Perspectives

Health Care Current: July 14, 2015

Why health care is not “status quo”

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.

Why health care is not “status quo”

The US Supreme Court decision on June 25, 2015 to allow premium assistance tax credits to continue through federally-facilitated Exchanges resolves an important underlying question around a major coverage provision in the Affordable Care Act (ACA). The decision removes the threat of 6.4 million people losing federal help to purchase health insurance this year and gives health plans and providers greater certainty heading into the open enrollment period for 2016 (see the June 25, 2015 Health Care Current Special Edition).1

In the days following the Court’s decision, I heard many comment, “Now we are back to status quo.” In my 26 years in health care policy experience, I have never considered health care to be “status quo.”

Yes, the ruling in favor of the Administration provided some certainty in the insurance markets regarding the status of Exchanges. But, we are still facing a time of incredible change in health care that is certain to keep us on our toes. Health care providers and plans are experimenting with innovative models to finance and deliver care, not just as a result of the ACA, but on their own accord and to adapt to a changing marketplace and consumer demand. We still have large numbers of uninsured in the US whom providers, plans, and states are seeking to bring into the system through expanded outreach efforts and coverage options.

There also are major regulatory developments coming down the pike beyond 2015 at both the federal and state levels. Now, the Administration will be working to finalize regulations on key provisions of the ACA before President Obama leaves office in January of 2017. For example, regulators will be working on new rules that will set the stage for states who wish to seek “Innovation Waivers” to start reshaping their insurance reforms and mechanisms to expand coverage in 2017. Another provision of the ACA that takes effect in 2017 will open the door to allow large employers (100+ employees) to purchase coverage through health insurance Exchanges previously only open to smaller employers.

Perhaps most notably, the Administration will issue new regulations regarding the excise tax on high-cost employer-sponsored coverage (the so-called “Cadillac” tax), which will take effect in 2018. The imposition of this new tax could drive companies to offer less generous health care benefits to employees. The movement toward less generous employer-sponsored coverage could in turn prompt health care plans and providers to re-evaluate their products, payer mix and services.

The next presidential election is widely considered to be the most significant upcoming event for health care in the next 18 months. Regardless of who is elected on November 8, 2016, it will mark the first time someone other than President Obama will have stewardship over the ACA and responsibility for developing regulations to implement the law. A new Administration might revisit some of these regulations, raising prospects for health care providers, plans and other stakeholders to re-open certain rules and put forward alternative approaches for consideration.

Beyond the ACA, the next Administration will bear considerable influence over the implementation of the recently enacted Medicare physician payment law, which aims to more closely align Medicare reimbursements with health care quality and outcomes (see the April 14, 2015 Health Care Current). The next Administration largely will determine how new incentive payments for providers in traditional care delivery models will be developed and refined over time.

The Supreme Court steadied the ground beneath our feet. But health care is anything but “status quo” and we are a far cry from standing still in one place. We must continue to look ahead to the changing health care landscape, plot our course and travel full speed ahead.

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Source: 1Centers for Medicare & Medicaid Services, “March 31, 2015 Effectuated Enrollment Snapshot,” June 2, 2015.

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My Take

By Anne Phelps, Principal, US Health Care Regulatory Leader, Deloitte & Touche LLP

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CMS proposes physician fee schedule updates and requests input on MIPS

Last week, the US Centers for Medicare & Medicaid Services (CMS) published its annual proposed rule that would make updates to the Physician Fee Schedule (PFS) and would make revisions to other Medicare policies. For the 2016 calendar year, CMS proposes to increase physician pay under Medicare Part B by 0.5 percent. This payment update was written into statute through the passage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (see the April 21, 2015 Health Care Current).

CMS also used the proposed rule to request input on various aspects of the policies set forward in MACRA. MACRA established two new systems for physician payment updates: 1) one for providers who receive a substantial portion of their revenue from alternative payment models (APMs) and 2) the Merit-Based Incentive Payment System (MIPS) for providers who receive smaller amounts of revenue from APMs. Many of the details as to how the systems would be structured and how they would interact with CMS and the US Department of Health and Human Services’ (HHS) goals for moving toward greater adoption of value-based care will be determined in the regulatory process.

