Health Care Current: June 3, 2014

Health care’s run toward the Triple Crown

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.

The next leg of health care’s run toward the Triple Crown

This weekend California Chrome, a three-year-old chestnut colt, will be chasing the crown jewel of thoroughbred racing. He stands to be the first Triple Crown winner since Jimmy Carter's presidency. But, capturing the coveted trophy is no easy feat; since 1978, 12 winners of the Kentucky Derby and the Preakness have faltered in the "Test of the Champion."

What makes California Chrome’s story a bit more unique is the surprisingly low price at which his owners purchased his mother, epitomizing what many typically view to be good value: high quality, low cost and a crowd pleaser.

The U.S health care system is chasing its own “triple crown” in the move toward a more value-oriented system that promises the intricately connected goals of increased access, improved quality of care and lower costs. It seems that we could be entering a new phase in our run for the trophy. Building on wins in the expansion of insurance coverage and testing of new care and payment models, many companies are now taking on even more complex cost-quality-access challenges.

I attended the recent Financial Times/Deloitte conference in New York, and this was a strong theme. Industry stakeholders in attendance seemed to be focused less on what’s wrong with the system and more on what we need to do to fix it. Access has certainly been improved now that the health insurance exchanges have been built and some states have expanded Medicaid, and many companies are driving forward with an intensified focus on cost and quality concerns.

In many ways, “the future is here,” as the Executive Vice President, Chief Medical Officer of Pfizer, Freda C. Lewis-Hall, MD, put it. “It’s just not evenly distributed,” she continued, completing the William Gibson quote. Many companies have already committed to shifting to value-based approaches to care and payment. For example:

  • Some health care systems are putting in place evidence-based practice models, data systems and mobile applications that are already resulting in better outcomes at a lower cost through reductions in emergency room visits for conditions such as asthma. They are experiencing early wins in what they expect will be a long race.
  • Other companies such as life sciences firms are embedding a value focus in every step of their business from R&D to commercialization. They are doing this by moving toward more direct comparisons with active competitors and gold standards, looking at cost effectiveness for specific populations and restructuring their commercial strategies to become a trusted source of information for consumers.

While there seems to be an emerging consensus on what needs to be done, companies are taking steps forward at different rates depending on how quickly they are achieving clarity and alignment around organizational strategy, their ability to invest in expanding or acquiring capabilities that may be needed and their willingness to take on risk.

Since the value equation depends on the highly complex interplay of business relationships, processes and transactions that occur in producing and delivering health care services and products, there is no single way to move ahead. Instead, transitioning to a value-oriented system requires that companies test and implement a constellation of coordinated modifications to systems, incentives and behaviors.

Companies that have taken tangible steps are moving deeper into what one of the speakers termed the “messy period of transition.” During this period, information systems are in place, but may not yet be interconnected. Improvements have been made to care delivery and coordination, but the scope may not have expanded yet beyond clinical areas. Quality measures have been identified, but may not yet be fully formulated or synchronized with financial incentives. And, performance- and outcomes-based payment arrangements are on the table, but these are still evolving as contracts are negotiated.

There are signs of some early wins, as some of these efforts are already generating measurable results. But, for others, it will likely take longer to observe improvements in quality and reductions in cost, the desired prizes. It’s going to take some trial and error, and time, for a body of evidence to emerge.

Long-term success will depend not only on demonstrating greater value in the delivery of health care, but also on engaging with consumers in a fundamentally different way. Achieving the best outcomes will require reaching consumers before they need care to help them monitor and improve their health, and then partnering with them to determine and provide only the care they need when they need it.

As one panelist noted, “It’s easy to focus on who’s walking through the door, but we also need to worry about those who aren’t walking in.” Winning health care’s “triple crown” in any lasting, widespread way is going to require a true multi-channel outreach strategy that focuses on building long-term relationships with consumers in ways that help them stay healthy, deal effectively with health problems when they arise and become more sensitive to value in the health-related decisions they make.

It’s only a matter of days before we learn if California Chrome will emerge as the victor. It will take longer for the industry to claim its triple crown, but individual companies are already experiencing some wins. I am confident that we as an industry are on the right track as we sharpen our focus on value and accelerate efforts to lower costs and improve quality at all levels of the system.


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My Take

By Reynold W. (Pete) Mooney
Deloitte Touche Tohmatsu Limited (DTTL) Global Managing Director, Life Sciences and Health Care



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Implementation & Adoption

CMS alters Meaningful Use deadlines

On May 20, the Centers for Medicare & Medicaid Services (CMS) and the Office of the National Coordinator for Health IT (ONC) released a proposed rule that would extend the deadline for Stage 2 of Meaningful Use of certified electronic health records (EHR).

