Health Care Current: June 9, 2015

What can health care learn from the FIFA scandal?

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.

What can health care learn from the FIFA scandal?

During the 2014 Fédération Internationale de Football Association (FIFA) World Cup Brazil™, 166 goals were scored by 32 qualifying teams in the 64 matches that were played. More than 3.3 million spectators from across the world were in attendance.1 The games brought in a spectacular $330 million to the local economy in Natal, Brazil in just two weeks.2

On May 27, 2015, FIFA made headlines across the world in a different way. According to recent allegations, 14 leaders from the association have accepted kickbacks and bribes that total more than $100 million over the last 25 years.3 FIFA’s story changed overnight.

When stories of health care fraud and abuse reach the headlines, the case is usually big, large health care systems are often named and the settlements can be substantial. And, just as in FIFA’s case, the actual violations could have happened years ago. As cautionary tales, these stories can offer big lessons for health care organizations. Don’t commit fraud. Don’t compromise patient safety. Don’t cut corners.

There’s a problem with big cautionary tales: they’re hard to scale to the everyday decisions and situations that make up so much of health care. Fraud isn’t always as big as FIFA’s is claimed to be. It might not always dominate headlines. It might take the form of one employee doing the wrong thing without knowing it or management making an important decision based on outdated information.

Each year, the US Department of Health and Human Services (HHS) and the Department of Justice (DOJ) recover more than $3 billion in improper health care payments.4 HHS, DOJ and other federal agencies prevent and monitor fraud by enforcing laws such as the False Claims Act the Anti-Kickback Statute, the Sherman Act and more.

Consider the following scenarios, each based on real-world risks that the HHS Office of Inspector General (OIG) has warned about:

  • A provider practice sole-sources a lab for all its patient testing. In order to retain the contract, the lab waives fees that insurance doesn’t cover. This could be seen by the OIG as a kickback.5
  • The rent paid by a private medical practice to operate in a hospital turns out to be less than fair market value. This could also be seen as a kickback.
  • A hospital network discovers that its new affiliate has unpaid Medicare debt. This could threaten the entire network’s continued participation in Medicare.7

While these scenarios may not have the drama of a data breach involving millions of patient records, each could result in serious fraud and abuse violations. More importantly, as outlined in a recent Deloitte Center for Health Solutions report, Health care fraud and abuse enforcement: Relationship scrutiny, many of the unwanted outcomes might be avoided with a strong risk mitigation program.

Informed by analytics, refined by experience and anchored in actionable knowledge, an effective fraud and abuse risk program can help organizations identify, adjust, communicate and learn.

If applied correctly, analytics can help identify issues before they start. For the sole-source lab in the example above, real-time monitoring of organizational data could have warned the organization that some patients were not being billed for services they received. Managers could start a conversation with the lab about its billing practices, using their understanding of regulatory rules to guide the conversation and using this knowledge to make protocol adjustments to avoid this specific risk.

As another example, the private medical practice that found itself in the rent scenario could be addressed in a similar way. Since the regulatory risk is not new, program administrators could integrate rules into the analytics system to monitor agreements between hospitals and medical practices that rent space within it. Such a system could even integrate updated market rate data from a third party information source to help monitor this risk area.

Finally, for the new affiliate with unpaid Medicare debt, analytics could help to identify such a liability before any agreement is signed. Prior to the deal, analytics can be used in the due diligence process to identify relationships that exist between the two organizations, their stakeholders, vendors and affiliates. In this process, employees and contractors can be screened against lists of those with outstanding Medicare debt and other risk factors.

In each scenario, identifying potential issues through analytics is only part of the solution. Also important is adjusting strategy and tactics to mitigate risk, communicating the risk of fraud and abuse so that all within an organization can watch for it and continual learning to stay ahead of the compliance curve.

Sometimes fraud and abuse can grab headlines and change the game forever. But managing the risk doesn’t have to be dramatic. It isn’t just about avoiding the big things. It’s about using all the tools at the disposal of an organization, including analytics, to address potential issues before they start. Equally important is using what can be learned from past issues, from the evolving regulatory landscape and from the sea of data that health care organizations create to improve readiness.

