Health Care Current: March 22 2016 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: March 22, 2016
Is medical innovation ready for the evolution of value-based care?
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.
- My Take
- Implementation & Adoption
- On the Hill & In the Courts
- Around the Country
- Breaking Boundaries
Is medical innovation ready for the evolution of value-based care?
By Greg Reh, Principal and Life Sciences Sector Leader, Deloitte & Touche LLP
Few would deny that the health care system is evolving. And, in the case of health care, evolution is a good thing. It has brought us new care delivery approaches, new treatments, and new technological advancements that have created tremendous value to patients. Now, the focus is shifting toward ways to curb rising health care costs while maintaining and even improving the quality of care patients receive today.
Payers – health plans, employers, and government entities – are working with providers to test new value-based care (VBC) payment models that shift the focus away from the number of services to the value of those services. But defining value is not easy, and the question remains, what does this mean for medical innovation and the life sciences industry?
Last fall, the Deloitte Center for Health Solutions and the Network for Excellence in Health Innovation (NEHI) convened 21 leaders across the health care system, including biopharma, medtech, health plans, providers, academics, non-profits, and patient groups to discuss this very question. Many important topics were discussed throughout the day, but the participants really sought to answer how medical innovation will be evaluated under VBC and how VBC models can evolve to encourage medical innovation.
The results, which were published in “Delivering medical innovation in a value-based world,” are telling. Today, there is much uncertainty around how VBC and supporting policies might evolve. Even more uncertain is how medical innovation will be evaluated, much less rewarded, under these new models.
What is the impact if VBC models and policies do not consider how to support patient access to medical innovation? For one, today, many VBC models focus on process measures and short-term clinical measures, leaving out long-term clinical or quality of life improvements that medical innovation can bring. Some also have relatively few quality measures and instead emphasize improvement against financial goals. For example, the new mandatory Comprehensive Care for Joint Replacement bundled payment model only includes two quality measures. For providers working under these models, there is a risk that they will consider short-term cost over quality improvements, deterring them from using more expensive advanced technology.
Finally, we already see many providers participating in VBC arrangements standardizing their care pathways to achieve cost-effectiveness goals emphasized by these new payment models. Standardization may leave little room for provider adoption and patient access to breakthrough technologies that challenge existing standards of care. How can we make exceptions so that patients can access breakthrough innovation and payers and providers can test cost-effectiveness in the real world?
The conversation at Deloitte and NEHI’s convening led us to identify four changes that may help integrate medical innovation into VBC models. Most importantly, the discussion pointed to the need for ongoing cross-stakeholder dialogue, specifically, giving life sciences companies a more prominent seat at the table.
Evidence from the field suggests that a few “early adopters” are already heeding the message that cross-stakeholder discussions are needed to bring medical innovation to patients under VBC. Just last month, Cigna and Novartis agreed to performance-based pricing for Entresto, a new drug for the treatment of heart failure. Under the deal, Cigna will pay Novartis based on how well the drug improves the health of heart failure patients in Cigna’s commercial business. Novartis will be measured on how well the drug reduces the number of patients with heart failure hospitalizations.1
In another recent collaboration, Eli Lilly and Anthem joined together to suggest policy solutions that may remove regulatory barriers that are impeding additional similar value-based payment arrangements today. The two companies said in a recent Health Affairs blog that anti-kickback statutes and government price calculations may need to be reconsidered before additional value-based collaborations can move forward.2 The Centers for Medicare and Medicaid Services (CMS) is also joining the conversation, most recently announcing it will test new ways to pay for drugs covered under Medicare Part B payments to physicians and hospitals.3
In the not-to-distant future, medical innovation will likely be measured against an evolving definition of value, based on clinical and economic factors, as well as the ability of products to optimize care delivery. Life sciences companies should consider engaging health plans, providers, consumers, and policymakers now to shape how the value delivered by their products will be assessed in that future state. This will likely call for ongoing conversation among all health care stakeholders to ensure that this definition of value gives patients access to today’s and tomorrow’s life-changing innovations.
