Health Care Current: July 28, 2015

Employing wellness: The employer’s role in promoting health

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.

Employing wellness: The employer’s role in promoting health

My 13 year-old son Luca recently took up cycling. Inspired by my wife’s cycling prowess (see the June 30, 2015 Health Care Current), we created our “Tour de Pain” – family rides ranging from 15 to 65 miles amid the spectacular scenery in and around Washington, DC. When I was at work, Luca would ride on his own. With each stage we did together, it became clear that Luca was getting stronger, while I was simply getting older.

Determined to catch up, I considered investing in an indoor spinning bike so I could train before or after work (or even during excruciatingly long conference calls). But, doing my research, I found the prices steeper than some of the hills I struggled to climb. Much to my delight, Deloitte offers its employees a wellness benefit that can defray some of the cost of fitness equipment, making a sophisticated bike quite affordable. A few clicks and a few days later, it arrived at my door.

Deloitte is one of the many employers that offers some type of wellness program or incentive to their employees. By the latest count, 70 percent of employers offer general wellness programs – this can include newsletters, smoking cessation programs, health fairs, on-site fitness centers and more.1

It makes sense: The US is struggling with an epidemic of “lifestyle diseases” derived from unhealthy behaviors. Inactivity, poor nutrition, tobacco use and frequent alcohol consumption are just some of the issues contributing to this epidemic. And, because employers play a significant role in the provision and financing of health insurance – more than half the US population is covered by employer-based insurance – many have begun seeking ways to encourage healthier lifestyles among their employees.2

But, as employers continue to adopt wellness strategies that aim to encourage health, lower absenteeism and presenteeism and reduce health care expenditures, there are skeptics.

Many privacy advocates believe that giving employers access to sensitive health information puts employee privacy at risk. With the advent of fitness-related wearables, there is also concern that employers could use them to track employee whereabouts.

Some patient advocates are concerned that cost savings will be achieved at the expense of the disabled or unhealthy. The Affordable Care Act (ACA) increased the amount that employers can incentivize their employees for participating in health-contingent wellness programs. Employers can reduce insurance premiums by 30 percent if employees complete health-contingent action items. But in 2014, the Equal Employment Opportunity Commission (EEOC) filed several lawsuits against employers, challenging that requiring employees to submit to biometric testing and health risk screening may force employees to provide health information that is not job-related or required by business necessity. The Commission also challenged organizations that had what it deemed to be excessive penalties or rewards for participation in employer wellness programs. Then earlier this year, the EEOC published a proposed rule to reconcile the Americans with Disabilities Act (ADA) and current tax incentives for employer wellness programs. This proposed rule is intended to supplement earlier regulations issued by the US Departments of Labor, Health and Human Services, and Treasury. It clarifies how employers can promote better health without violating ADA prohibitions against using excessive penalties or rewards that essentially make the programs mandatory.

Finally, even some of the “believers” are skeptical that employee wellness programs will limit or reduce health care costs. Results from Deloitte’s 2013 Survey of US Employers found that while 36 percent of employers use health improvement tactics as part of their strategy, only 25 percent believe this will have a high impact on managing or reducing health care costs. Another survey found that fewer than half of employees (46 percent) have had clinical screenings or completed health risk assessments (HRA), which are used to identify employees for lifestyle health interventions.3

However, according to Deloitte’s 2013 Survey of US Health Care Consumers, nearly one in five consumers covered by employer-sponsored insurance participated in a healthy living or wellness program to help them improve their health. Healthier employers can reduce absenteeism and improve productivity.

Ultimately, employers are likely to continue using wellness strategies – not only to encourage healthy habits among their employees, but also to bolster recruitment. For now, the question is how to proceed amidst the conflicting viewpoints, regulations and study findings on return on investment. Though subsidizing a gym membership seems straight forward enough, evidence suggests that disease management programs are more effective at limiting costs.4 Today, one of the best strategies for organizations may be to have a multi-faceted approach to their wellness programs so that their employees have several options for engagement.

I am fortunate enough to be healthy, but I also recognize I need to get into better shape. It’s likely I would have purchased the spin bike on my own, but my employer’s program certainly made the decision easier. Time will tell how this and other programs, bolstered by flexibility built into the ACA, will get me and others to make healthier lifestyle choices. For now, I have run out of excuses not to exercise, so when Luca and I are not out biking on the road, I will be sweating in the basement while wondering if our program will also cover the cost of a defibrillator.