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My Take

By Jeremy Perisho, Partner, Deloitte Financial Advisory Services LLP


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CMS updates MSSP in final rule

Last week, the US Centers for Medicare and Medicaid Services (CMS) published a final rule that updates the Medicare Shared Savings Program (MSSP). Accountable care organizations (ACOs) participating in the program will continue to receive traditional fee-for-service payments under Medicare, but are eligible for shared savings if they meet certain quality and savings requirements.

The rule makes changes in the following areas:

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Implementation & Adoption

RAND: Nearly 17 million people newly insured after ACA rollout

A recent study by RAND found that since 2013, 22.8 million people in the US gained insurance coverage and 5.9 million lost coverage. Overall, 16.9 million people are newly insured.

To capture the Affordable Care Act’s (ACA) influence on health insurance trends, researchers tracked the insurance status of 1,589 adults (ages 18 to 64) between September 2013 and February 2015. The results indicate that the proportion of individuals covered by insurance consistently grew from November of 2013 to May of 2014. Eighty percent experienced no change in their source of coverage.

Among the individuals who gained insurance coverage (22.8 million), many got insurance from their employer. Medicaid, the public insurance marketplaces and other sources accounted for the remaining growth in coverage. The researchers also sought to determine whether many plan cancellations occurred as a result of the ACA. They found that only 600,000 individuals who began with non-group plans became uninsured. Most people who had insurance through the individual market in 2013 remained covered in 2015. This suggests that individuals whose policies were cancelled found coverage in other areas.

(Source: Carman, Katherine G., Eibner, Christine, Paddock, Susan M., RAND, “Trends in Health Insurance Enrollment, 2013-2015,” May 2015)

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Commonwealth Fund: 23 percent of adults are underinsured

Last month, the Commonwealth Fund released a study that examined underinsurance in the US from 2003 to 2014. Researchers defined someone as underinsured if they had consistent coverage for 12 months, but had high out-of-pocket expenses and deductibles relative to their income. Although the study could not determine the influence the ACA had on underinsurance (the study timeframe did not capture 12 months of coverage in the new marketplaces), the findings suggest that 31 million, or 23 percent of, adults between the ages of 19 and 64 are underinsured.

While this proportion is relatively similar to those seen in 2010 and 2012, it is nearly double the figure estimated for 2003. This study also identified what types of coverage underinsured individuals have. While only 20 percent of those with employer-sponsored coverage were underinsured, individuals with employer-sponsored coverage made up the largest proportion of the underinsured at 59 percent. This was followed by Medicare (14 percent), individual coverage (13 percent) and Medicaid (9 percent).

Related: A recent Deloitte analysis looked at the impacts and implications of the increasing consumer health care cost burden. In Dig deep: Impacts and implications of rising out-of-pocket health care costs, the analysis revealed that consumers’ out-of-pocket (OOP) purchases add considerably to the total cost of health care. Nutritional supplements make up the largest portion of costs not included in the National Health Expenditure Accounts (9 percent), followed by spending for complementary and alternative medicine providers (5 percent). Ideally, consumers seeking to reduce OOP costs will take time to research options and use available tools to select low-cost, high-quality providers in their health plan’s network. People facing high cost-sharing may be discouraged from using many of the health services they need, including help managing chronic health conditions, and may not see the value in paying premiums for future coverage.

(Source: Collins, Sara R., Rasmussen, Petra W., Beutel, Sophie, Doty, Michelle M., Commonwealth Fund, “The Problem of Underinsurance and How Rising Deductibles Will Make it Worse,” May 20, 2015)

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Study: Employer coverage remains steady

According to a recent study, enrollment in employer-sponsored insurance has remained stable, even after ACA implementation. Last week, the Urban Institute published findings from a study that evaluated employer-sponsored coverage and uptake. Researchers found that the number of employers offering insurance, the level of coverage and take-up rates for these plans have remained largely unchanged.