In the proposed rule, CMS requests feedback on the following:

In addition to finalizing the rates for 2016, CMS proposes payment policy updates and seeks comments on several additional areas, including telehealth, payments for biosimilars under the PFS, adding star ratings to Physician Compare and paying for advance care planning services in Medicare. CMS created two codes for advance care planning services, which include discussions about advance directives and end-of-life decisions, but these two codes have been invalid – or not available for use – since the 2015 PFS rule. CMS proposes activating these two codes, which would allow physicians who have these discussions to get paid for them under Medicare.

Analysis: This is the first time that CMS has issued regulations under MACRA as part of a larger effort to more closely link Medicare payments to quality and outcomes. The Sustainable Growth Rate (SGR) formula set a total budget cap on Medicare payments for physician services. The new payment systems put greater weight on performance and encourage physicians to migrate to value-based care. The systems connect incentives with individual provider performance, put more emphasis on quality and volume control and create financial incentives for physicians to participate in alternate payment models that incorporate value-based care. MIPS also aims to alleviate some of the burden that the various incentive programs have placed on physicians to date. All of the old programs – the electronic health record Meaningful Use incentive program, quality reporting program and value-based payment program – are now consolidated into MIPS. Stakeholders will continue to seek clarity on the new payment systems as CMS issues regulations and requests feedback.

Related: Also last week, CMS announced that it plans on testing bundled payments for hip and knee replacements in 75 geographic areas through the Comprehensive Care for Joint Replacement (CCJR) model. These two procedures are the most common services received by Medicare beneficiaries, and the average payment for these services ranges from $16,500 to $33,000. The CCJR model would be in addition to the Bundled Payments for Care Improvement (BPCI) initiative, as CMS is interested in testing the payment model in different hospitals. Hospitals may choose to participate in the BPCI initiative, where select hospitals would be required to participate in this initiative.

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Implementation & Adoption

House passes the 21st Century Cures bill

On Friday, July 10, the House of Representatives voted (344-77) to approve H.R. 6, the 21st Century Cures Act. The bill would fund the National Institutes of Health for $8.5 billion and US Food and Drug Administration (FDA) for $550 million between 2016 and 2020.

Several amendments were added to the bill after it was approved by the House Energy and Commerce committee. On Friday, lawmakers voted on whether or not to adopt the amendments to the bill before it passed the full chamber. Two of the amendments did not pass, but may have stopped the bill from passing if they had. The first would have made the NIH and FDA funding discretionary rather than mandatory. The other would have stripped the language that bars the use of federal funds for abortion services from the bill. There was considerable discussion around both of these amendments before they were voted down on Friday. Other amendments considered:


The bill that passed the House is the culmination of more than a year of stakeholder engagement through roundtables and discussion drafts. Now the pressure may mount on the Senate to continue developing its similar legislation, Healthy Americans; however, the timeline on that bill is unclear.

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CMS publishes 2016 home health payment rule

Last week, CMS published the 2016 payment rates for home health organizations in a proposed rule that could save Medicare $308 million from 2018-2022 through fewer unnecessary hospitalizations and use of skilled nursing facilities. CMS also proposed a new Home Health Value-Based Purchasing Model to test ways Medicare can pay for higher quality and more efficient home health services. Through the model, home health agencies that provide care for at least 20 episodes per year would be susceptible to payment adjustments starting at 5 percent in 2018 (based on 2016 performance) and increasing to 8 percent by 2021.

CMS would launch the model in nine states: Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee. All Medicare-certified home health agencies in these states would be required to participate in the initiative.

CMS also proposes to reduce the national, standardized 60-day episode payment by 1.72 percent in 2016 and 2017. It will continue to rebase payments to the Home Health Prospective Payment System. CMS proposes to reduce payments by $80.95 in 2016. In total, home health agencies face $350 million in reduced payments in 2016, significantly greater than the $60 million decrease seen in 2015.