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3 Mattke, Soeren et al.
4 Caloyeras, John, Liu, Hangsheng, Exum, Ellen, Brderick, Megan, and Mattke, Soeren. Manging Manifest Diseases, But Not Health Risks, Saved PepsiCO Money Over Seven Years. Health Affairs, 33, no. 1 (2014): 124-131.

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My Take

By Harry Greenspun, MD, Director, Deloitte Center for Health Solutions, Deloitte LLP


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Study: Physicians still receiving most of their compensation through productivity and salary

Researchers from the University of Michigan recently published results from an analysis of primary care physician compensation in the US. The analysis showed that compensation tied to factors like quality and productivity does not differ substantially by type of payment model.

The researchers looked at data from the National Survey of Physician Organizations and analyzed payment arrangements for 632 practices in the US. They grouped the payment arrangements into three categories: (1) practices with no substantial risk for their population and not participating in a Medicare accountable care organization (ACO), (2) practices not participating in an ACO but with substantial financial risk and (3) practices that were participating in an ACO.

They found that on average, physicians are paid similarly across all three arrangements. Physicians in ACOs are paid an average of 3.4 percent of their salary based on quality, while physicians not in ACOs but responsible for a substantial amount of risk for their population are paid an average of less than 1 percent based on quality.

Some analysts argue this study indicates that organizations are not passing payment incentives onto physicians. Rather, they are using quality measures in performance evaluations and other non-financial areas. However, many of the Medicare ACOs are early in the process of transforming the way that care is paid for, so quality measures and payment based on outcomes may become more common.

(Source: Andrew M. Ryan, Stephen M. Shortell, Patricia P. Ramsay, and Lawrence P. Casalino, Annals of Family Medicine, “Salary and Quality Compensation for Physician Practices Participating in Accountable Care Organizations,” 2015)

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Implementation & Adoption

CMS selects 140 hospices for the Medicare Care Choices Model

Last week, the US Centers for Medicare and Medicaid Services (CMS) announced that it has selected 140 hospices to participate in the Medicare Care Choices Model (MCCM). The MCCM is a pilot program that aims to improve hospice care for Medicare beneficiaries. Many hospices want to participate, so CMS made the initiative more than five-times bigger than originally planned. It will also now last for five years instead of three. The program is scheduled to begin January 1, 2016 and to continue until December 31, 2020.

Background: CMS introduced the MCCM pilot in March 2014. Hospice patients will continue receiving curative treatment while they receive end-of-life care. In the past, patients had to stop seeking curative treatments to receive hospice services. CMS estimates that the program will allow 150,000 Medicare and dual eligible beneficiaries to experience this new option and flexibility. CMS will pay $200 to $400 per beneficiary per month to participating hospices. Providers and suppliers delivering curative services to beneficiaries in the model can continue to bill Medicare. Participation is limited to beneficiaries with advanced cancers, chronic obstructive pulmonary disorder, congestive heart failure and HIV/AIDS.

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$142.5 million awarded to PCORI to expand PCORnet

Last week, the Patient-Centered Outcomes Research Institute (PCORI) announced that nearly $142.5 million will go to expand the national health research resource known as PCORnet. This collaborative project collects health data for research studies and promotes research partnerships for Clinical Data Research Networks (CDRNs) and Patient-Powered Research Networks (PPRNs). CDRNs are networks of health care systems (e.g., hospitals and health plans) where patient data can be securely gathered throughout the normal course of care. PPRNs are patient-led networks that typically focus on one condition. Individuals may participate in PPRNs to promote research opportunities.

This new award will pay for three years of the second project development phase, supporting the 34 networks that collectively form PCORnet. The new networks will contribute expertise on conditions such as Alzheimer’s disease, Parkinson’s disease and autism disorders. Over the next three years, networks must show they can function in multi-network research collaborations that continue beyond the second development phase.

Analysis: As Dr. Harry Greenspun, MD, Director, Deloitte Center for Health Solutions, Deloitte LLP explained in the April 7, 2015 Health Care Current, web communities and social media platforms have allowed patients and caregivers to connect with each other for years and many have recognized the value of the data being shared. Some sites have even aggregated lessons learned. However, only recently has the government tried to use this information to advance and accelerate medical research.