The Urban Institute analysis evaluated employer-sponsored coverage for non-elderly workers between June 2013 and March 2015. The study only focused on the non-elderly population between ages 18 and 64. Although individuals may continue to work after age 64, they become eligible for Medicare at age 65. The researchers also looked at employer-sponsored coverage by family income and by firm size. Offer rates and the share of workers with employer-sponsored coverage were greater among individuals working at large firms and for families with incomes above 250 percent of the federal poverty level, or $71,025 annually for a family of four. Despite these differences, rates within these categories remained relatively unchanged between the two periods in the study.

Background: Some previously speculated that the ACA coverage expansion would encourage employers to stop offering health insurance to employees, forcing them to seek coverage in the individual market. Provisions built into the ACA like the employer mandate create incentives for employers to continue offering employees health insurance. The analysis only evaluates an 18-month time period and does not predict the future of the employer-sponsored market.

(Source: Fredric Blavin, Adele Shartzer, Sharon K. Long, and John Holahan, Urban Institute, “Employer-Sponsored Insurance Continues to Remain Stable under the ACA: Findings from June 2013 through March 2015,” June 3, 2015)

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Study: Upcoding in MA risk adjustment costs the US $10 billion per year

An analysis published by the National Bureau of Economic Research found that Medicare Advantage (MA) plans record in administrative data that beneficiaries have more medical diagnoses than providers would typically record for the same beneficiary in traditional Medicare.

Researchers from University of Texas at Austin and Harvard Medical School sought to identify whether diagnosis coding intensity differs between traditional Medicare and MA plans. Traditional Medicare pays providers the same regardless of the number of diagnoses that their patients have. The MA program’s risk adjustment system pays health plans more if their enrollees have more diagnoses. The argument is that MA plans have the incentive to “code well and code often.” Although the codes may accurately reflect conditions that are present, the factors in the MA risk adjustment system are based on coding practices in the traditional program. The researchers analyzed coding intensity differences between MA plans and traditional Medicare to find:

Related: In the 2016 MA draft call letter, CMS addressed MA plans’ practices of collecting in-home risk assessments for their beneficiaries. MA plans perform annual health risk assessments, usually through questionnaires sent to enrollees. CMS has seen an increase in in-home health risk assessments. CMS alluded to concerns that health plans are using in-home assessments to collect diagnoses, which in turn can increase risk adjustment scores and payments. In the final call letter, CMS encouraged health plans to use best practices for performing in-home assessments, making sure that they are a tool for care management and improvement. During 2015, CMS indicated it will also track and analyze care provided after in-home visits.

(Source: Michael Geruso and Timothy Layton, “Upcoding: Evidence from Medicare on Squishy Risk Adjustment,” NBER Working Paper No. 21222, May 2015)

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Drug shortages up 74 percent from five years ago

According to the University of Utah Drug Information Service, in the first quarter of 2015, 265 drugs were in shortage in the US. This is up 74 percent from just five years ago. The shortage is for many types of drugs, including antibiotics, cancer treatment drugs, central nervous system drugs and drugs for nutrition and electrolyte balance.

The reasons a drug can be in short supply range from manufacturing to pricing issues. As an example, one pharmaceutical manufacturer faced unexpected shortages of a pneumonia drug when one of its European factories had to undergo maintenance. Another reason can be attributed to drugs coming off their patent and becoming less expensive. While this is good for patients, manufacturers may cut back production if the older drugs are not very profitable. One-fourth of shortages in 2014 were caused by manufacturing issues:

When faced with shortages, many providers have to come up with alternative ways to treat patients, which often involves giving patients less effective treatments. Sometimes it requires providers to tell patients they cannot receive a treatment at that time.

Analysis: Last year, the US Government Accountability Office (GAO) found similar evidence that drug shortages remain high. While new drug shortages declined from 255 in 2011 to 195 in 2012, the total number of ongoing shortages year after year grew from 40 cases in 2007 to 261 by 2012. Steps taken by the US Food and Drug Administration (FDA) (e.g., FDA Safety and Innovation Act) have prevented more shortages in the past, and the FDA continues to implement new initiatives to help improve shortage responses. Drug shortages affect patient care, operations and spending; additional steps to improve the system and oversight could help reduce new and ongoing drug shortages.

