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The business case for hospital collaboratives
Health Care Current | March 7, 2017
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
The business case for hospital collaboratives
By Sarah Thomas, Managing Director, Deloitte Center for Health Solutions, Deloitte Services LP
Race car driving: It’s an occupation that’s typically seen as a solo gig. One rider in the driver’s seat, the black pavement beneath his wheels, and the only thing on his mind is coming across the finish line in first place. But, Charles Duhigg once pointed out that while other sports depend on individual athletes or teams to win, winning in NASCAR depends on cooperation among competitors. One wrong turn of the wheel by one driver can send seven or eight cars spinning toward the wall.
In health care, this may also be the case. Indeed, we’re starting to see health systems today develop teams to collaborate and partner in new ways. Rather than having an “every man for himself” or takeover mentality, groups of health systems are working together to drive increased efficiencies and value through collaboratives.
Collaboratives are organized groups of entities that work together toward a particular goal. This is not a new concept in the health care industry, but one that we have seen rise in popularity over the past few years. We wanted to understand whether provider collaboratives are actually meeting their goals or if they are a fad that will go away. Are they helping health systems compete in today’s changing payment environment or are they complicating the market? And finally, what makes a collaborative successful?
In Provider collaboratives: Working together to navigate the changing health care delivery system, a new paper from Deloitte’s Center for Health Solutions, we analyzed the track record of nine provider collaboratives to find answers to these questions. Our research found that after investing time and appropriate resources into the formation of the collaborative, many are starting to see progress against stated goals and are evolving to expand their scope. Some successes include cost savings in the ranges of tens to hundreds of millions of dollars, resulting from supply chain optimization and better resource utilization (e.g., labs). Other examples of success include building the right foundation to engage in value-based care or improve population health, sharing best practices, and engaging in advocacy efforts.
Both “early days” collaboratives and ones that are more established often recognize that the road to success is a journey. And not all collaboratives result in lasting relationships. Some have attempted to align, but failed and chose to dissolve. We learned important lessons from those we interviewed for creating a road map to a strong collaborative:
- Get a leader in the driver’s seat: Having the right team with the right skills can be critical, and engagement and buy-in should come from the top. Support and participation of CEOs was seen as necessary for the collaboratives to endure.
- It’s a journey not a sprint: Success doesn’t happen overnight. Patience, persistence, flexibility, and a long-term vision are often essential.
- Remain agile: Strong collaboratives can be dynamic. Many begin with one set of goals that shift over time.
- Think beyond the dollars: Cost-savings and higher revenues are important, but value or “ROI” can be broader than just cost-savings. Stronger relationships, learned best practices, clinical improvements, and coming together for a louder collective voice can create value for the members.
- Navigate through speed bumps as a team: The members of collaboratives value the relationships they’ve built and see them as a defense strategy for future challenges down the road.
Our view is that collaboratives will likely continue to evolve, primarily motivated by the transition from volume to value. These organizations offer their members an environment to create the necessary capabilities and the opportunity to participate in risk-based payment models. While existing collaboratives fall along a spectrum of commitment to transitioning to value-based care, the model can create an effective forum for experimentation and learning. Collaboratives can provide needed infrastructure for participating in value-based care and can lay the groundwork for identifying clinical and cost improvements.
Despite plenty of M&A activity, health systems’ desire to remain independent and focus on their communities is unlikely to go away. Collaboratives can offer an attractive option for health systems to do this and may put them in a winning position going forward.
Implementation & Adoption
President Trump discusses five elements for health reform his in first address to Congress, and House Republicans release draft ACA repeal bill
Last week, President Trump gave his first address to a Joint Session of Congress. In his remarks, he said that his health care agenda promotes expanded health plan choices for consumers while increasing access, lowering costs, and improving quality of care. Citing recent premium increases and decreased participation from health plans in the public health insurance exchanges, he called on Congress to work with the administration to repeal and replace the Affordable Care Act (ACA).
President Trump laid out the core health care reform elements his administration supports:
Then, late Monday, March 6, the House Ways and Means and House Energy and Commerce Committees released draft legislation that would repeal and replace key provisions of the ACA. Notably, Medicaid expansion would remain in place through December 31, 2019 at which point it would impose a per-capita limit on federal contributions to state Medicaid programs and give states greater flexibility to administer their Medicaid programs. The bill would also keep the ACA’s tax credits in place until the end of 2020, when they would be replaced with advanceable, refundable tax credits based primarily on an individual’s age (there would also be some means-testing for higher income households). Finally, it would repeal taxes and fees on higher income individuals, medical devices, health insurers, and brand-name prescription drug manufacturers for tax years beginning after December 31, 2017, but it would delay the Cadillac tax from tax years beginning after December 31, 2019 to tax years beginning after December 31, 2024.
Stay tuned to the Reg Pulse Blog for more in depth analysis in the next few days.
