Health Care Current: July 1 2014 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: July 1, 2014
Welcome to the age of biosensing wearables
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
Welcome to the age of biosensing wearables
When I was 10 years old, I had a crush on a girl named Mary. Mary knew my love was real—when I saw her, my mood ring would turn from a swirly green to a wavy, purplish-orange. As an adult, I now have more sophisticated tools—tools that measure information related to my health and fitness. I’ve traded in my mood ring for my Fitbit®, which I have on from the moment I leave the house to walk our dog, Tarot. Tarot has an activity monitor too, which tracks his location by GPS in case he runs off. And at the end of the day, my wife compares my results to Tarot’s on her smartphone and decides who sleeps on the floor. Wearables have changed our lives.
The past few weeks have brought forth announcements by major technology companies touting new smartwatches and digital platforms, while smaller innovators are releasing a range of new wearable (and ingestible) devices. Wearables are now moving beyond the well-established realm of tracking movement, and new entrants are developing devices that continuously monitor a broad range of physiology—from posture to brain activity— and convert the information into a signal output. With greater connectivity and computing power in our pockets and on our wrists, we seem to have entered a new era: Welcome to the age of biosensing wearables.
Given the potential of these devices, one obvious question is if and when will health care take advantage of them. Unlike blood pressure cuffs and other devices that are driven by physician utilization, consumers appear to be driving the growth and use of wearables, and investors are taking note. According to Rock Health, venture funding of biosensing wearables is up five times since 2011.1 Wearable devices are becoming increasingly sophisticated, now measuring heart rhythms, oxygenation, glucose, blood pressure and more.
What might it take to get consumers to use these devices for their health—not just for fitness and wellness?
- Convenience: If it isn’t easy, people probably aren’t going to use it. Many of us have tried a traditional pedometer at one point in our lives, and just as many of us abandoned it within two weeks of starting. Through wireless data collection, made possible with low energy Bluetooth, data appears automatically with these new devices, and tracking is simplified, requiring little to no intervention by the user.
- Interoperability: Many consumers want a seamless experience. Having to switch from app to app to see the outputs of various sensors can be a recipe for frustration and confusion.
- Privacy: While consumers may be perfectly happy to share their step count with friends, co-workers and even strangers, they might be reluctant to do so with their employers or their insurance companies. Moreover, they may have no reservations about sharing their physical activity on any given day, but they might feel less inclined to reveal their glucose or blood pressure readings.
- Motivation: While each of the prior issues matter, perhaps the most important factor leading to the continued use of a tracker is making it social. Whether users are motivated by sharing, competing or obtaining rewards, the use of social media platforms has been cited as a strong determinant of ongoing use and achieving goals.2
As consumers get onboard, what might it take for the health care industry to recognize the value in these devices?
- Rationale: Just as consumers need to be motivated, health care needs a reason to adopt new technology. While innovation is exciting, unless there is a clear return on investment (ROI), few often embrace it. With the rise of value-based care and its focus on population health, prevention and outcomes, new opportunities could arise. Consumer engagement for health promotion and medication adherence, management of chronic disease and remote monitoring now present clearer paths to ROI.
- Validity: While the makers of biosensors make many claims about their accuracy, some are no more precise than my old mood ring. If medical decisions are going to be made based on these devices, they will need to truly reflect what they purport to measure. Some companies and developers have gone as far as to get approval from the U.S. Food and Drug Administration (FDA), and many more may follow.
- Reliability: The data need to flow consistently and accurately in order to be useful. Gaps introduce errors and a degree of uncertainty that may often be acceptable to consumers, but can render the data useless to clinicians and researchers.
- Evidence: Amid the excitement over the potential of these sensors and companion apps, right now there is scant evidence that they contribute to improved outcomes. And as I have said before, just because I have a fitness app on my phone, it does not make me an athlete. Thankfully, a number of pilot studies have been launched to understand what devices have an impact under what circumstances.
Finally, as biosensing wearables work their way into health care, industry stakeholders should consider asking if they are measuring the right things. Physiologic signs would seem to provide incredible insights. However, if I wanted a sensor to alert me to potential problems with my aging parents, I might glean more from a sensor on their refrigerator door than a continuous heart rate monitor. Tracking my steps is one thing—but it doesn’t tell you I was walking from a fast food restaurant to a cupcake bakery like my credit card bill does.
No matter what, these devices are probably here to stay, and more are on the way. How they address the needs of consumers and the health care industry will determine which are truly effective, and which wind up in the doghouse.
P.S. Don’t forget to join me and my colleagues on July 15 for the Dbriefs webcast mHealth, eHealth and telehealth: Converting disruption into opportunity where we will discuss the topic of biosensing wearables and more – don’t miss out!