(Source: Peter Loftus, “US Drug Shortages Frustrate Doctors, Patients,” Wall Street Journal, May 31, 2015)

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CMS publishes second round of Medicare payment data

Last week, CMS released three data sets detailing Medicare payments to hospitals for inpatient and outpatient services and to physicians under Medicare Part B. This is the second year that CMS has released this payment data. Just as the data showed last year, charges vary widely for the same services across the country and may vary widely among hospitals in the same region.

This year, CMS broke out payments for Part B drugs from other payments to physicians. Physician groups who had noted that most of the payment for Part B drugs goes to the drug manufacturers and not physicians administering the drugs applauded CMS for this change. They said it will help eliminate the misconception that physicians keep the payments for Part B drugs.

In total, Medicare paid $62 billion to hospitals for inpatient services and $90 billion to physicians for outpatient and office services. As in 2012, major joint replacements were the most common service, totaling more than $7 billion in payments. Below is a list of the top five diagnosis-related groups (DRG) and the total Medicare payment to hospitals.

Analysis: When CMS released the first set of physician payment data last year, Dr. Harry Greenspun, Director, Deloitte Center for Health Solutions said in the January 28, 2014 Health Care Current that the challenge with transparency is that a complete picture often cannot emerge through one data point from a single data set (e.g., reimbursement). Instead, he said, stakeholders get a cluster of data from one source at a time, typically without sufficient context to be insightful: a little cost here, a little quality there. True transparency could enable a comprehensive, comprehendible and actionable view of health care. For a patient, it means being able to answer a simple question: “Where can I go to get good care for a reasonable price in a respectful manner?” For employers and government agencies, the questions are more complex, but the data needs are very similar. Reimbursement information is one small, isolated piece. How this information will be used remains to be seen and what cautions go along with it have yet to be determined. But, as stakeholders aim to slow the growth in cost of health care, each new element of transparency added is an important step.

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Senate Judiciary Committee marks up PATENT Act

Last week, the Senate Judiciary committee met to mark up S. 1137, the Protecting American Talent and Entrepreneurship (PATENT) Act. The act aims to amend the Leahy-Smith America Invents Act to combat so called “patent trolls.”

Patent trolls are companies who purchase patents from companies without intending to produce the product. Instead they use the patent ownership to threaten companies with infringement lawsuits. According to recent figures, patent trolls bring in more than half of the new suits filed over patents and they cost the US approximately $12.2 billion last year. In recent years, the number of patent-infringement cases has increased by approximately 25 percent.

The PATENT Act would shift the burden to pay the attorney’s fees of defendants in a lawsuit onto the patent troll company if the case is found to be unreasonable by a judge. It would require those companies to demonstrate in advance that they can pay defense fees before the case can be heard. The bill would also prevent patent trolls from suing companies that are only using the technology they purport to be an infringement on a patent.

Industry stakeholders such as the Pharmaceutical Research and Manufacturers of America (PhRMA) and Biotechnology Industry Organization (BIO) have lobbied for greater protections of their organizations’ patents. They have said that any efforts to deter abusive patent lawsuits should be balanced with efforts to protect patent holders’ rights to enforce their patent. An updated version of the bill includes language that PhRMA and BIO lobbied for, but which the Information Technology Industry Council opposes. House lawmakers have introduced a related bill, H.R. 9, which would make similar changes.

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On the Hill & In the Courts

House lawmakers discuss Medicaid program integrity in a recent hearing

Last Tuesday, June 2, the House Energy and Commerce Subcommittee on Oversight and Investigations held a hearing on Medicaid fraud and abuse. The hearing focused on the findings of a recent GAO report that identified thousands of cases of misconduct among both providers and beneficiaries in a sample of four states.

The subcommittee heard testimony from two witnesses: Seto Bagdoyan represented the GAO as Director of Audit Services in the Forensic Audits and Investigative Service Team, and Dr. Shantanu Agrawal represented CMS as Deputy Administrator and Director for the Center for Program Integrity. Mr. Bagdoyan largely spoke to the findings of the GAO report, and Dr. Agrawal testified to CMS’s current efforts to reduce fraud and waste, including federal-state collaboration and use of enhanced data systems.

