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Health Care Current: July 12, 2016

Please rate your stay: A better patient experience is associated with higher hospital margins

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.

Please rate your stay: A better patient experience is associated with higher hospital margins

How would you rate the comfort level of your room? How comfortable was your pillow? How would you rate the noise level during your stay? Were the staff friendly to you?

These are all questions you may have been asked after a recent stay at a hotel. Increasingly, these are also the questions that many organizations are asking patients after their stay at a hospital. Patient experience – the factors that get at how patients perceive the care they receive, the interactions they have with hospital staff, and even the look and feel of the hospital – has become an increasingly important part of providing care to patients.

Indeed, many federal initiatives have built patient experience into the foundation of performance measurement. For example, under the US Centers for Medicare and Medicaid Services (CMS) Hospital Value-Based Purchasing Program (HVBP), hospital Medicare diagnosis-related group (DRG) payments are adjusted based on performance in three domains of care, of which patient experience currently accounts for 25 percent.1 And, patient experience also accounts for one-fourth of performance measurement under the Medicare Shared Savings Program (MSSP).

While federal initiatives and reporting are always important, many health care organizations may be asking, “Does better patient experience really drive higher margins?” and “What does patient experience do for our bottom line?”

We sought to answer these questions in a recent report, “The value of patient experience.” Deloitte researchers looked at several factors to determine how patient experience impacts health care organizations’ margins.

Patient experience of care is deeply personal and can be measured and tracked in many ways. To any given patient, the experience of care can include doctor’s bedside manner to whether they got a bed sore or how they liked the look and feel of the waiting room.

CMS gauges hospitals on patient experience at the national level through Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) scores. The HCAHPS survey is a publicly reported survey of patients' perspectives of hospital care and is administered between 48 hours and six weeks after discharge to a random sample of adult inpatients in the medical, surgical, and maternity care service lines. The survey looks at whether patients would recommend a hospital to family and friends, as well as at nine different aspects of patient experience. I think you will agree these are meaningful issues:

  • How well nurses and doctors communicate with patients
  • How responsive hospital staff are to patients’ needs
  • How well hospital staff help patients manage pain
  • How well the staff communicates with patients about new medicines
  • Whether key information is provided at discharge
  • How well patients understood the type of care they would need after leaving the hospital
  • Level of noise on the hospital floor throughout the night
  • Cleanliness of the patient’s room2

Using these HCAHPS scores, we classified hospitals as “Excellent,” “Moderate,” and “Low” scorers with regard to patient experience. We then measured hospitals’ experience scores against their financial performance.

The results were intriguing: We found a strong correlation between higher patient experience and improved profitability. For example, between 2008 and 2014, hospitals with “excellent” overall patient experience ratings had a net margin of 4.7 percent, on average, compared with 1.8 percent for hospitals with “low” ratings. These findings also held true when we ran a regression analysis to control for other factors that might contribute to hospitals’ profitability.

Many factors can impact patient experience – which means many opportunities exist for health care organizations to enhance – or deter from – the patient experience of care. Deloitte’s 2015 Survey of US Health Care Consumers found that staff engagement measures (such as quality of staff, staff communication and responsiveness, and appointment ease), among others, were among the most important drivers of patient experience among respondents. As a result, improving hospital staff’s and, in particular, nurses’ work environments may lead to improvements in patient experience.

Health care organizations that invest in the mechanisms, tools, and technology necessary to better engage patients and enhance patient experience – from increasing shared decision-making to offering convenient payment processes and effective care follow-up – may be better prepared to meet patients’ expectations for their hospital experience. But, patient experience investments should not come at the expense of reduced investments in clinical quality.

Unfortunately, some patients may give more weight to features that are not as strongly associated with better care outcomes, as few may realize that a freshly painted waiting room with the latest trend in décor might not always mean that the care quality is high. Organization leaders should be mindful of prioritizing enhancements to patient experience that do not also improve care quality. Finally, when prioritizing investment or deciding on where to cut costs, be very aware of the strongly positive correlation between patient experience and margin.

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1 Hospital Value Based Purchasing Program. Available at

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My Take

By Mitch Morris, MD, Global Life Sciences and Health Care Industry leader, Deloitte Consulting LLP


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ONC releases metrics for MACRA interoperability requirement

The Office of the National Coordinator for Health Information Technology (ONC) on July 1, 2016 released metrics the agency will use to assess the interoperability of electronic health records (EHRs), as required by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

Moving forward, ONC will use two measures of interoperability: the proportion of health care providers that electronically send, receive, find, and integrate information from outside sources and the proportion of health care providers that use electronically received information for clinical-decision making. ONC will also use data from existing national surveys of hospitals and office-based physicians that gather information on the exchange of health information and interoperability.