1 Rock Health, “The future of biosensing wearables,” June 2014;
2 Medical Economics, “Wearable devices: a health trend or a long-term solution?” April 4, 2014
By Harry Greenspun, MD
Senior Advisor, Deloitte Center for Health Solutions, Deloitte LLP
Implementation & Adoption
CMS could penalize 760 hospitals for poor performance
In April the Centers for Medicare & Medicaid Services (CMS) released a preliminary list of U.S. hospitals that are likely to be penalized due to their high patient complication and infection rates. More than 760 hospitals are on the list, and fines are expected to add up to $330 million. Certain types of hospitals and areas are over-represented:
- Teaching hospitals, publicly owned hospitals and those which treat high numbers of low-income patients.
- Hospitals in the West and Northeast versus other geographic areas.
- More than one-third of state hospitals in eight states and the District of Columbia.
The penalties are being assessed as part of the Hospital-Acquired Condition Reduction Program created by the Affordable Care Act (ACA). In fiscal year (FY) 2015, which begins this October, CMS will assess penalties against hospitals with low scores for patient safety indicators, central line-associated bloodstream infections and catheter-associated urinary tract infections. The hospitals in the lowest 25 percentile of performance will see 1 percent reductions in their Medicare payments for that year. Some of the hospitals on the preliminary list may be removed after CMS receives additional performance information in the fall.
Poll: 5 percent of Americans have gained health insurance coverage in 2014
According to Gallup poll results released last Tuesday, 5 percent of Americans gained health insurance coverage in 2014. Of that 5 percent, 2.8 percent reported obtaining insurance through the health insurance marketplaces, and 2.2 percent indicated they purchased off of the marketplaces. To obtain the results, Gallup conducted interviews with more than 31,000 adults from April 15 to June 17. Additional highlights include:
Source: Gallup, “After Exchanges Close, 5% of Americans Are Newly Insured,” June 23, 2014
Notably, there is a higher share of the 18-29 year old population (29 percent) among the newly insured group than is present in the general U.S. population (21 percent). These results show a slight increase from Gallup’s poll in April, which found that approximately 4 percent of adults were newly insured. The first open enrollment period closed March 31, but some states and the federally-facilitated marketplace continued to process insurance applications for marketplaces through mid-April.
Report: Trends in job creation and entrepreneurship in the life sciences sector
This month The Brookings Institute released an analysis of entrepreneurship and job creation in the life sciences sector. According to the researchers, life sciences companies play “an outsized role” in the creation of jobs and make significant contributions to entrepreneurship. However, these types of contributions have slowed recently. Key findings include:
- Job creation and firm age: New and young firms (5 years old or younger) represent new job creation in the sector, while job creation in middle-aged and older firms (6 or greater years) is slow or flat in the aggregate.
- Firm formation: The rate of new firm creation in the sector declined between 1990 and 2011 (from 2,600 new firms to 2,000, respectively). The number of pharmaceutical firms grew 53 percent during this time period, while research, lab and medical testing firms grew until 2007 when the Great Recession hit, dramatically slowing growth.
Overall, the researchers found that in the life sciences sector, there are fewer startups and the startups that are creating jobs are doing so more slowly than in previous years. Note: In this report, life sciences is defined as drug and pharmaceutical companies, medical device and equipment companies and laboratories that perform research and testing.
(Source: The Brookings Institute, “Entrepreneurship and Job Creation in the U.S. Life Sciences Sector,” June 2014)
Study: Provider outlook from health care reform less positive than other sectors
Standards & Poor’s Ratings Services (S&P) looked at how the ACA and other trends are affecting ratings for the health care industry. Not-for-profit and for-profit providers could see stable to slightly negative outlooks on ratings, as operating margins have been declining. For insurers, S&P expects the outlook to be strong and stable. Major findings include:
- Utilization rates are falling: Consumer use of health care services is lower in part due to the prevalence of high-deductible plans (causing patients to forgo treatment) and in part due to new payment models. S&P expects that the credit pressure providers have experienced as a result of lower utilization will continue, at least for the near future. Insurance companies are benefiting from the decline in utilization, but they face possible payment and regulatory constraints from their Medicare and Medicaid business.
- Impact of health care reform varies across sectors: Profits are projected to be low and even negative for some providers (e.g. hospitals). Pharmaceutical companies and health plans may see higher profits due to the increased number of insured consumers, but the effect of greater rates of coverage is not expected to outweigh other factors bringing margins down.