In his opening statement, Subcommittee Chairman Tim Murphy estimated that CMS made approximately $17.5 billion in improper Medicaid payments in 2014. This is a more than $3 billion increase from 2013. Subcommittee Ranking Member Diana DeGette acknowledged that there is bipartisan support for addressing this issue. DeGette is also interested in how the ACA provisions to reduce fraud have influenced trends in misconduct. The effects of the ACA were not captured by the GAO report because it used data from before the ACA went into effect. The ACA provided nearly $350 million to anti-fraud efforts and granted the Secretary of HHS new authorities to prevent improper payments.

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House Ways & Means committee marks up Medicare Advantage bills

Last week, the House Committee on Ways & Means (W&M) marked up of a number of health care related bills. Markups give the committee of jurisdiction an opportunity to debate and amend legislation before it is voted on by the entire chamber on the House floor. Out of ten bills discussed, five would reform various policies in the MA program. All garnered bipartisan support and were passed by unanimous voice vote.

Related: The W&M members also passed bills that would repeal the Independent Payment Advisory Board (IPAB) and medical device tax, both established by the ACA. Unlike the MA bills, votes for these bills were split along party lines. House lawmakers are scheduled to vote on these two bills, in addition to the five MA bills the week of June 15.

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Federal court delays Texas telemedicine rule

In an ongoing dispute between Teledoc and the Texas Medical Board, a judge for the US District Court Western District of Texas has granted a temporary injunction in favor of the telecommunications company.

As discussed in the April 21, 2015 Health Care Current, Teledoc is in the midst of an antitrust suit against the Texas Medical Board after the licensing board decided to place strict restrictions on telemedicine services. The rule was supposed to go into effect on June 3 and while it did not ban telemedicine explicitly, it prevented doctors from treating patients through video chat software without a medical professional physically present to examine the patient. The rule would contrast with policies in other states intended to reduce the barriers to providing care remotely (e.g., Idaho and Utah).

Judge Robert Pitman’s decision puts the prior rule on hold until the antitrust case is resolved. This case could foreshadow how medical boards in other states choose to deal with telemedicine companies moving forward. Many state policymakers have ongoing questions about physician shortages and how best to serve patients in rural areas. That being said, state legislatures are increasingly debating these issues and are setting licensing rules in statute rather than allowing licensing boards to handle these debates.

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Around the Country

CMS publishes proposed premium rates for 2016 that are significantly higher than 2015

Last week, CMS published premium rates for insurance companies that plan to “significantly” increase rates in the federally-facilitated marketplaces and in some state-based marketplaces for the 2016 coverage year. The ACA requires that a summary of rate review justifications and results be accessible to the public in an easy-to-understand format and that HHS hosts a site to help meet this requirement.

While it’s difficult to generalize overall market trends from this small slice of the market – plans sold on the health insurance marketplaces and individual coverage sold through brokers and agents – many insurers have proposed to increase premium rates above 10 percent for 2016. For example, health plans in North Carolina requested average increases of 26 percent for individual plans. Some plans in Maryland, New Mexico and Tennessee have proposed average increases of 30 percent.

For the first time since the marketplaces opened in 2014, plans have a full year’s worth of claims data on which they can base premium increases. Many plans have cited increased costs from new customers and the rising prescription drug costs as contributing factors to premium increases.

Analysis: While the proposed rates are initial requests and may change before they are finalized, it is clear that many plans are adjusting to changes in the market. As discussed in The 10 percent problem: Future health insurance marketplace premium increases likely to reach double digits, insurers are responding to new rules, a competitive environment and ambiguity with enrollee populations.

Though the ACA established three programs – risk adjustment, risk corridors and reinsurance – to help stabilize rates, two of the programs will expire after 2016. Through modeling by Deloitte Consulting LLP’s health actuarial practice, researchers estimated the effect of the risk corridors and reinsurance program expirations on health plan premiums. Notably, the analysis found that premium increases of 10 percent or more could be likely over the next several years as health plans prepare for the end of the risk corridors and reinsurance programs and try to reach or maintain profitability in 2017.