After receiving feedback from EHR vendors through letters, public forums, survey data and more, CMS and ONC decided that the amount of time that had been given for attestation of Meaningful Use in Stage 2 was too short for vendors to certify their products. Under the proposed rule, eligible providers would be given an extra year to attest to Stage 2. The rule would also move Stage 3 to the beginning of 2017.

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FTC urges lawmakers to require greater transparency among data brokers

Last week, the Federal Trade Commission (FTC) released a report that focuses on data brokers who collect and share with others large amounts of information about consumers, mostly without their knowledge. This information is sold to companies such as consumer goods manufacturers, educational institutions, government entities, insurance companies, marketing firms and financial services firms to help inform marketing campaigns and drive fraud prevention.

The researchers found that brokers hold large amounts of information—one of the brokers studied had information on more than 1.4 billion consumer transactions, and another adds 3 billion new data points to a database each month. Findings include:

  • Information is collected from both online and offline sources and includes purchase data, social media, religious and political affiliations and more.
  • Data brokers often share data amongst each other, passing the information back and forth.
  • The information is used to make inferences about consumers, such as ethnicity, income, age and health.
  • Some of the brokers store information and data about consumers for extended periods of time, potentially creating security risks and concerns.

The FTC makes several legislative recommendations in the report. These include creating a centralized portal that would allow consumers to have access to the information, requiring opt-out capabilities and protecting sensitive data and information, including health information. The FTC looked at nine data brokers after the commission voted in 2012 to require the companies to release the data for the study.

(Source: Federal Trade Commission, “FTC Recommends Congress Require the Data Broker Industry to be More Transparent and Give Consumers Greater Control Over Their Personal Information,” May 27, 2014)

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National Coalition on Health Care launches Rx pricing campaign

Last week, the National Coalition on Health Care (NCHC), along with 80 participating organizations across medicine, business, health care, insurance and more, launched the Campaign for Sustainable Rx Pricing. Citing the increase in high-cost therapies, the group aims to spark a national dialogue about the pricing of new biopharmaceutical therapies that come with high price tags.

According to NCHC, some new therapies cost $1,000 per dose, adding up to $100,000 for the total cost of treatment per individual. The group claims that these high prices can be barriers to care and cause higher out-of-pocket spending, premiums and taxes. Specialty drug spending has increased rapidly over the last decade and, according to Express Scripts, is expected to increase 63 percent from 2014 to 2016 in the U.S. The U.S. Food and Drug Administration (FDA) recently approved four drugs that cost more than $200,000 annually per patient.

Related: The January 14, 2014 Health Care Current addressed the challenges facing the biopharma sector in balancing the need for innovation and driving competition in the industry.

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Report predicts uninsured rate to rise after 2016

Last week, researchers from the University of Minnesota (UM) Carlson School of Management released an analysis that found that individual plan enrollment through the exchanges could drop off after 2016. Using the 2014 health insurance exchange (HIX) enrollment data as well as a microsimulation model, the researchers forecasted insurance prices and enrollment from 2015 through 2024. They predict that after 2016, the uninsured rate will jump back to where it was before the opening of the exchanges and will increase from there. Notably, the enrollment projections differed from those of the Congressional Budget Office (CBO):

The researchers argue that there are three reasons behind this:

  • The risk corridors and reinsurance programs that aim to stabilize premiums and encourage competitive pricing among health plans are temporary and will sunset at the end of 2016.
  • The employer mandate is delayed for mid-size employers (50-99 employees).
  • In March, the Administration further delayed the cancellation of insurance policies that do not meet the new ACA standards until 2017.

The researchers also forecast premium changes over time. For example, they predict that the national average cost for a bronze-narrow plan for a single individual could increase from $2,132 in 2016 to $4,174 in 2017.

Analysis: For both of these analyses (CBO and UM), there are several assumptions that go in to the projections. While it is likely that the results are directionally correct, some of the assumptions might be too extreme. For example, the study projects a 50 percent increase in average family rates for bronze plans and a 100 percent increase for individual rates – this is much higher than plans are proposing after this first year. The analysis also does not take into account the approval process that states use to limit rate increases.