- Mergers and acquisitions (M&A) have increased in all sectors: Due to increased pressure to lower costs and maintain quality, for- and not-for-profit providers have increased M&A in the sector to simplify administrative efforts and support population health. Pharmaceutical companies have been active in M&A, especially in the mid-tier specialty pharmaceutical market.
(Source: S&P Capital IQ, “Health Care Reform: The Prognosis Is More Upbeat For Insurers Than For Providers,” June 2014)
On the Hill & In the Courts
SCOTUS rules for religious employers in Burwell v. Hobby Lobby
Yesterday, Monday, June 30, the Supreme Court of the United States (SCOTUS) issued its decision on the case of Burwell v. Hobby Lobby, voting 5-4 against the administration and in favor of Hobby Lobby et al. SCOTUS heard oral arguments in March on the legality of the ACA’s requirement for employers who provide group health insurance plans to provide coverage for contraceptives. The companies sued the administration over this requirement, claiming that a private, for-profit, secular corporation should be provided constitutional protection from the mandate based on religious beliefs under the Religious Freedom Restoration Act of 1993 (RFRA). In their decision, the Court held that the contraceptive mandate violates the RFRA for closely held corporations. Further, the Court ruled:
- The RFRA does apply to regulations that govern the activities of closely held for-profit companies such as Hobby Lobby: The Court ruled that “protecting the free-exercise rights of closely held corporations thus protects the religious liberty of the humans who own and control them.”
- The contraceptive mandate substantially burdens the exercise of religion: It requires owners of these companies to “engage in conduct that seriously violates their sincere religious belief that life begins at conception.”
- The government failed to show that the contraceptive mandate is the least restrictive means of furthering its interest in guaranteeing cost-free access to the four contraceptive methods that were challenged in the case: This decision only holds for the case of the contraceptive mandate and not necessarily for all insurance-coverage mandates (e.g., vaccinations, blood transfusions).
The broader preventive services mandate still stands, and contraception is still part of it. The Court's decision means that closely held companies are allowed to seek an exemption from the coverage requirement on religious grounds.
Senate Finance and House Ways & Means committees propose post-acute care bill
The Improving Medicare Post-Acute Transformation Act of 2014, released Thursday, seeks to standardize patient assessments among the four post-acute care settings―home health agencies, skilled nursing facilities, inpatient rehabilitation facilities and long-term care hospitals. The bill is also meant to serve as the foundation for payment reforms down the road. If passed, post-acute providers will be required to report standardized patient assessment data on new quality measures, including the following: functional status and change in function; skin integrity; medication reconciliation; incidence of major falls; and patient preference of treatment and discharge options. Failure to report standardized assessment data and quality measures will carry payment consequences. The legislation also aligns patient assessment data with claims data to reduce duplicative data elements. The proposed legislation would phase in requirements over the next several years. By 2016 quality data would be used to help discharge hospital patients to appropriate facilities. In 2017, providers would report standardized quality and resource-use data, and in 2019 they would report standardized patient assessment data.
Related: For background and context on the evolving post-acute care business models, go to the June 17, 2014, Health Care Current. Additionally, two recent Deloitte publications on post-acute and home care providers offer additional insight into this trend: Home health care: New opportunities and challenges for care provided inside the home and Going vertical: Post-acute care as an opportunity for growth.
AHA urges CMS and ONC to finalize new timeline quickly for Stage 2 Meaningful Use
On June 17 the American Hospital Association (AHA) sent a letter to CMS Administrator Marilyn Tavenner and Karen DeSalvo at the Office of the National Coordinator for Health Information Technology (ONC) to request that the agencies finalize the proposed changes to the Medicare and Medicaid Electronic Health Records (EHR) Incentive Programs for 2014. While the new rule will offer greater flexibility to providers around adoption of EHR technologies, the group says “that the extremely late release of the proposed rule will limit its benefit to hospitals.” The AHA believes the proposal, if enacted, poses both risk and operational challenges to providers. The group also pointed out that the comment period for the proposed rule closes after the final reporting period for the EHR program has begun. If the rule is not finalized with their requests in mind, the AHA believes that many providers would exit the program.
Background: On May 20, CMS and ONC proposed a rule to extend the deadline for Stage 2 of the Meaningful Use program and are collecting comments until July 21, 2014. For more, see the June 3, 2014, Health Care Current.