PCORnet was established in 2013. It allows researchers to easily access data from millions of people across the country and to use the data for many different research efforts. One example includes iConquerMS, which aims to obtain medical data and other information from 20,000 of the 400,000 Americans living with multiple sclerosis (MS). Its eventual goal is to provide researchers with insight to develop more effective treatments. Many patients with MS have trouble knowing what therapies will work best for them. The website gives patients the opportunity to offer research questions and share information on their daily lives and quality of life. This information may not be captured as well in a traditional clinical trial.

(Source: Patient-Centered Outcomes Research Institute, “PCORI Board Approves $142.5 Million to Fund Expansion Phase of PCORnet, the National Patient-Centered Clinical Research Network,” July 21, 2015)

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Alzheimer's expected to reach 24 percent of Medicare spending by 2040

Last week during the Alzheimer’s Association International Conference® in Washington, DC, the group announced that it projects spending on Alzheimer’s will reach 24.2 percent of total Medicare spending by 2040. By then, Baby Boomers will be 76 to 94 years old, and more than 28 million of them are projected to develop Alzheimer’s disease by that year. The Alzheimer’s Association projects that Medicare costs for this population will reach $328.15 billion that year.

The Alzheimer’s Association released these estimates in a report that reviewed progress on treatments and cures for the disease. No current treatments can prevent, slow or cure Alzheimer’s disease. The group has a national goal to identify a treatment by 2025 that delays the onset of Alzheimer’s. If the goal is met, the group estimates that by 2030 (five years later), the number of individuals living with Alzheimer’s would fall by 2.4 million.

In addition to lowering the incidence rate of Alzheimer’s among older adults, a treatment that delays onset by five years would reduce total spending by more than $83 billion by 2030. In 2050, they estimate that total spending would drop from $1.101 trillion to $734 billion—a 33 percent reduction.

Analysis: Alzheimer’s disease and other aging-related diseases already affect spending and people’s lives. Medical and economic costs to treat such diseases are growing, and more family members face challenging decisions around treatment and care. The direct costs can be computed easily, but the indirect costs of such diseases are also growing. Caregivers often must scale back on work in order to take care of loved ones. Some leave the workforce entirely, resulting in a loss of productivity to the US economy and a loss of income for that individual. The Alzheimer’s Association estimates that unpaid caregivers provided nearly 18 billion hours of labor in 2013. Future efforts to curb the costs – both economic and personal – of such diseases will likely be critical to the sustainability of the health care system.

(Source: Alzheimer’s Association, “Changing the Trajectory of Alzheimer’s Disease: How a Treatment by 2025 Saves Lives and Dollars,” 2015)

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IRS: Taxpayers pay $1.5 billion in individual mandate fines

On July 17, the Internal Revenue Service (IRS) published results of the filing season for the 2014 tax year and the new tax provisions of the ACA. According to the most recent estimates, 7.5 million taxpayers paid $1.5 billion in penalty payments for the individual mandate in 2014. The IRS also shared other results from the most recent tax filing season:

2014 is the first year that taxpayers experienced changes to their tax returns due to the shared responsibility tax penalty and APTCs. These results are preliminary because many will get tax filing extensions and data corrections.

Background: Health insurance exchange enrollees with certain incomes are eligible to receive a premium tax credit. This credit may be paid in advance to their health plan, paid through tax returns in the form of a premium tax credit or a combination of these two options. Tax credits are based on several factors, including anticipated income and household size. If individuals incorrectly estimate these factors before they enroll, they may have to repay any excess amount or they may be eligible for payments if they underestimated. The final tax return results are expected to be released 15 to 18 months after the tax year has closed.

(Source: John Koskinen, Internal Revenue Service, Letter to Congress, July 17, 2015)

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On the Hill & In the Courts

Medicare trustees release annual report

Last week, the Social Security and Medicare trustees published the annual overview of the financial and actuarial status of the federal Hospital Insurance (HI) Trust Fund for Medicare Part A and Supplementary Medical Insurance (SMI) Trust Fund for Parts B and D. The trustees did not change their outlook for the HI Trust Fund from last year; it is still expected to be solvent through 2030. Each year the trustees update financial and actuarial projections for both funds.

Medicare spending and income: In 2014, total Medicare expenditures were $613.3 billion, and total income was $599.3 billion. Average per beneficiary costs in Part A decreased slightly from 2013, dropping from $5,090 to $4,935. The trustees estimate expenditures will increase from 3.5 percent in 2014 to 6.0 percent in 2089. This is down from last year’s projection of 6.3 percent of GDP by 2088.