The development of the measures was informed by responses to an April 2016 request for information (RFI) on how to measure interoperability. Stakeholders urged ONC to consider four topics:

(Source: Health IT Buzz, “Measuring Interoperability: Listening and Learning,” July 1, 2016)

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Implementation & Adoption

AMA calls for delay in MACRA implementation, more specifics on APMs

The American Medical Association (AMA) recently told CMS that while it supports MACRA, it sees opportunities for improvement in its implementation. AMA sent its comments in a letter and focused on three main points:

AMA also said that CMS should adopt an interim final rule, instead of finalizing the proposed rule. It said this may help maintain open dialogue with the industry and stakeholders and provide much-needed flexibility in implementing the new standards.

Related: As explained in Deloitte’s recent report, “MACRA: Disrupting the health care system at every level,” MACRA’s Quality Payment Program aims to drive health care delivery and payment reform across the board. MIPS and Advanced APMs will create strong incentives for clinicians to engage in value based care. Both tracks contain substantial quality reporting requirements, but Advanced APMs must meet their own set of requirements, including mandatory financial risk-sharing. Participation in Advanced APMs (as opposed to MIPS) increases payments to clinicians.

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CMS risk adjustment program may see similar feedback to 2014 results

In late June, CMS released the payment plan for 2015 results of the reinsurance and risk adjustment programs in the public health insurance exchanges. CMS will distribute $3.9 billion in risk adjustment funds among 821 health plans. Reinsurance and risk adjustment are two of the three premium stabilization programs included in the Affordable Care Act (ACA) to protect health plans from major losses in the new public exchanges, prevent adverse selection, and protect health care consumers from high premium increases.

CMS said that the 2015 absolute value of risk adjustment transfers will average roughly 10 percent of the health insurance premiums in the individual market and 6 percent of premiums in the small group market. These are similar to rates in 2014. CMS also said that health plans’ claims payments strongly correlate to risk scores – health plans with higher risk scores paid out more in claims; health plans with lower risk scores paid out fewer claims.

Some smaller health plans have said that risk adjustment payments are difficult to predict and are skewed toward larger, more established health plans, which has caused financial volatility. In particular, nonprofit consumer oriented and operated plans (CO-OPs) are concerned that having to pay too much into the risk adjustment pool may put them out of business. Many large health plans will also have to make significant payments into the program for 2015.

CMS also said that for 2015, health plans in the individual market will receive $7.8 billion in reinsurance payments for high-cost consumers who enrolled in coverage. The reinsurance program will reimburse 55.1 percent of patient claims between $45,000 and $250,000.

(Source: CMS, “Summary Report on Transitional Reinsurance Payments and Permanent Risk Adjustment Transfers for the 2015 Benefit Year,” June 30, 2016)

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CMS provides guidance on sharing of Medicare claims data under MACRA

Last week, CMS issued a final rule that provides guidance on the expanded scope of the Qualified Entity Program (QEP) under MACRA. First authorized by the ACA in 2012, the QEP allows approved organizations to share or sell Medicare and private health plan claims data, as well as any analyses made with that data, to non-public organizations.

Under the final rule, organizations that are interested in qualifying must apply to the program and go through an approval process before sharing any Medicare data or analyses. Only 15 organizations have been approved since the program began in 2012. Once approved as a qualified entity, the organizations must follow requirements in the Qualified Entity Data Use Agreement (QE DUA) and must follow all applicable laws and regulations – including Health Insurance Portability and Accountability Act (HIPAA) – to protect individuals’ personal health information (PHI). The final rule also allows organizations to share Medicare data for free or to sell it if it is combined with non-Medicare data.

CMS estimates that these changes may expand the program to least 20 qualified entities within the next few years. The agency’s goal is to make it easier for stakeholders from across the health care system to make more informed decisions, especially about care for people with chronic conditions and other populations with high health care spending.

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CMS proposes changes to outpatient facility payment system

Last week, CMS proposed changes to Medicare’s hospital outpatient prospective payment system for 2017. Following input from health care stakeholders, including professional associations, beneficiaries, and lawmakers, the proposed rule would increase payments for outpatient services by 1.6 percent.

CMS also proposed the following changes:


Many health care experts have been concerned that hospitals are buying physician practices and converting them into outpatient departments to get higher payments, since Medicare typically pays more for care in outpatient departments. The American Hospital Association (AHA) opposes the site-neutral payment provision, saying that it does not reflect hospitals’ higher costs. The Congressional Budget Office (CBO) estimates that this change would save Medicare about $500 million in 2017.

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On the Hill & In the Courts

CMS proposes changes physician fee schedule, focuses on care management

Last week, CMS proposed changes to the Medicare Physician Fee Schedule, including expanding the Diabetes Prevention Program to Medicare beginning on January 1, 2018. This comes after HHS announced in March that the Office of the Actuary had certified that the program saves money for Medicare.