1 Cigna, “Cigna implements value-based contract with Novartis for heart drug Entresto,” February 8, 2016 http://www.cigna.com/newsroom/news-releases/2016/cigna-implements-value-based-contract-with-novartis-for-heart-drug-entrestotm
2 Eli Lilly and Anthem, Promoting Value-based Contracting Agreements,” January 29, 2016, https://lillypad.lilly.com/WP/wp-content/uploads/LillyAnthemWP2.pdf
3 CMS, “CMS proposes to test new Medicare Part B prescription drug models to improve quality of care and deliver better value for Medicare beneficiaries,” March 8, 2016, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-03-08.html
CMS’ Conway finds bipartisan support from Congress on MACRA
On March 17, 2016, Patrick Conway, CMS Deputy Administrator for Quality and Innovation and CMO, testified at the House Energy and Commerce Health Subcommittee’s hearing on implementation of the new Medicare payment law, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The tone of the testimony and questions was positive, indicating bipartisan support of the law, both for the general direction in which it is steering Medicare and the US health care system and the specific timetable in the statute.
Conway described MACRA as “disruptive by design” and key to the long-term sustainability of the Medicare program. He said that MACRA will help payers align and talked about CMS’ work with the Health Care Payment Learning and Action Network, which includes private payers, health care provider organizations, consumer groups, and other stakeholders.
CMS is “working expeditiously” on the proposed rule on the Merit-Based Incentive Payment System (MIPS) and confirmed that it will be released this spring. As CMS works to implement MACRA, Conway shared key takeaways so far (see the March 21, 2016 Reg Pulse blog post).
Background: MACRA repealed the Sustainable Growth Rate (SGR) formula and establishes a path toward a new payment system that will more closely align reimbursement with quality and outcomes measures while steering health care providers towards participating in risk-bearing, coordinated care models and away from the traditional system.
The law sets payment updates under the Medicare physician fee schedule for all years in the future and creates two payment tracks for clinicians paid under the physician fee schedule. Clinicians who receive a substantial percentage of revenue through Alternative Payment Models (APMs) will be eligible for 5 percent increases to their payments from 2019 through 2024. Clinicians who choose to stay out of APMS will participate in MIPS, a pay-for-performance program that ties individual clinician’s payment adjustments to their performance on performance measures in four categories: quality, resource use, use of a certified electronic health record (EHR), and clinical improvement activities.
Implementation & Adoption
8.8 million consumers were in exchange plans at the end of 2015
As of December 31, 2015, 8.8 million people were enrolled in health insurance coverage through the exchanges according to the final 2015 exchange analysis. This is approximately 4.5 percent below the 9.1 million goal for the end of the second year of the exchanges. In 2015:
Enrollment numbers fluctuate daily as people move in and out of the exchanges and gain coverage through their employer or become eligible for Medicaid. Approximately 4.9 million new customers signed up for coverage during the third open enrollment period that just ended on January 31, 2016. The latest projections from the US Department of Health and Human Services (HHS) are that 10 million individuals will be enrolled by the end of 2016.
Consumers were actively engaged and shopped for coverage in 2016. Almost 70 percent of returning customers visited Healthcare.gov. Of the reported 3.9 million individuals who actively re-enrolled in plans, nearly 60 percent switched to a different plan and saved on average $480 per year over their previous plan.
HHS cybersecurity task force to begin work on cyber risk report for health care
The Health Care Industry Cybersecurity Task Force will begin meeting after HHS announced 19 individuals who will serve on the task force last week. Cyber risk is one of the most pressing topics facing many health care leaders today. In 2015 alone, more than 260 breach incidents were reported to HHS – and that was only breaches that impacted more than 500 lives.
The members of the Task Force represent hospitals, health plans, patient advocates, health information security researchers, life sciences companies, health information technology vendors, and more. Many of the members are Chief Information Security Officers for their organizations. The Cybersecurity Information Sharing Act of 2015 required the HHS Secretary to create the Task Force. It will coordinate with the Department of Homeland Security and National Institutes of Standards and Technology (NIST), which has developed a Cybersecurity Framework that various industries use to reduce cyber risk in the US.
The Task Force members have experience with technical, administrative, management, and legal aspects of health information security and deep understanding of policies, best practices, organizations, and trends that affect health information security. The Task Force is expected to publish a report by the end of March 2017, when its term expires.