The challenge here, however, is that if plans begin to lose money after the risk corridors and reinsurance programs sunset, and states disallow them from increasing rates enough to account for their losses, they could begin to withdraw from the state markets. Many plans are relying on the “3Rs” programs – risk adjustment, reinsurance and risk corridors – and remain concerned as to what happens after the two temporary programs sunset.

Some plans could see the need to put large increases in their premium rates due to keeping them artificially low during the first few years. If the risk pools also significantly shift, there could be large, discontinuous rate increases. While the permanent risk adjustment program helps to adjust for differences in risk selection among plans, it does not account for an overall less healthy insurance pool. In the future, findings such as these could serve as a justification to making changes to the law.

(Source: Stephen Parente & Michael Ramlet, Carlson School of Management, University of Minnesota, “National and State Impact Analyses of the ACA on Insurance Prices and Enrollment Beyond 2014,” May 20, 2014)

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On the Hill & In the Courts

CMS announces Round 2 of State Innovation Model Initiative grants

At the end of May, CMS announced that Round 2 of the State Innovation Models (SIM) initiative will be made available through grant awards. SIM is a multi-payer model innovation program that focuses on public- and private-sector collaborations to transform the state’s delivery of care system. CMS will award up to 12 states with grant awards from $20 million to $100 million, totaling $700 million over a four-year period. CMS will also provide up to $3 million per state for 15 Model Design awards.

CMS will provide financial and technical support to states for designing new State Health System Innovation Plans or enhancing existing plans previously developed in Round 1. All Model Design awardees from Round 1 must apply for Round 2 of SIM. The selection criteria for Round 2 will be based on a state’s ability to effectively apply policies and regulations to address key focus areas, including improving population health, transforming heath care delivery systems and decreasing per capital total health care spending.

Related: The SIM grants are allowing states to focus on transforming payer-provider relationships and altering payment mechanisms to improve quality of care, reduce costs and achieve better health outcomes. These initiatives hold potential for system transformation. The May 13, 2014, Health Care Current addressed the question: Can the move to value-based care happen without involvement from the states?

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IRS: employers seeking to shift employees to HIX may face additional penalties

Beginning in 2015, employers that fail to offer minimum essential coverage to their full-time employees will face a “shared responsibility” penalty of as much as $2,000 per full-time employee. However, a recent Q&A document released by the Internal Revenue Service confirms that, based on guidance issued in September 2013, employers may be subject to an additional penalty of up to $36,500 per employee per year if they attempt to provide pre-tax subsidies to help employees purchase coverage in the individual market, including the HIXs.

Background: The ACA requires large employers (100 or more employees) to offer health care coverage to full-time employees. On average, employers contribute more than $5,000 a year per employee for health care benefits, an amount that is tax-free. The new guidance clarifies that employers seeking to drop employer-based coverage may help employees buy insurance on their own through the HIX, but that it will have to be in the form of taxable wages.

Analysis: While the FAQ document has received considerable news coverage over the last week, many employers have probably known about the IRS’s position for some time. As noted in the FAQ document, the IRS first articulated these rules in guidance issued on September 13, 2013. In terms of impact, clearly employers may not provide tax-favored subsidies to their employees to purchase health insurance in the individual market or on public exchanges.

This might be an issue for employers thinking about dropping coverage in favor of paying the $2,000 per full-time employee penalty, but only if they were hoping to help employees purchase other coverage on a tax-favored basis. Pay increases will continue to be an option, but will be taxable. For employers that choose to continue sponsoring health plans (either fully insured or self-insured) for their employees, including those that do so through a private exchange, these rules should be a non-issue.

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Court overrules expansion of 340B pricing for non-orphan use

Last week, U.S. District Judge Rudolph Contreras overruled final rules issued by the Health Resources and Services Administration (HRSA) in late 2013. A provision of the Affordable Care Act exempted orphan drugs from required discounts for new 340B entities. In the final rule from HRSA implementing the law, the agency interpreted the provision only to apply to orphan drugs when they are used for their “orphan-approved purpose.”

Thus, 340B pricing would be available to organizations if they were using the orphan drug for other purposes than the originally approved use. After the final rule, the Pharmaceutical Research and Manufacturers of America (PhRMA) filed a lawsuit, claiming that HRSA did not have the regulatory authority to promulgate these regulations. Last week, Judge Contreras ruled against HRSA in this case. Rural and cancer hospitals will no longer receive discounted prices for orphan drugs when using them for purposes other than those for which they were approved.

