accompanied the recent budget legislation (Consolidated and Further Continuing Appropriations Act of 2015), congressional lawmakers directed the ONC to use its authority to stop the certification of electronic health records (EHR) that block information exchange. Lawmakers encouraged the ONC to decertify products that block information sharing, and calls for a report on this issue within 90 days of the bill’s enactment (approximately mid-March). See more in the December 23, 2014 Health Care Current.

(Source: Prashila Dullabh, Petry Ubri, Lauren Hovey, NORC at the University of Chicago, “The State HIE Program Four Years Later: Key Findings on Grantees’ Experiences from a Six-State Review,” December 2014)

 

Tiny wireless device could lead to better understanding and treatment of chronic pain

Researchers at Stanford University are building a miniscule wireless device that has the potential to transform treatments for pain. The research is one of many innovative projects funded by Stanford Bio-X seed grants, which bring multi-disciplinary teams together to solve complex biomedical problems.

Chronic pain costs the U.S. economy an estimated $600 billion a year. The most common treatments – narcotics and surgery – have drawbacks, including risk of addiction and complications from surgery. Available treatments do not help all people find relief from chronic pain.

The Stanford Bio-X project builds on research that employs optogenetics, a technique for controlling brain activity with light. Previously, researchers developed a method to activate neurons that transmit pain—one color of light would cause nerves to fire, another would stop them from firing, thereby preventing pain. This work involved genetically engineering nerves in mice to be responsive to light. But it had limitations. Since the light came through a fiber optic cable, the mice were not able to move freely. Moreover, any insights the research found may not be relevant to humans. However, the work did point to a new way of studying how the sensation of pain is transmitted to and from the brain, and the potential to develop better pain therapies.

The Bio-X researchers built on this initial research to develop a small wireless, remotely-powered device to allow the mice to move freely, use an exercise wheel and socialize. This wireless device allows researchers to design experiments that more closely emulate a patient's experience. For example, patients in pain do not necessarily complain only about the pain, but about related challenges such as not wanting to socialize, not being able to go to work or not being able to do activities they enjoy. In observing the mice, researchers can assess whether or not a treatment is allowing the mice to return to normal activities by tallying time spent exercising and socializing.

Analysis: In 2011, the Institute of Medicine reported about 100 million Americans have chronic pain. A recent study in the Journal of Pain showed that those with persistent pain (defined as frequent or constant pain lasting longer than three months) correlated with other indices of health-related quality of life, such as anxiety, depression and fatigue. The study concluded that from a public health perspective, persistent pain may be an indicator of unmet need for pain management in the general population, as well as an obvious risk factor for disability, depression and dependency.

Individuals with chronic pain are also at increased risk for long-term exposure to and dependency on pain medications. This new approach could offer a more direct way of studying pain and could lead to more natural measures of pain relief and potentially improved therapies.

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Breaking Boundaries

 

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