Study: More than half of ACOs include hospitals
More than half (63 percent) of accountable care organizations (ACOs) include hospitals, according to a recent Commonwealth Fund analysis of 5,110 hospitals in the US. However, only 20 percent of all US hospitals are part of an ACO, and only 10 percent of US hospitals participate in a Medicare ACO. Hospitals can participate in ACOs in several ways: initiating or leading the ACO, participating in the contract without a leadership role, or through contracts with physician group-led ACOs.
The analysis revealed several trends among hospitals participating in ACOs. They are more likely to:
ACOs can benefit from including a hospital in their network in three ways. Hospitals can bring capital to fund investments, including for quality reporting. Hospitals also can advance patient data sharing between inpatient and outpatient settings. Lastly, hospitals can help physicians and other providers across the care continuum improve quality and control the total cost of care by streamlining care coordination during transitions.
Certain disincentives and barriers prevent some ACOs from including hospitals in their networks and prevent hospitals from joining ACOs. A key goal for ACOs is to curb health care spending. Several of the ACO leaders interviewed for the study say that some hospitals cannot fully commit to reducing their spending because doing so might reduce their inpatient or emergency department revenue.
(Source: The Commonwealth Fund, “Hospitals Participating in Accountable Care Organizations Tend to Be Large and Urban, Allowing Access to Capital and Data,” March 2016)
ICER: Stakeholders can overcome barriers to greater use of indication-specific pricing
Payers (health plans and government payers), manufacturers, and policymakers should increase use of indication-specific pricing, according to the Institute for Clinical and Economic Review (ICER). In December 2015, ICER convened 22 payer and life sciences organizations to discuss the barriers and challenges to greater use of indication-specific pricing and identified recommendations for each stakeholder group involved.
Indication-specific pricing means setting different payment rates for drugs based on different indications. Today, drugs have one price, regardless of their use or the relative clinical value they have for a type of patient.
Three common models of indication-specific pricing exist. In one model, the same drug will be marketed as two different ones, each with a different indication. In another model (used in Italy), drugs are tracked using an indication-specific registry and separate discounts are applied to the drug based on how patients use the drug. The third model pays a single weighted-average price for a drug using indications across populations and retrospectively applies rebates based on how the drug is actually used.
Several barriers slow adoption of indication-pricing in the US. For one, the drug purchasing and delivery system in the US is complex, with many purchasers and distribution channels. Many of the examples above have been successful because they are used in countries with universal health care systems. Challenges with data and analytics capabilities are another reason, as different prices for different indications require complex data systems that contain individual patient information. Regulatory barriers have also slowed adoption, as health plans and manufacturers must obey anti-kickback laws in the US.
ICER says that solutions to these problems exist:
- Health plans can use medical and pharmacy claims data to identify drug indications. ICD diagnosis codes in retail pharmacy systems and J-codes in physicians’ offices could be used to look at different indications for drugs.
- Manufacturers can apply lessons learned in other countries to the US, bringing successful indication-specific pricing models to inform efforts here.
- Health plans, manufacturers, and policymakers can agree to new models for adopting indication-specific pricing and test them as pilots. For example, CMS could test this kind of pricing through a demonstration project at the Innovation Center. Beyond that, federal legislation would need to address other barriers in federal reimbursement policies.
(Source: ICER, “Indication-specific Pricing of Pharmaceuticals in The US Health Care System: A Report from the 2015 ICER Membership Policy Summit,” March 2016)
OCR clarifies how HIPAA applies to workforce wellness programs
Last week, the Office of Civil Rights (OCR) at HHS addressed how rules under the Health Insurance Portability and Accountability Act (HIPAA) apply to employer wellness programs. OCR clarified that only workplace wellness programs that are part of an employer-sponsored group health plan must comply with HIPAA. Key points include:
An example of a wellness program tied to a group health plan includes programs that tie incentives to lower premiums or cost-sharing. If a wellness program is not offered through a group health plan (e.g., data gathered through biometric screenings or wearables) then the collected information is not protected under HIPAA.
Analysis: Employers play a significant role in providing and financing health insurance and have a stake in maintaining employee productivity. These responsibilities have prompted many companies to provide wellness programs and activities to encourage healthier employee lifestyles. As employers work to implement new and innovative wellness programs, they face numerous challenges: understanding sensitivities in engaging with employees around lifestyle behaviors, sifting through studies and examples to identify evidence-based interventions that can keep employees motivated over time, and navigating an evolving regulatory landscape. Deloitte’s 2015 Survey of US Employers shows that despite these challenges, employers are still bullish on wellness programs.