MedPAC proposes updates to the QPP
At last week’s Medicare Payment Advisory Commission (MedPAC) meeting, the commissioners reviewed possible changes to the Merit-based Incentive Payment System (MIPS) under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).
According to the commissioners, MIPS has too many quality measures – 300 – to identify high value clinicians. Further, the commissioners said that MIPS’s design does not provide enough incentives to clinicians to join advanced alternative payment models (APMs), as financial incentives under MIPS are not capped. Commissioners discussed:
- To better identify high value providers, CMS could agree on a uniform set of outcome and patient experience measures.
- To make the advanced APM track more attractive to clinicians, CMS could rebalance the incentives under the Quality Payment Program (QPP) by moving $500 million in funding from the MIPS program to advanced APMs to fund asymmetrical risk corridors.
Under this risk corridors program, clinicians would still accept downside risk, but there would be higher upside risk levels than downside risk levels. Currently, in order to participate in an APM, clinicians must assume the same amounts of downside and upside risk. In the example provided by the staff, clinicians could face five times more upside risk than losses. According to the commission, clinicians may be more likely to accept limited downside risk if there is the potential for asymmetrical amounts of financial gain.
The commission is requesting comment on these proposals, specifically on the proposed quality measure reorganization of MIPS, the potential of rebalancing the QPP, and the funding of an asymmetrical risk corridor.
Prescription drug spending higher on exchange plans than in other markets
In 2016, per-person prescription drug spending in the public health insurance exchanges increased 14 percent, mostly due to increases in utilization and unit cost, according to the 2016 Express Scripts drug trends report. This is much higher than in other markets; for example, prescription drug spending increased just 3.8 percent in 2016 for employer plans.
Additional findings include:
- Average list prices for the most commonly used brand-name prescription drugs increased nearly 11 percent from 2015.
- Specialty drug unit costs increased 6.2 percent in 2016, significantly less than the 11 percent increase in 2015.
- The top therapy classes driving spending on specialty drugs were drugs for inflammatory conditions, HIV, oncology, multiple sclerosis, and Hepatitis C. For inflammatory conditions, just two drugs accounted for approximately 70 percent of market share in 2016. Hepatitis C, however, was the only top specialty therapy class with a decline in utilization and unit cost.
- In the employer market, approximately one-third (33 percent) spent less per person on prescription drugs in 2016 compared to 2015 (of those managed by Express Scripts).
(Source: Express Scripts, “2016 Drug Trend Report,” February 2017)
On the Hill & In the Courts
Senate Finance advances nomination for new CMS Administrator
Last week, the Senate Finance Committee voted to advance the nomination of Seema Verma for Administrator of the US Centers for Medicare and Medicaid Services (CMS). Following an inconclusive vote on Wednesday, March 1, Verma’s nomination was confirmed 13-12 on Thursday, March 2.
Several lawmakers said that Verma is especially qualified to lead CMS. Formerly a health care consultant in Indiana, she is the architect of the Healthy Indiana Plan 2.0. CMS approved this Medicaid expansion model under a section 1115 Medicaid demonstration waiver. Verma not only designed Indiana’s program, but she also advised Iowa, Kentucky, and Arkansas on their waiver submissions and subsequent approvals. At her hearing last month, Verma testified that if confirmed as Administrator, a key priority for CMS would be allowing greater state flexibility for innovation in their program designs (see the February 21, 2017 Health Care Current).
The Committee advancement means that the full Senate will now consider Verma’s nomination, although no date has been set for that vote.
Also last week, the Trump Administration appointed Brian Neale to head the Center for Medicaid and CHIP Services. Neale served under Vice President Mike Pence when he was governor of Indiana and worked with Seema Verma to create the Healthy Indiana Plan 2.0.
Trump Administration mandates agency task forces on regulatory reform
Last month, President Trump issued an executive order requiring each federal agency to establish a task force to evaluate existing regulations and recommend whether they should be repealed, replaced, or modified. Further, each agency must designate a regulatory reform officer to oversee the implementation of regulatory reform initiatives.
The purpose of the regulatory task force is to identify government regulations that:
- Limit job creation
- Are outdated, inconsistent with regulatory reform, or insufficiently transparent
- Cost more than they benefit
After 90 days, the regulatory task force must submit a report to the head of the agency detailing the agency’s progress. Agency leaders may request a waiver if the agency usually issues little to no regulation.
The executive order comes after President Trump’s regulatory freeze (see the January 31, 2017 Health Care Current) and executive order on eliminating two existing regulations for every new one (see the February 7, 2017 Health Care Current).
Around the Country
Governors want to preserve coverage, but disagree on approach
Governors of both parties called on Congress and the new Administration to preserve current Medicaid funding levels in January (see the January 31, 2017 Health Care Current). But, during last week’s National Governors’ Association meeting, disagreements about the best path forward emerged. A record number of governors attended the meeting, where they discussed health care reform, education, and cyber security. Halfway through the sessions, a draft ACA repeal proposal from House Republicans was leaked, and it triggered discussion about how to approach health care under the new administration.