House E&C Committee hearing assesses Medicare fraud and abuse
Last Wednesday the House Energy and Commerce Committee held a hearing to assess CMS and the U.S. Department of Health and Human Services (HHS) Office of Inspector General efforts to prevent waste, fraud and abuse and identify areas of vulnerability in the Medicare program. In 2013, Medicare served approximately 51 million beneficiaries and cost the federal government about $604 billion. CMS reported that in 2013, up to $50 billion went to improper payments. During the hearing, government officials highlighted the following efforts meant to improve provider enrollment, establish safeguards and recover fraud and abuse funds:
- Risk-based screening of providers: In 2011 CMS began to use risk-based screening to assess providers who intended to enroll in Medicare and to revalidate the 1.5 million existing providers. Through the revalidation process, 20,219 providers had their billing privileges revoked due to felony convictions, locations deemed non-operational or non-compliance with Medicare rules.
- Fraud Prevention System: CMS has been using predictive modeling technologies since June 2011 to identify and prevent waste, fraud and abuse in the Medicare fee-for-service (FFS) program. During its first year, the program stopped, prevented or identified an estimated $115.4 million in improper payments with the help of CMS’s Zone Program Integrity Contractors, who help prevent, detect and deter fraud in the Medicare program.
- Medicare Fraud Strike Force teams: Coordinated federal and state enforcement efforts fighting waste, fraud and abuse across the country have resulted in a decrease in payments for services targeted by fraud schemes and an increase in monetary recoveries. The Health Care Fraud and Abuse Control Program estimates that its return on investment is $8 for every $1 invested.
While acknowledging progress, U.S. Government Accountability Office officials recommend “strengthening provider and supplier enrollment standards and procedures, improving prepayment and post-payment review of claims and addressing identified vulnerabilities.”
Related: Last Tuesday, a day before the hearing, HHS released a report to Congress that provides an overview of the Fraud Prevention System’s progress during its second year of implementation. The report highlighted that since June 30, 2011, CMS has used predictive analytic technologies as a part of its fraud and abuse strategy. The technology has allowed the agency to take administrative action faster and on a nationwide basis. To date, savings have reached an estimated $210.7 million. For more on health care fraud and abuse, see the My Take, “In health care compliance, the devil is often in the details,” from the June 24, 2014, Health Care Current.
(Sources: CMS, “Report to Congress Fraud Prevention System Second Implementation Year,” June 2014; GAO, “Further Actions Needed to Address Fraud, Waste, and Abuse,” June 2014)
Draft guidance indicates that FDA will not provide regulatory oversight of medical device data systems
On June 20 the FDA released draft guidance on regulation of medical-device data systems (MDDS). MDSS are hardware or software products that transfer, store and convert formats and display various types of health information data. Through the guidance, the FDA notified manufacturers, distributors and other entities that the agency does not intend to enforce regulatory controls of these devices because MDDS pose a low level of risk to patients. The FDA oversight of health information technology (IT) is focused on higher-risk devices. The agency expects this new guidance will spur innovation in MDDS.
Background: In February 2011 the FDA issued a regulation that downgraded the risk level of MDSS from Class III (high-risk) to Class I (low-risk). Class I devices are regulated by the FDA but are less of a focus than other devices. The risk-based regulatory framework was proposed in April 2014 (see the April 8, 2014, Health Care Current). Health IT products are placed in three categories according to risk to patients; the lower the risk, the lower the regulatory focus.
CMS issues proposed guidance on reenrollment to reduce burden and costs
On Thursday CMS issued a proposed rule outlining additional options for annual eligibility redeterminations and reenrollment notice requirements for qualified health plans offered through the insurance marketplaces for plan year 2015. The rule reflects input from listening sessions with consumers, providers, employers, health plans and states. The goal of the proposed rule is to ensure a streamlined renewal process for enrollees and cut down on administration costs for states and the federal government. In the proposed rule and related additional guidance documents, CMS included specifications for health plans when issuing notices to enrollees to discontinue or renew coverage. This guidance seeks to ensure that enrolled individuals receive information in a single notice as well as to reduce burden to health plans. CMS will accept public comments on this proposed rule for 30 days after it is published in the Federal Register.
Around the Country
California approves expansion of Medi-Cal while maintaining provider payment reductions
California Governor Jerry Brown signed a budget for FY2014-2015 that continues the expansion of Medi-Cal, the state’s Medicaid program, and preserves a 10 percent reduction in payment to most health care providers who treat Medi-Cal patients. Provider associations and other health care advocates have criticized the payment reduction, citing concerns over access to care. The California Department of Healthcare Services believes that access to services should not pose a problem because the state has been shifting Medi-Cal FFS patients into managed care plans that have contracted with the state to guarantee access to treatment. CMS first approved the 10 percent reduction to Medi-Cal FFS payments and an equivalent cut to managed care rates in 2011, but these have yet to take effect due to lawsuits filed by provider associations.