HI Trust Fund projections: HI expenditures exceeded income again in 2014, as they have since 2008. The trustees expect this trend to end next year when the program is projected to take in more than it spends by approximately $2 million. The primary drivers behind this trend are continued economic recovery, which has accelerated income growth, a 0.9 percent HI payroll tax that started in 2013 and higher taxes for high income couples.

SMI Trust Fund projections: The trustees expect Part B premiums to increase from $104.90 this year to $159.30 in 2016. Much of this increase is due to the increase in outpatient services. It is also due to the fact that approximately 70 percent of Part B beneficiaries are protected by policies that prevent their premiums from increasing, so the other 30 percent must make up the difference. The trustees project an average annual growth rate of 6.7 percent for Part B and 10.9 percent for Part D over the next five years. Both of these are significantly higher than the projected average annual growth rate of 5.3 percent for the US economy. The trustees expect the SMI Trust Fund to be adequately financed for the next 10 years. Unlike the HI Trust Fund, premium and general revenue income for Part B and Part D is reset annually to cover expected costs and ensure that Part B has reserve funds.

Independent Payment Advisory Board (IPAB): The trustees project that the IPAB could be triggered for the first time in 2017. Established by the ACA, this fifteen-member panel would be tasked with setting a limit to Medicare spending growth and establishing policies to reduce expenditures within the program. The trustees project that in 2017, increases in Medicare per capita spending will exceed the target growth rate. This would trigger IPAB to submit recommendations for reducing Medicare spending. The trustees encourage lawmakers and the executive branch to work closely together to address the financial challenges within the program.

(Source: Centers for Medicare and Medicaid Services, “2015 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,” July 22, 2015)

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MedPAC leader discusses recommendations for Medicare

Last week, Mark Miller, Executive Director of the Medicare Payment Advisory Commission (MedPAC) testified before the House Ways and Means Health Subcommittee. In the hearing, Miller discussed a number of policies that the commission recommends to curb cost growth within the Medicare program, with a focus on hospitals.

MedPAC recommends Medicare pay hospital outpatient department services rates that more closely match those for freestanding physician offices. So called “site-neutral payments” could remove incentives for hospitals to acquire physician practices to bill for the same services at higher outpatient rates. Several lawmakers are interested in advancing legislation on this issue. Representative Kevin Brady asked Mr. Miller how difficult it would be to create a site-neutral pay policy. Miller said that while it would be complex, there are ways to do it that do not put patients at risk.

Miller also discussed issues and potential policy solutions to a number of Medicare payment policies for targeted types of hospitals. MedPAC recommends changes to graduate medical education, disproportionate share hospital and add-on payments for rural hospitals. MedPAC believes that these payments could be better distributed based on hospital need.

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Study: Reducing geographic variation in Medicare spending

A recent Institute of Medicine (IOM) study published in the American Journal of Managed Care found that neither pay-for-performance nor ACOs would change geographic variation in spending significantly, but found that bundled payments could modestly reduce variation.

In 2008, per-beneficiary Medicare spending varied greatly. In Rapid City, South Dakota, average spending was $6,000, and it was more than $18,000 in Miami, Florida. Congress has discussed different ways to reduce geographic spending variation in Medicare (e.g., adjust rates to providers in high-cost regions). But to prevent penalizing efficient providers in high-cost areas, the IOM has advocated that variation should be addressed through payment reform targeted at individual providers.

This report estimated the impact of three Medicare payment reform programs on variation in geographic spending: pay-for-performance, bundled payments and ACOs. The researchers then looked at different scenarios to see how Medicare spending differed by geography.

The scenarios indicated that under the pay-for-performance model, spending would not change significantly and geographic referral patterns would stay the same. The ACO scenario reduced spending in all hospital referral regions but had little impact on variation across regions. The bundled payment model projected spending increases in lower cost areas and spending reductions areas with higher spending. For example, payments to providers in Miami, a high spending area, would be $400 less per beneficiary (or 2.3 percent) under the bundled payment model.