(Source: HHS OCR, “How HIPAA Applies to Certain Workplace Wellness Programs,” March 14, 2016)
On the Hill & In the Courts
MedPAC releases March 2016 Report to Congress
Last week, the Medicare Payment Advisory Commission (MedPAC) released its annual March report to Congress. It includes payment update recommendations across various providers in fee-for-service Medicare. The commission also evaluates the Medicare Advantage (MA) program on beneficiary access, quality of care, provider costs, and Medicare payments relative to fee-for-service.
The commission recommends that Congress change four MA policies:
- Eliminate two adjustments to the benchmarks: The Affordable Care Act (ACA) standardized county benchmarks—targets health plans use to make their MA bids. Caps constrain the annual growth rate for benchmarks in some counties and can limit quality bonuses for health plans there. Another adjustment doubles quality bonuses for health plans in some counties. MedPAC recommends that Congress equalize county benchmarks by eliminating these two adjustments because they increase variability.
- Include two years of claims data in the risk score calculation: MedPAC also recommends changing how CMS calculates beneficiaries’ risk scores and alters payments based on those scores. The commission recommends using two years of diagnostic data to calculate risk scores. MedPAC research found that because the diagnostic data usually identify chronic conditions, which persist over time, it is more appropriate to use two years to calculate risk scores. MedPAC expects this approach to increase plans’ ability to document chronic conditions and reduce year-to-year variation.
- Remove health risk assessment (HRAs) data from the risk score calculation: Recent research by MedPAC and other organizations has shown that risk scores are higher for beneficiaries in MA plans than for similar patients in traditional Medicare. MedPAC suggests that plans not be allowed to use diagnosis information from HRAs in risk score calculations to reduce the discrepancy in scores between MA and traditional Medicare. HRAs are used in annual wellness visits to identify health risks and the presence of disease or disability. MedPAC found that including HRA findings in risk scores can increase payment regardless of whether those diagnoses led to follow-up care.
- Change how CMS pays Employer Group Waiver Plans (EGWPs): Bids for EGWPs are not submitted competitively. The commission recommends that CMS pay employer plans in a manner more consistent with non-employer plans. Employer group plans now pay 106 percent of fee-for-service for employer plan enrollees. MedPAC made the same recommendation in its March 2014 report, and CMS proposed to change the process in its recent call letter (see the February 23, 2016 Health Care Current).
Vermont applies for 1332 waiver to keep letting small employers purchase plans directly from insurers
Vermont applied for a Section 1332 waiver to gain flexibility around certain requirements under the ACA. The ACA requires states to allow small businesses to enroll for health insurance through their state health insurance exchange by January 1, 2017. Vermont is asking CMS to waive this provision, exempting it from building a website that it estimates would cost roughly $8 million. Instead, small businesses would continue to purchase coverage directly from health plans.
Vermont officials say that the state has a unique insurance market; it is mostly a rural state with a population of approximately 625,000 people. Vermont also had strong consumer protections, high insurance rates, and one of the healthiest populations in the nation prior to the ACA. The waiver would not affect other sections of the ACA and would not require any additional funds from the federal government to implement. Acknowledging that the state could decide to move to HealthCare.gov to sign up individuals, the application outlined that the state would still want to retain its 1332 waiver for the small business exchange.
Analysis: The ACA established 1332 State Innovation Waivers, similar to Medicaid 1115 waivers, which allow states to pursue alternative approaches to providing residents with high-quality, affordable health insurance under certain guidelines beginning in 2017. Vermont is not the first state to apply for a 1332 waiver. The scope of Vermont’s proposal is similar to applications from Hawaii and Massachusetts, which also are seeking to modify certain ACA requirements. Deloitte’s recent report, State health coverage innovation and Section 1332 waivers: Implications for states, discusses innovative approaches states may consider when designing these waivers.