The diabetes program is an intensive lifestyle intervention program that is designed around 16 core sessions provided in a group setting. Participants learn how to make dietary changes, increase their physical activity, and change their behavior to control their weight. CMS says that it will tie payment to session attendance and weight loss goals. CMS also is considering allowing providers to deliver the services virtually as well as in person, emphasizing that this would not be a part of current telehealth benefits in Medicare.

CMS also proposes several additional changes, including adding new payment codes for chronic care management services and allowing physicians to bill for telehealth services related to dialysis, advanced care planning, and critical care. It also proposes to publish pricing data from Medicare Advantage bids and medical loss ratio reports.

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Democrats publish draft platform for the party; aim to prohibit pay for delay and create public option

Last week, the Democratic Party released its draft platform, which includes policy proposals for health care. Noting that the party plans to continue working toward goals established by President Obama through the ACA, the Democrats would encourage the remaining 20 states to expand Medicaid. In addition to Medicaid expansion, the party says that Americans should be able to access coverage through Medicare or a public option. Presidential candidate Hillary Clinton has also said that she supports creating a public option.

The party supports policies that it says would keep prescription drug costs low. It would do this through prohibiting pay for delay deals – when pharmaceutical companies pay to keep generic drugs off of the market so that branded drugs do not have competition. Democrats would also support allowing pharmacists, individuals, and wholesalers to import prescription drugs from Canada and other countries that have adequate safety protections and would support allowing Medicare to negotiate drug prices.

Finally, the Democrats say that they recognize the National Institutes of Health (NIH) needs full funding to combat some of the costliest and widely common diseases, such as Alzheimer’s disease, HIV/AIDS, and cancer. The party platform also includes provisions to support expansion of community centers, increased efforts around drug and alcohol addiction, including for opioid abuse, expanded mental and behavior health treatment, and more.

The Democrats released their platform shortly after House Republican leaders said they would repeal the ACA and replace it with a mix of new policies and some that are in the ACA. This is according to a white paper describing their proposal, called “A Better Way,” which was released in late June by the Speaker of the House, Representative Paul Ryan, and members of the Speaker’s Task Force on Health Care Reform (see more in the June 28, 2016 Health Care Current).

(Source: Democratic National Convention, “2016 Democratic Party Platform Draft,” July 1, 2016)

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Senate roundtable debates possible Stark law reform

Senate Finance Committee Chairman Orin Hatch published a white paper that highlights key findings from a round table discussion on the Stark law. The law prohibits health care providers from referring Medicare and some Medicaid patients to entities (e.g., clinics, laboratories, or imaging centers) in which they have a financial stake; it was intended to limit the relationship between financial arrangements and physician referrals.

Some stakeholders are raising concerns the Stark law may be inhibiting development of value-based care programs and incentives, including pay-for-performance, gainsharing, bundled payments, and outcomes measures. The success of value-based care arrangements relies on giving incentives to physicians based on aspects of their referral patterns. Indeed, many of the ACA value-based care models (e.g., MSSP) have waived certain provisions of the Stark law, recognizing this disconnect.

The panel offered several suggestions on how to better align the law to current policies, including:

  • Establish new waivers to exempt APMs and organizations pursuing delivery reforms from violations, modeled after those currently available to MSSP organizations
  • Establish a set of new exceptions to the law for all Advanced APMS under MACRA
  • Add a “bright line” definition of violations in the law to distinguish between technical and substantive violations
  • Repeal the law entirely and rely instead on the federal Anti-Kickback Statute to regulate improper incentives

(Source: Senate Finance Committee Majority Staff Report, “Why Stark, Why Now? Suggestions to Improve the Stark Law to Encourage Innovative Payment Models” June 2016)

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CMS asks for stakeholder feedback on proposed drug reimbursement demonstration

Dr. Patrick Conway, CMS’ Acting Principal Deputy Administrator and Chief Medical Officer, testified about the proposed Medicare Part B demonstration before the Senate Finance Committee on June 28, 2016. The demonstration would alter the reimbursement rate for drugs prescribed under Medicare Part B.

Medicare pays physicians the average sales price of a pharmaceutical drug, plus a 6 percent add-on. Under the demonstration, physicians would get a flat fee of $16.80 per drug per day, plus a 2.5 percent add on. CMS says this demonstration will test whether the different payment structure would encourage physicians to prescribe the most effective medications at the lowest cost available, including prescribing more generic and lower-cost, biologically similar drugs.