Reaction: The Safety Net Hospitals for Pharmaceutical Access was in favor of HRSA’s final rule, arguing that more financial burden will be placed on hospitals and patients. The American Hospital Association also filed an amicus brief last December, siding with the U.S. Department of Health and Human Services and arguing that a ruling against the agency “would deprive America’s rural and cancer hospitals of the medically necessary drugs that in many cases are unaffordable and it would jeopardize the financial sustainability of those hospitals.”

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Around the Country

Connecticut unveils smartphone app for HIX enrollment

Connecticut’s HIX, Access Health CT, has unveiled a new mobile application to assist residents and small employers. The app, ahCT, is free and allows consumers and employers to:

  • Browse plans that are offered by the HIX before they enroll in and purchase health insurance coverage
  • Determine if they qualify for assistance through the HIX
  • Create an account for beginning the enrollment process
  • Upload verification documents using the camera
  • View enrollment by household, messages, documents and notices from Access Health CT

This is one of several strategies that Connecticut is using to advance capabilities around its exchange. Future editions of the app will allow residents to apply for benefits, enroll in coverage from the mobile device and obtain additional information about their coverage through the app. In addition to the mobile app, Connecticut is working with other states to host their exchange operations functions such as enrollment, marketing and billing.

(Source: Arielle Levin Becker, The CT Mirror, “Access Health CT update: Younger people bought late; calls still coming,” May 22, 2014)

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CMS approves Texas’s dual eligible demonstration

CMS has approved Texas’s proposal for a Dual Eligible Integrated Care Demonstration Project. The federal-state partnership will test capitated payment models where the state and federal governments will have contracts with managed care plans that serve Medicare-Medicaid enrollees (dual eligibles).

The demonstration project begins on March 1, 2015, and runs through December 31, 2018. Texas will pilot the program in six of its most populated counties, reaching more than 168,000 of the state’s dual eligibles, or 40 percent of the 400,000 dual eligibles in the state. Under the new plan, beneficiaries will be covered under one consolidated plan that combines benefits from both programs. The partnership, called STAR+PLUS (State of Texas Access Reform Plus) Medicare-Medicaid Plans (MMPs), expects to reduce Medicaid and Medicare spending. Savings are expected to grow over time:

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Breaking Boundaries

Study: telehealth services for chronically-ill improve both patient and physician satisfaction

A study published last week in Telemedicine and eHealth online found that among chronically-ill patients, satisfaction and clinical outcomes improved through the use of telehealth follow-up services via a web platform. The researchers used results obtained from 175 patients, age 24 to 90, at Massachusetts General Hospital-Beacon Hill Primary Care.

The researchers recruited patients with 10 common chronic conditions and sent them an online survey seven to 28 days following their first office visit to their primary care physician. The survey asked them to rate their overall health and answer disease specific questions. Physicians then reviewed survey responses and conducted follow-up via video chats, phone calls or in-person meetings. Specific study results include the following:

  • Patients were satisfied with their virtual experience in all measures: convenience, time spent, clinical skill and next steps explanation.
  • Physicians were satisfied with the ability to access meaningful information to inform clinical decision making via the telehealth visit.

Although significant barriers exist to widespread adoption of telemedicine services, the study shows potential benefits that could result from greater use of these technologies. The researchers argue that through the use of telemedicine, patients can experience decreased travel time, transportation costs and absences from work while physicians can see time savings.

(Source: Dixon, Ronald F. and Rao, Latha. Massachussetts General Hospital-Beacon Hill Primary Care, “Asynchronous Virtual Visits for the Follow-Up of Chronic Conditions,” July, 2014)

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NIH announces new initiative to harness biomedical research techniques from big data

The National Institutes of Health (NIH) is leveraging big data to provide insight into biomedical research. In a blog post published in early May, the NIH announced the launch of a new initiative called Big Data to Knowledge (BD2K), which will enable biomedical scientists to harness big data opportunities to develop innovative and transformative biomedical research. This initiative comes after an NIH-funded researcher, Atul Butte, showed the benefits of utilizing big data to find new links between genes, diseases, and traits.

Butte recently combed through the VARiants Informing MEDicine (VARIMED) database, which he created in 2008 and now includes over 9,000 studies. Butte’s team found that 120 diseases and traits were linked to the interaction of only a handful of genes. While some of the disease-trait associations were previously known, 20 percent of the findings were new discoveries.

The use of big data allowed researchers to mine through an existing dataset to test new hypotheses and provide the biomedical research community with a new way to capitalize on the wealth of data available. The NIH hopes to inspire more scientists with the BD2K initiative, enabling them to develop approaches and tools that engage big data.

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