(Source: David Auerbach, Ateev Mehrotra, Peter Hussey, Peter J. Huckfeldt, Abby Alpert, Christopher Lau, and Victoria Shier, American Journal of Managed Care, “How Will Provider-Focused Payment Reform Impact Geographic Variation in Medicare Spending,” July 2015)

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Around the Country

Evaluating the second year of delivery reform in Oregon’s CCOs

In a recent Health Affairs blog post, two researchers published results from their evaluation of Oregon’s ACO-like arrangements, known as Community Care Organizations (CCOs). The researchers investigated whether Oregon’s CCOs had transformed care delivery or conducted the usual cost-containment strategies.

From interviews with leaders at two CCOs, Health Share of Oregon in Portland and Pacific Source Community Solutions in Central Oregon, the authors learned that health care organizations embraced CCOs because of market and legislative forces and efforts to transform care for certain populations. The interviews also revealed that most leaders felt like the state wanted the CCOs to succeed and were partners in the project.

The CCOs used grant funding from partner groups to collaborate on “care transformation” projects focused on vulnerable populations. Many of the interviewees said that these were important projects, but now they are beginning to think about their long-term impact. The next step, some leaders said, is to use data to measure the impact of these projects and make investment decisions based on outcomes.

The interviews highlighted that legislative and market forces are still the most powerful drivers of collaboration among these organizations. The authors concluded that the most effective way to steer CCOs to perform a certain way is to offer financial incentives for certain benchmarks. However, the stakeholders stressed that to see true care transformation and innovation, the state may need to integrate additional flexibility into the programs.

(Source: Lauren Broffman and Kristin Brown, Health Affairs, “Year Two: Capturing The Evolution Of Oregon’s CCOs,” July 15, 2015)

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Virtual reality treatment shows promise for impacting health-related behaviors

While many people know that eating certain high sugar, high fat foods may lead to obesity, the growing obesity epidemic in the US and other developed countries over the past few decades shows that simply having the facts is not always enough to keep people from making unhealthy choices. New research out of the University of Georgia shows that individuals who watch a virtual reality avatar of themselves sipping a high sugar drink like a soda while simultaneously seeing their body gain weight over a two-year time frame may alter people’s eating behaviors. The study indicated that virtual reality is more effective than pamphlets or videos at spurring behavior change.

This study is one example of how researchers are examining use of virtual reality simulations to impact health-related behaviors. Another recent study out of South Korea shows that virtual reality may help treat alcohol dependency. This small, preliminary study involved only 10 patients with alcohol dependence. Participants went through a week-long detox program before cycling through virtual reality sessions using a 3D-television screen twice a week for five weeks. The sessions featured three simulations: one was meant to relax alcohol cravings and another to trigger them in a situation where others were drinking. The last was meant to make drinking seem unpleasant by placing participants in a setting where people were getting sick from alcohol. During the last simulation, the participants drank a vomit-tasting drink. The study indicated that areas of the brain thought to be sensitive to alcohol showed changes after repeat exposure to the different virtual realities.

The premise behind these investigations is that the brain experiences and processes a virtual reality scenario in the same way it does a real experience. When a person watches a video there is some cognitive distance between the viewer and the subject. Virtual reality research suggests that letting people experience the future today makes them more likely to change current behaviors. That makes virtual reality a promising resource in prevention and wellness.

Analysis: More research is needed on the long-term effects of virtual reality simulations on behavior change. The preliminary study on the individuals with alcohol dependency showed that five weeks after the therapy, metabolic activity had decreased in the limbic system area of the brain, which is associated with emotions and behavior. On subjective and objective measures, alcohol craving was reduced after the aversive scene. More research is also needed to see if therapy involving virtual reality simulations could work on other forms of addiction.

Currently, early adopters of virtual reality in health care are most frequently using simulations to train staff and to give patients pre-surgery instructions. Because many malpractice suits stem from a gap in patients’ understanding of written instructions on a procedure, many hospitals are hoping that allowing patients to really experience the procedure ahead of time and see what will be happening to their body may reduce confusion. These newer studies showing positive effects on eating and alcohol behaviors suggest that in the future, virtual reality interventions may be more prevalent.

(Sources: Sun Joo (Grace) Ahn, Health Communication, “Incorporating immersive virtual environments in health promotion campaigns: a construal level theory approach,” July 3, 2015; Ji Hyun Son, et al, Journal of Studies on Alcohol and Drugs, “Virtual reality therapy for the treatment of alcohol dependence: A preliminary investigation with positron emission tomography/computerized tomography,” 2015)

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Breaking Boundaries

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