Analysis: The Medicare program spent approximately $17.9 billion on home health services for 3.5 million beneficiaries in 2013. The traditional US home health care market, valued at $77.8 billion in 2012, is projected to grow to $157 billion by 2022. The proportion of the population age 65 years and older, expected to increase from 12.4 percent in 2000 to 19.6 percent in 2030, is a key driver of this growth. Baby Boomers – the customers of the future – are even less inclined than previous generations to relinquish their freedom when they need chronic or long-term care, and have a strong desire and commitment to remain at home.

In the last four years, legislative and regulatory actions have cut traditional fee-for-service (FFS) payments to home health care agencies for Medicare services. These actions have included a four-year requirement through the ACA to reduce the base payment rate (called “rebasing”) to account for coding practices that have increased reimbursement and reducing or eliminating the annual payment update.

Regardless, the demand for efficient home health care – both traditional and more broadly defined – is projected to grow, particularly amid the adoption of new and expanded payment and delivery models. Changing payment models, the shift toward value-based care, and new enabling technologies may prompt other health care providers – hospitals, physicians, and integrated delivery networks – to seek alignment with the home health care sector. In particular, providers taking on new or additional financial and performance risk may find that providing care outside of traditional settings can reduce hospital readmissions, shorten the length of rehabilitation that is needed, avoid use of high-cost settings, reduce emergency room use and manage chronic conditions. Industry stakeholders who seek to partner with, contract with, refer to, or sell to these providers likely will need to carefully navigate this new landscape. The most strategic providers and partnerships should consider demonstrating their ability to reduce costs and improve patient outcomes. See more in the Deloitte Center for Health Solutions report, “New opportunities and challenges for care provided inside the home.”

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OIG: Some states do not report required Medicaid managed care data

The Office of Inspector General (OIG) released a report earlier this month which found that many states are not meeting managed care data submission requirements set by CMS. Specifically:

In seven states, the OIG could not determine whether they submitted encounter data for all managed care entities due to inaccurate plan IDs. The plan-ID field requires a single unique code corresponding to a managed care entity. OIG could not use files that included dummy IDs, multiple IDs, invalid IDs or no ID at all in the plan-ID field to determine how representative the submissions were of all managed care entities.

Based on these findings, the OIG recommends that CMS monitor encounter data to guarantee that all managed care entities report the required information. Additionally, it recommends that CMS withhold federal funds from states that do not report encounter data until states submit accurate information. CMS agreed with both recommendations.

Background: The OIG analyzed three quarters of fiscal year 2011 encounter data submitted to the national database, the Medicaid Statistical Information System (MSIS). The office looked at all 38 states that operate Medicaid managed care programs and require data reporting (i.e. managed care organizations or prepaid inpatient health plans). The OIG conducted this review as a follow-up to its 2009 findings that encounter data (the managed care equivalent of FFS claims data) submitted to MSIS were incomplete. The office also found that there was a 1.5 year delay between the point of data submission and CMS acceptance of the data. Complete and timely encounter data is required for Medicaid oversight because it is used for rate-setting, quality assurance and evaluation purposes.

(Source: Office of Inspector General, “Not All State Reported Medicaid Managed Care Encounter Data as Required,” July 2015)

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Study: Many Medicaid beneficiaries receive PCMH-like care

Last week at a Health Affairs briefing, Peter Cunningham, a professor at Virginia Commonwealth University, presented findings from his recent research that indicate many Medicaid beneficiaries are receiving care similar to that of the patient-centered medical home (PCMH) model.

PCMH is a model of care delivery designed to better coordinate care between primary care providers and specialists, better manage patients with chronic conditions outside of the hospital and empower patients to become active participants in the care they receive. The researchers sought to evaluate the prevalence of PCMH-like services that Medicaid beneficiaries receive. They used data from the 2008-2012 Medical Expenditure Panel Survey (MEPS) Household Component to conduct the analysis. The MEPS Household Component collects information from individuals on their health status, access to care, satisfaction with care and more.