While regulatory modifications at the state and federal level could alleviate some of the pressure, health plans should consider using multi-year pricing strategies for setting premiums. Value-based care purchasing strategies, population health investments and analytics to target care coordination, are also tools and methods that health plans can use to manage costs.

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Governor of Pennsylvania applies to establish state-based marketplace

To mitigate the potential loss of insurance subsidies offered through the federally-facilitated marketplaces if the Supreme Court rules against the government in the upcoming King v. Burwell case, Pennsylvania Governor Tom Wolf submitted an application to the federal government last week to establish a state-based marketplace.

The Court’s decision in King v. Burwell will determine if insurance premium subsidies can continue to flow to consumers enrolled through the federally-facilitated marketplaces. Even if the Court decides that subsidies for these individuals are invalid, it is still unclear how much time states will have to come up with a solution. The Court could defer the implementation of any judgment for a specific period of time.

Pennsylvania is the first state to outline a contingency plan. Last month the state gave notice (see the May 12, 2015 Health Care Current) that it would establish a state-based marketplace in the event of an adverse Supreme Court ruling. The most recent announcement formalizes the application process, though the Governor’s office has continued to emphasize that submitting an application does not require the state to follow through. Instead, this leaves the door open for the state to act if subsidies suddenly cannot flow through the federally-facilitated marketplaces. HHS Secretary Sylvia Burwell has said that the administration has no contingency plan. The administration believes that the Court will uphold the validity of subsidies flowing through the federally-facilitated marketplaces.

Related: In the March 10, 2015 Health Care Current, Anne Phelps, Principal, US Health Care Regulatory Leader, Deloitte & Touche LLP, said that though the HIPAA preceded the ACA, the structures of the laws are similar and HIPAA is the precursor to the ACA. She explained that both laws amend the same statutes and certain provisions are optional with a “fallback” to the federal government. If the Court strikes down the availability of tax credits in the federal marketplaces the structure of the law will remain in place, and states will still have the option to move forward or not. If the Supreme Court upholds the credits in the marketplaces, many states may interpret that as nearly a final word on the permanence of the law, decide to take the ACA back into their own hands and work toward establishing their own state-based marketplaces. Ultimately, the most pressing question is: Will the Supreme Court decision spur states to action?

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NCI announces "precision cancer" initiative

Last week, the National Cancer Institute (NCI) announced a major “precision cancer” initiative that mirrors President Obama’s Precision Medicine Initiative by exploring treatments for cancers that have not responded to traditional therapies. The initiative, called the Molecular Analysis for Therapy Choice (NCI-MATCH) trial, has begun enrolling thousands of patients from 2,400 clinics around the country.

Patients with intractable cancers will be given a DNA sequencing test that looks at 143 important cancer genes. The trial will match approved and investigational drugs with tumors that have specific genetic signatures. Researchers will test 20 drugs on different gene mutations within the first few months. The research team is considering a response rate of 16 to 25 percent in a molecularly defined population to be encouraging. If 35 percent of the sample has reached progression-free survival at six months, the researchers will begin to develop the treatment further. The team estimates the study will cost $30 to $40 million. They may receive expanded funding from the Precision Medicine Initiative.

Related: The Energy and Commerce Committee’s 21st Century Cures Act aims in its precision medicine provision to leverage the game-changing technological advances brought on by the human genome project, which began more than two decades ago (see the March 3, 2015 Health Care Current). There are still many unknowns about the underlying causes of many serious diseases, what treatments work best for what individuals and why individuals with the same disease can progress at different rates. A focused precision medicine initiative could get the health care system one step closer to finding those answers.

The NCI study is the first of its kind that links tumor genetics with clinical outcomes in thousands of patients. Over the last decade, experts have considered every cancer as unique based on its characteristics and the background of the patient. As the trial’s co-leads explain, it is common to find genetic mutations associated with certain cancers that are present in dozens of other cancers. It is not clear if this means that the cancers could be treated with the same drugs. This study will help clarify whether it still makes sense to identify tumors by where they originate.

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Breaking Boundaries

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