The committee members raised concerns about the broad scope of the demonstration, saying that about 75 percent of all Medicare covered pharmaceuticals would be under the demonstration’s payment structure. They questioned whether the demonstration would harm quality and continuity of care for patients whose conditions have no biosimilar or generic treatments. Supporters of the demonstration say that it will help ensure that Medicare beneficiaries will be able to afford their care. Many have suggested that CMS create an ombudsman program, which would track the effects of the demonstration in real time.

CMS is actively seeking and reviewing industry and stakeholder feedback, especially regarding the scope of the demonstration.

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Tennessee legislative task force proposes alternative Medicaid expansion plan

A Tennessee legislative task force has proposed expanding TennCare, the state’s Medicaid managed care program, in two phases. This plan differs from Tennessee Governor Bill Haslam's “Insure Tennessee” plan, which would help provide new health coverage options to the state’s uninsured population.

During the first phase, Tennesseans who earn up to 138 percent of the federal poverty level (FPL) – approximately $16,000 for an individual – would qualify for coverage if they have been diagnosed with a mental illness or have been honorably discharged from the military. The task force estimates up to 115,000 individuals would be eligible to enroll in the first phase.

If the first phase is successful, the second phase would open enrollment to anyone making up to 138 percent of the FPL. The state would gauge success of the first phase on an analysis of the costs per member, the number of enrollees, health outcome improvement, and utilization of emergency services and primary care physicians.

The task force expects to negotiate for six to seven months with federal and state officials before finalizing the proposal. Then, the state legislature would need to vote to approve it and CMS would need to approve the waiver.

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Around the Country

First human trials of the genome-editing technology CRISPR/Cas9 may be moving forward

Last month, the NIH Recombinant DNA Advisory Committee approved the first human trials of the genome-editing technology CRISPR/Cas9 for creating genetically-altered immune cells to attack three types of cancer. The next step is to seek approval from the US Food and Drug Administration (FDA) and the medical centers where the study would be conducted. If approved, the study, funded by the Parker Institute for Cancer Immunotherapy, will enroll patients with multiple myeloma, melanoma, and sarcoma.

What is CRISPR? What is Cas9? CRISPR stands for Clustered Regularly-Interspaced Short Palindromic Repeats. CRISPRs are part of the bacterial immune system, and they defend against invading viruses. They consist of repeating sequences of genetic code interrupted by “spacer” sequences – remnants of genetic code from past invaders. The system helps the cell detect and destroy invaders when they return. Cas9 is one of the enzymes produced by the CRISPR system that binds to the DNA and snips it, shutting the targeted gene off.

Scientists have known for decades that genetic mutations cause disease. Many say that if we could go into the genes and change these mutations to the normal sequence, this technology could potentially cure disease. Other gene-editing techniques exist, but they are slow, imprecise, and very difficult.

For years scientists sought to understand how they could adapt CRISPR’s mechanism for use in humans. In the last few years, scientists have developed a deeper understanding of how CRISPR and Cas9 interact. Using modified versions of Cas9, researchers can activate gene expression instead of cutting the DNA. CRISPR/Cas9 has the potential to target and modify mutations in the three-billion-letter sequence of the human genome to treat genetic disease. Some scientists have compared it to correcting a typo in a gene – deleting the wrong letter and replacing it with the right one.

What would the study involve? A team at the University of Pennsylvania proposed the trial that the NIH committee approved. If approved, University of Pennsylvania, the MD Anderson Cancer Center in Houston, and the University of California at San Francisco would conduct the study with approximately 15 patients. The researchers will remove T cells (a type of white blood cell) from the patients and edit them using CRISPR before injecting the cells back into the patient. The first CRISPR edit will insert a protein engineered to detect cancer cells and instruct the T cells to target them, and the second will remove a protein that could interfere with this process. The third edit will remove the gene that identifies the T cells as immune cells to prevent the cancer cells from disabling the T cells. While more approvals are still needed, the trial could start as early as next year.

Analysis: Potential applications for CRISPR range from curing different diseases, to growing organs that could be used in transplants, to possibly preventing genetic diseases in embryos.

While many in the scientific community are citing CRISPR/Cas9 as one of the biggest breakthroughs in modern medicine, many researchers are proceeding with caution. One concern is that CRISPR could snip other genes and potentially create new cancer genes or trigger existing ones. The University of Pennsylvania-led team plans to carefully measure the growth rate of the engineered T cells and test for genomic abnormalities. Another concern is that the technique could activate the body’s immune response. For these reasons, leaders in the field are cautioning that the scientific community must proceed carefully to ensure the benefits outweigh the risks from potential misuse and unforeseen consequences.

(Sources: Rachel Reeves, “CRISPR cancer therapy trial gets go-ahead in US,” BioNews UK, June 27, 2016; Broad Institute, “What is CRISPR?” 2016)

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Breaking Boundaries

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