Response: The California Medical Association issued a statement in response to the latest budget, urging the state to restore the payment rates moving forward. However, the association praised the budget’s inclusion of $41.3 million to provide technical assistance to Medi-Cal providers to implement EHRs and achieve meaningful use under the federal EHR incentive program.
Background: More than 7 million low-income residents, primarily women and children, are covered by the state’s Medi-Cal program. Through this expansion, the state expects to add 2.5 million residents. Around 825,000 of those individuals will be paid for under the federal-state cost-sharing arrangement; the remaining 1.6 million will be paid for by the federal government. The Medi-Cal program has been shifting most of its enrollees to managed care.
Oregon’s health system transformation project sees advances and areas for improvement
Last week the Oregon Health Authority Office of Health Analytics released the 2013 performance report on its Health System Transformation project. Throughout the year, the state tracked 15 coordinated care organizations (CCO) on 17 incentive metrics and 16 state performance metrics to gauge whether they were improving care and lowering costs. Throughout the year members of the CCOs showed improvements in the following areas:
- Decreased emergency department visits: Since 2011, individuals in CCOs decreased their visits to emergency departments by 17 percent; the cost of providing services to emergency departments decreased by 19 percent during the same period.
- Decreased hospitalization of individuals with chronic conditions: Individuals in the CCOs had decreased hospital admissions for congestive heart failure (27 percent), chronic obstructive pulmonary disease (32 percent) and adult asthma (18 percent).
- Increased developmental screenings during the first months of life: In 2013, 33 percent of children in CCOs were screened for developmental, behavioral and social delays (up from 21 percent at the 2011 baseline).
- Increased primary care: CCO members visited outpatient primary care offices 11 percent over the baseline, and enrollment in primary care patient-centered medical homes (PCMH) has increased by 52 percent since 2012.
Despite these improvements, according to the report, measures for screening for risky behaviors (e.g., drugs, alcohol) and access to health care providers need improvement. In 2013, Oregon established a quality pool to provide incentive payments to CCOs participating in the program. Last year, Oregon Health Authority held back 2 percent of the payments to CCOs. To receive full payment, organizations must meet improvement targets for 12 out of the 17 incentive metrics and have 60 percent of their members enrolled in a PCMH. Eleven of the CCOs met 100 percent of their improvement targets last year.
(Source: Oregon’s Health System Transformation, “2013 CCO Performance and Quality Pool Distribution,” June 24, 2014)
Alabama’s Medicaid agency uses data visualization to aid in health care decision making
With the help of an Adult Health Quality Measures Grant from CMS, Alabama’s Medicaid agency has been using data visualization software to enable stakeholders to comprehend and interpret complex clinical and treatment data. The state is using the SAS Visual Analytics tool, which allows the agency to translate data on illnesses, treatment and costs into graphs and charts and allows decision makers to find patterns among the data. The technology allows users to stratify the data by population and geography while identifying health related patterns. The tool will also allow Alabama’s Medicaid agency to study their health care quality data, looking at utilization across groups and comparing the program to its counterparts in other states. Alabama has created a Quality Analytics Unit to collect, analyze and report data from claims and the Real Time Medical Electronic Data Exchange, the state’s health information exchange.
Background: Alabama was one of 25 states to win the Adult Health Quality Measures grant on December 21, 2012, to help the state purchase new technology and resources for its Medicaid program. CMS awarded the state $1 million for the first year of the grant. States can receive up to $2 million in funding from the two-year program. The program’s primary goals are to:
- Help states test and evaluate methods for collecting and reporting the Initial Core Set of Health Care Quality Measures for Adults Enrolled in Medicaid.
- Develop capacity for staff to report, analyze and use the data for monitoring and approving access and quality of care in the Medicaid program.
- Conduct two quality improvement projects in Medicaid related to the Initial Core Set Measures.
Three-dimensional heart image technology could help detect and treat heart disease
Researchers at Columbia University are creating a new technology that allows physicians to capture a high-resolution, three-dimensional image of the heart. Using optical coherence tomography, a technique used to detect plaque in arteries, the procedure threads a specialized catheter with a laser and lens through the heart’s arteries. The technology generates an image by analyzing laser light reflections off of the heart’s tissue. Instead of using traditional imaging technology, such as ultrasounds and MRIs, this three-dimensional image can give cardiac surgeons a real-time view of the heart during surgery. It can also help surgeons identify the location of disrupted heart tissue found in arrhythmias. In procedures, surgeons often utilize their sense of touch to identify the heart’s muscle wall and burn off affected tissue. The technology could reduce the number of invasive biopsies performed for certain heart conditions.