The study used key attributes of the PCMH model to evaluate aspects that overlap with current Medicaid care. Researchers looked at how well providers:

  • Served multiple health needs
  • Made it easy to contact them by phone
  • Extended office hours
  • Coordinated prescriptions
  • Built in shared decision making with patients

The researchers also evaluated whether beneficiaries usually see a regular provider outside of the emergency department.

The researchers found that younger and healthier beneficiaries are more likely to report having more access to PCMH-like services. The analysis also showed that 77 percent of Medicaid beneficiaries between 18-64 years old report having a usual physician, while 50 percent say they have a usual physician and access to services that are similar to three PCMH attributes. Only 5 percent report having a usual physician and access to five PCMH-like services.

(Source: Pete Cunningham, “Many Medicaid Beneficiaries Receive Care Consistent With Attributes Of Patient-Centered Medical Homes,” Health Affairs, July 2015)

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GAO: Drug spending higher in 340B hospitals than non-340B hospitals

A recent US Government Accountability Office (GAO) report found that hospitals that participate in the 340B drug program – which allows hospitals to purchase prescription drugs at a discount – have higher per beneficiary Medicare Part B drug spending on average than hospitals that do not participate in the program. According to GAO, this difference may mean that 340B hospitals are prescribing more drugs and/or more costly drugs than their non-340B counterparts.

Medicare pays hospitals for Part B drugs at a fixed rate, regardless of how much it costs for a hospital to purchase drugs. Thus, Medicare payments do not account for discounts hospitals may receive for purchasing drugs. GAO suggests that hospitals may be able to gain financially from participating in the 340B program because of this arrangement. Furthermore, GAO said they may be more inclined to over-prescribe and prescribe more expensive drugs. The agency said that this trend could have adverse effects not only for the Medicare program, but also for Medicare beneficiaries. Beneficiaries could be responsible for more cost-sharing for these drugs, and they may be receiving unnecessary care, GAO said. GAO recommends that Congress should consider “eliminating the incentive to prescribe more drugs or more expensive drugs than necessary.”

Background: Drug manufacturers are required to participate in the 340B Drug Pricing Program to have their products covered under Medicare. The 340B program allows eligible providers to purchase drugs at discounted rates. Most eligible providers are hospitals that serve a large proportion of low-income individuals. These hospitals are referred to as disproportionate share hospitals (DSH). In response to a Congressional request, GAO issued a report to compare 340B hospitals to non-340B hospitals in terms of drug spending and financial characteristics. Key report findings are highlighted below:

Reaction: HHS provided comments back to GAO on the report. The comments focused on two criticisms of the analysis. HHS said that while the analysis presents a “useful” understanding of the difference in spending between 340B and non-340B hospitals, it does not factor in quality or outcomes for patients served by either type. HHS said that it is not possible to determine whether patients at these hospitals received unnecessary care from the analysis performed here. HHS also said that the health status of the individuals served by 340B hospitals may be worse than those served by non-340B hospitals. GAO found that the average risk score for outpatient beneficiaries at 340B and non-340B hospitals was 1.50 and 1.45, respectively. HHS believes this could represent a significant difference between the patient populations and that the risk score differences should be analyzed further.

(Source: Government Accountability Office, “Action Needed to Reduce Financial Incentives to Prescribe 340B Drugs at Participating Hospitals,” June 2015)

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On the Hill & In the Courts

Lawmakers call for additional funding for fraud and abuse prevention

As part of their Labor, HHS, Education and Related Agencies Appropriations Bill, the Senate Appropriations Committee called for an increase in funding of $34 million to the Health Care Fraud and Abuse Control (HCFAC) program. The lawmakers estimate that this new funding could help the federal government save more than $5.7 billion in the long run.

Senators on the committee also expressed concern about the appeals backlog at the Office of Medicare Hearings and Appeals (OMHA). To that end, the bill would increase OMHA’s budget by $10 million, which the lawmakers hope would be used to ease the backlog. They also said OMHA could use the additional funds to update Recovery Audit Contractor (RAC) requirements in hopes of reducing unnecessary burden on providers.