Many governors have said they worry about making changes to Medicaid financing and how these changes could affect their states’ budgets. While some governors say they support a block grant or per-capita cap model, others say they are concerned that these models could shift the burden of covering low-income people primarily to the states. Additionally, many governors, such as Rick Scott of Florida, said that Medicaid funding should be equitable across states. For example, states that did not expand Medicaid might get less federal funding than states that did expand under certain scenarios. Other governors, like Jay Inslee of Washington, are pushing to preserve the ACA, including funding for Medicaid expansion.
Republican governors do not agree on a position on what should happen to current Medicaid funding for the expansion population. But, the Republican Governors Public Policy Committee has drafted recommendations for principals for repeal and replace:
- A stabilized private insurance market
- Greater flexibility in Medicaid program design
- Equity in Medicaid funding across states
- Federal coverage for specialty populations like American Indians, undocumented immigrants, refugees, and disaster victims not covered by Medicaid
- Greater input from states on federal regulations
Meanwhile, Democratic Governors sent a letter to Republican leaders in Congress to say that they disagree with:
- Block granting Medicaid and other proposals; they say these policies could lead to increased uncompensated care
- Increasing flexibility for states; they say this could result in reductions in the number of enrollees in Medicaid
- Reducing federal contributions to the Medicaid program
At the end of the three-day meeting, most governors said they agree that an ACA replacement should cover as many people, but disagree on how to achieve this goal.
(Source: Democratic Governors' Association, " Democratic Governors To Congress: Don’t Shift Medicaid Costs to States,” February 25, 2017; Republican Governors Association, “Governors’ ACA replace and reform working paper 1: Medicaid,” February 24, 2017)
Illinois governor outlines new Medicaid managed care plan
Illinois Governor Bruce Rauner inherited a Medicaid managed care program from his predecessor that had enrolled about 65 percent of the population into managed care plans. He is now pushing managed care plans to improve prevention and take even more responsibility for their members’ health outcomes.
Under the proposal, managed care plans will no longer bid to cover specific segments of the Medicaid population. Instead, they will position themselves as “one-size-fits-all” health plans and better demonstrate value to the state and enrollees. The state aims to enroll 85 percent of Medicaid beneficiaries in managed care and extend managed care to all 102 counties. The state is also limiting the number of health plans it will contract with to reduce the administrative burden on providers.
The state will accept proposals this summer and will award up to seven contracts, down from the current 12. Governor Rauner said that proposals should:
- Streamline procedures for patients and providers
- Create guidelines for care coordination, quality measures, and access
- Better prevent and manage chronic illnesses
- Integrate physical and behavioral health (a component of the state's 1115 demonstration waiver)
The proposal is a part of Illinois’ Health and Human Services Transformation initiative and implements goals of the state's Medicaid waiver application. The new program goes into effect January 1, 2018.
Startup aims to build a blood pressure sensor into smart phones
A Swiss medical device company startup is designing a sensor that uses a smartphone to monitor and report on heart rate, respiration rate, blood oxygenation, temperature, and blood pressure. Leman Micro Devices is starting trials to submit the device for clearance with several regulators around the world and wants to license the technology to major smartphone companies to integrate the sensors into their phones within a few years.
The company is trying to adapt the “old science” of taking blood pressure measurements into the smartphone. The old science involves using traditional blood pressure cuffs around the patient’s upper arm to see at what pressure the blood flows stops and starts, when the heart is pumping, and when it’s relaxed. The company is working to engineer the sensor to make it low cost and integrated into the smartphone without requiring additional hardware.
The US Centers for Disease Control and Prevention (CDC) reports that high blood pressure is very common – affecting about one in three adults in the US – and dangerous because of the link to heart attack and stroke. Often, people with high blood pressure have no warning signs or symptoms so many do not know they have it. However, if individuals know their condition, they can take steps to manage high blood pressure through lifestyle and medication.
Analysis: Biosensing wearables for consumers and smartphone-based laboratory and diagnostic equipment for physician use could transform health care in the coming years. Researchers at the University of Washington are developing a portable sensor that uses a smartphone camera to detect a biological indicator for several types of cancer. At Columbia University, researchers have developed a smartphone accessory called a “dongle” that can perform much like a lab-based blood test to detect syphilis and HIV markers from a finger prick.
Affordable, portable testing for HIV and other diseases could revolutionize public health, presuming the results are accurate. In the developed world, the prospect of consumers having direct access to medical and possibly genomic testing elicits both applause and concern. Consumer education and privacy protections will need to be in place to both assure that consumers use the information appropriately and with confidence. For example, it is important for consumers to learn about the results and take recommended actions. Privacy and security concerns will also continue to shape discussions around mobile and connected health.