Around the Country
Massachusetts law puts limits on opioid prescriptions
Massachusetts Governor Charlie Baker signed a bill that establishes a seven-day limit on first-time opioid prescriptions, new efforts to evaluate patients within 24 hours after an overdose, and addiction screening for middle and high school students. This comes just days after the Senate passed the Comprehensive Addiction and Recovery Act (CARA) which, if signed into law, would authorize the expansion of grant programs to prevent and treat opioid addiction and prosecute those who sell heroin and prescription drugs on the black market (see the March 15, 2016 Health Care Current).
Governor Baker initially proposed stricter limits on opioid prescriptions, but the state legislature approved a compromise bill, extending his proposed three-day limit to seven for first-time opioid prescriptions.
New York mandates electronic prescribing
New York passed a law in 2012 that penalizes physicians who fail to use electronic prescribing. The program has been delayed until now, but goes into effect on March 27, 2016. This makes New York the first state to enforce an electronic prescribing law with penalties (Minnesota requires electronic prescribing but does not penalize those who fail to comply). The goal is to reduce errors and fraud and improve coordination of care
The change is also part of a larger effort to curb the illicit use of opioid prescriptions. The law established an online registry that physicians must review before prescribing any controlled substances. The registry documents controlled substances recently prescribed to patients to illuminate potential abuse. However, patients often could get around the registry simply by changing the spelling of their name. Electronic prescriptions may help the state reduce these types of actions.
Many physicians are struggling to meet the deadline, and some have requested extensions. As of January 2016, only 60 percent of the state’s 100,000 prescribers were able to send electronic prescriptions. Prescribing controlled substances requires extra security, and only about half of those able to prescribe electronically were able to prescribe controlled substances.
Patients will now need to know which pharmacy they would like to use prior to receiving a prescription. If they do not have a preferred pharmacy, they will need to select from a list presented in the prescribing platform. If the pharmacy does not have the drug or the drug is too expensive, patients will need to have the doctor call to cancel the prescription and then prescribe it again elsewhere. The law provides a few exceptions to the rules (e.g., technical issues or when a medication will be filled out of state etc.).
Strengthening patient and research networks to make progress in cancer care
In the era of using data analytics to understand how to better target therapies for cancer and other diseases, the US Department of Veterans Affairs (VA) and its network of 152 hospitals and 1,400 clinics that serve 55,000 cancer patients – all with EHRs – offers a contrast to the patchwork of the nation’s 5,000 non-military hospitals. A major cancer research group is now interested in tapping into the VA’s resources and is enrolling veterans in clinical trials of experimental cancer therapies. The initiative is starting with lung cancer patients.
Lung-MAP is an ambitious and innovative approach to cancer clinical trials and is being conducted at approximately 730 treatment centers in the US. While most trials test a single drug, Lung-MAP is focused on outcomes around five drugs. For three of the trial groups, physicians are testing patients’ cancer DNA to identify mutations that serve as the cancer’s control switch. The aim is to deliver a drug that turns that switch off. The physicians are treating two other groups with immunotherapy drugs, which use a patient’s own immune cells against a tumor.
In addition to the Lung-MAP trials, another cancer initiative is teaming up with some VA hospitals. SWOG, one of five major cancer research consortiums in the US funded by the National Cancer Institute, recently opened membership to VA hospitals with no university affiliation. It also arranged small grants for five other VA locations to hire research assistants and created a research coordinator position to help VA hospitals open cancer trials.
Analysis: Many clinical trials do not meet the time frame originally set to enroll patients, which can drive up cost and delay access to potentially effective medications. Many VA hospitals are affiliated with universities, some of whom have had research funding cuts in recent years, making it more difficult to hire assistants to help enroll patients in trials. And, like many physicians across the country, VA physicians are busy and clinical trial recruitment takes a long time. Connecting the VA’s integrated system with innovative cancer initiatives has the potential to improve care for veterans with cancer and advance research.
In related news, a former airfare search executive recently launched a new business venture, TrialReach, which aims to make clinical trials more accessible. TrialReach uses a tool from the travel industry to match scientists looking to test experimental therapies with patients. It works by pulling together information patients previously had to piece together from web searches, physicians, and a website run by the National Institutes of Health. Similar to sites that connect shoppers with retailers, this site aims to do the same with patients and researchers. Many pharmaceutical companies and physicians have welcomed the site and are helping to promote it with patients and consumers.