Analysis: The HCFAC program was established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The program has recovered more than $27.8 billion to the Medicare Trust Funds and returns $8 for every $1 spent on the program. The HCFAC is one of many tools the federal government has for preventing and addressing fraud and abuse in the health care system. Other examples include the Fraud Prevention System and Medicaid Fraud Control Units. Applying analytics to encounter data has helped federal regulators discover many patterns, including very high billing or prescribing rates, upcoding and duplicative billing. Health care organizations also can use analytics to anchor a fraud and abuse mitigation program by identifying patterns, associations and anomalies within their own data that may warrant further attention. As explained in Deloitte’s recent report, Health care fraud and abuse enforcement: Relationship scrutiny, health care organizations should consider having in place a responsive analytics-based program to address potential fraud and abuse. An effective program will likely enable organizations to identify risks in real time, adjust to mitigate them, communicate their importance and learn from the regulatory and legislative landscape.

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FDA delays track-and-trace enforcement

Earlier this month, the FDA announced it is giving pharmacies four more months to comply with the drug-tracking requirements set forth in the Drug Supply Chain Security Act (DSCSA). The FDA delayed the deadline to November 1, 2015 as the new date after which pharmacies will no longer be allowed to accept products without the tracking information required by the FDA (i.e. transaction history, product lot number, strength and dosage). At that point, pharmacies will be required to maintain product documentation for at least six years after the product is purchased.

This postponement does not apply to requirement that pharmacies have to send drug tracking information to the next purchaser in the supply chain. FDA enforcement was scheduled to take effect July 1, 2015, but the agency extended the deadline to November 1 due to concerns from the dispenser community that their electronic tracking systems would not be ready for use by the summer deadline.

Background: The DSCSA aims to track prescription medications through the supply chain beginning with the manufacturer through to the point of sale. The DSCSA also outlines an implementation guide for an interoperable electronic tracking system. The system, which is set to launch in 2023, will allow the FDA to more effectively protect consumers from potentially dangerous products. The delay does not apply to other trading partners in the pharmaceutical supply chain such as manufacturers, wholesale distributers and re-packagers.

(Source: Food and Drug Administration, “DSCSA Implementation: Product Tracing Requirements for Dispensers – Compliance Policy: Guidance for Industry,” July 2015)

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Oregon pharmacists gain provider status

Oregon Governor Kate Brown signed House Bill (HB) 2028 into law, recognizing pharmacists as health care providers and authorizing them to receive reimbursement for performing clinical pharmacy services. The bill received widespread approval – unanimous support in the state Senate and only two “nay” votes in the House. The American Pharmacists Association, the largest pharmacist trade association in the US, the Oregon State Pharmacy Association (OSPA) and the Oregon Society of Health-System Pharmacists expressed their support for the change.

The law specifies that pharmacists can be paid for clinical services and expands scope of practice laws related to collaborative drug therapy management. The bill does not include specific definitions of clinical services or additional education requirements for pharmacists, but it does authorize the Oregon Health Authority to work with the state Board of Pharmacy to establish statewide protocols. If appropriate or needed, any additional educational requirements can be defined by health plans within the set protocols.

Analysis: The push to give pharmacists provider status has increased since the expansion of Medicaid. The swell of newly insured patients has also exacerbated primary care provider shortages in some areas of the state. California and Washington recently granted provider status to pharmacists in those states. According to the National Alliance of State Pharmacy Associations, 38 states designate pharmacists as providers somewhere in state code or Medicaid provisions. However, there has been little movement toward paying them for patient care services nationally. This is likely due to the fact that pharmacists are not recognized as providers under Section 1861 of the Social Security Act and therefore are ineligible for Medicare Part B reimbursement. However, physicians can bill Medicare Part D for pharmacists’ work under a patient-centered medical home model.

Historically, there has been friction between national pharmacy groups working to expand scope of practice rules and national physicians groups. However, there is variation among trade association dynamics on the state level and in Washington, the Washington State Pharmacists Association (WSPA) worked with the Washington State Medical Association, and Washington State Hospital Association, and the legislature to change scope of practice rules.

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Around the Country

Data from fitness app suggests California, Colorado and Washington have the most active residents

MyFitnessPal looked at data from their active users in the US to identify the most active states. They defined “healthy” living as including “a solid dose of activity” paired with a healthy diet (e.g., met or exceeded goals for fiber, sugar and sodium intake).

MyFitnessPal, a community-based app that helps consumers count calories and track eating, combined its data with workout information from MapMyFitness, an open platform integrated with more than 400 fitness tracking devices, sensors and wearables. With this data, they ranked the states according to their diet, sleep and activity habits. To determine which states were healthiest and unhealthiest, the companies looked at six elements – four dietary (calories, sodium, fiber and sugar intake) and two fitness (number of workouts and workout length) – of their active users.

California, Colorado and Washington had the most physically active users. The top three states with users who had the healthiest eating and fitness activity were California, Arizona and Colorado. The bottom three states were Wyoming, North Dakota and South Dakota.

The data covered the period from January to December of 2014 and came from 25 million users mostly aged 25 to 44. Data from apps can be more accurate than self-reporting because if asked, people may overestimate or underestimate their experience. However, it is important to note that there is a selection bias because people are electing to sign up for these apps and programs rather being randomly assigned to use these apps.

Analysis: As discussed in the July 1, 2014 Health Care Current My Take, Welcome to the age of biosensing wearables by Harry Greenspun, MD, experts should help to ensure that biosensing wearables are measuring helpful things. While physiologic signs would seem to provide incredible insights, for example, it may be more helpful to have a sensor on the refrigerator door than a continuous heart rate monitor when monitoring older adults remotely. Tracking steps is helpful but it doesn’t demonstrate when a person is walking from a fast food restaurant to a cupcake bakery like a credit card bill would. It would seem that wearable devices and fitness apps are here to stay but their effectiveness will be determined by how they address the needs of consumers and if they can help change behavior rather than just monitor it.

(Source: MyFitnessPal, “The Healthy Habit Index: The Top (And Bottom) 10 Healthiest States,” July 6, 2015)

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New tool tracks electrically powered medical equipment during a power outage

A team at the HHS Office of the Assistant Secretary for Preparedness and Response and CMS have developed the emPOWER Map, a web-based interactive tool that can help locate individuals who rely on electrically powered medical equipment during a power outage. The tool shows the number and location of Medicare patients with electricity-dependent oxygen concentrators, ventilators, wheelchairs and other devices.

Approximately 1.6 million Medicare beneficiaries rely on this equipment. The emPOWER tool combines information on Medicare FFS beneficiaries with a real-time severe weather tracking service from the National Oceanic and Atmospheric Administration (NOAA). First responders, community health agencies and emergency management officials can search by ZIP code, county, state and territory to track in real time how many electrically-dependent medical devices there are in areas facing weather situations that may cause power outages. When officials search for a location, the NOAA weather alerts automatically appear. The tool is accessible from any Internet-connected mobile device.

The map does not contain personal information about individuals, and the location data is not granular enough for first responders to make rescues during a power outage. But having the number and location of at-risk medical device users can help local governments, first responders, hospitals and health officials in a community develop better preparedness and readiness plans. For example, emergency shelters can anticipate increased demand, officials can create evacuation plans and transportation and electric utility companies can prioritize areas to for power restoration.

Analysis: The number of older Americans and individuals with chronic conditions who are using home-based care is increasing. Drivers of this increase include rising chronic disease prevalence, general patient preferences to receive care at home and payment arrangements that are encouraging a shift to lower-cost care settings. At the same time, older adults are some of the most vulnerable to natural disasters and other emergency situations. As an example, only 15 percent of the New Orleans population was age 60 or older before Hurricane Katrina hit the area. However, 70 percent of individuals who died during the hurricane and the days after were over the age of 60. HHS has identified real-time awareness and response as a critical need, and is seeking to help communities plan for emergencies as best they can.

This tool is an example of the US health care system striving to optimize data collection and sharing to become a more intelligent, responsive and adaptable system. Linking the location of individuals who rely on electrically powered medical equipment with real time weather alerts is a promising approach to provide emergency officials with a clearer sense of potential threats and community needs.

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Breaking Boundaries

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