MACRA: Quietly transforming health care

Health Care Current | May 23, 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

MACRA: Quietly transforming health care

By Anne Phelps, principal, US Health Care Regulatory Leader, Deloitte & Touche LLP

It has been a couple weeks since House Republicans passed the American Health Care Act (AHCA). In my last My Take, I outlined the process the Senate will go through in moving the legislation forward, and what it will take to bring a bill to the president’s desk (see the May 9, 2017 Health Care Current). While repealing and replacing the Affordable Care Act (ACA) is dominating the headlines and would certainly have a significant impact on the health care landscape, I think the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) has the potential to be equally, if not far more, transformative to our health care system in terms of improving access to high-quality and lower-cost health care. A bipartisan law passed in 2015, MACRA is in its first year of implementation. And as we describe in Rebuilding the foundation of health care under MACRA, it is already quietly changing the health care conversation behind the scenes.

First, the law will impact many Medicare stakeholders. Not just many of the health care providers being paid under the Medicare Physician Fee Schedule, but also the 48 million beneficiaries, the caregivers who serve them, medical device manufacturers, pharmaceutical companies, and health insurers. MACRA rewards physicians for improving the way they deliver care while transforming payment and care delivery models to reduce costs and total expenditures under the Medicare program. Second, the law is poised to reach beyond Medicare into the Medicare Advantage, Medicaid, and the commercial space, and improve quality and care delivery across the spectrum. MACRA’s scale looms large.

MACRA is changing collaborations and conversations
In March, the Deloitte Center for Health Solutions teamed up with the Network for Excellence in Health Innovation (NEHI) and brought 31 stakeholders to Washington, DC to discuss MACRA implementation. Behind closed doors, and with no pressure to come up with solutions, health care leaders from across the US health care industry – health care providers, health plans, and biopharmaceutical (biopharma) and medical technology (medtech) companies – candidly discussed some of the challenges they’re encountering in the early stages of the law’s implementation and their thoughts on how best to move toward a value-driven care system.

The law creates incentives to move away from the often antiquated fee-for-service model in Medicare and toward a system that rewards value (see the April 4, 2017 Health Care Current). That change has the potential to reduce health care costs, lower insurance premiums and, most importantly, improve the quality of care that patients receive. That’s the magic behind MACRA. But to realize this promise, stakeholders will likely have to pull together for the common good. If these collaborations succeed, each group can benefit.

The participants that day said they are well aware of the obstacles they face under MACRA such as tracking and reporting new quality measures, bearing risk in payment models, and adopting information and technology platforms that can truly speak to each other. But they said they are also curious about the challenges other groups face, and the steps they are taking to address them. Watching these different stakeholders share ideas and really listen to each other made me optimistic that these diverse groups can come together to ensure that the health care industry as a whole succeeds under MACRA.

These groups have had formal business relationships for decades, but MACRA is challenging many of them to work together in different ways and to collectively solve problems. Along with changing the way stakeholders collaborate, the law also is changing the conversation, and that could help break down sometimes adversarial relationships. MACRA, for example, requires organizations to use data to report on physicians’ performance, gain insight into what can be done differently, and determine how to improve performance. Given those imperatives, stakeholders will need to work together to determine which group has access to certain types of data, or who has the most effective technology, or the most detailed insight into care patterns. However, many executives questioned how data sharing will happen and who should have and control access. Moreover, some of our attendees say collaboration can be hindered by organizational, competitive, and regulatory barriers.

Some organizations have been able to move past those barriers and begin to work collaboratively to tackle the challenges that come with the move to a value-based system. Here’s a glimpse into how some of the early collaborations among stakeholders are working:

Health plans and providers: Some health plans are already searching for provider groups that are willing to take on more risk in exchange for financial rewards. When a health plan has an existing relationship with a provider, renewed interest in risk-based contracts under MACRA may require the plan to restructure contractual roles and responsibilities. Getting an early start in these negotiations could help. Health plans might also need to monitor each provider’s operational strategies, as many could decide to consolidate, employ physicians, or launch new provider-sponsored plans in light of the demands they face under MACRA. One of the health plan participants said she is focused on finding providers who are excited about going to the next level. “When providers are embracing risk, it’s easier because we are on the same side. It’s not provider versus payer; you’re sitting on the same side of the table. Then we found that many doctors want to sell this partnership to employers and get more people in their network,” she explained.

Life science companies, health plans, and providers: Health plans and providers that enter into value-based contracts will likely need robust infrastructure to track individual patients, their treatments, and outcomes. Life sciences companies should consider focusing on the outcomes that are most important to the patient and the payer, and working with health plan and provider stakeholders to determine a definition of value that they can attribute to the drug therapy or device. One example is a demonstrated endpoint from clinical trials, an outcome that many provider organizations are actively measuring under quality initiatives.

We often say, the way Medicare goes, so goes the rest of the health care world. I think that is certain to be true with MACRA. But it might be even more powerful than that. MACRA is not just aligning the structure of payments, it is raising the bar to improve quality across the board. As lawmakers continue to debate what the US health care system should look like, many providers, health plans, medtech, and biopharma are embarking on a journey that has the potential to truly transform and improve it.


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In the News

International cyberattack highlights vulnerabilities in health care IT systems

Last week, WannaCry ransomware spread across the globe, infecting about 250,000 IT systems and holding them “hostage” until the users paid up to $600 in Bitcoin to regain access. US health care systems tried to patch their IT systems to resist the ransomware, and US Department of Health and Human Services (HHS) held calls to help providers address any damage.

While information on this specific attack is still emerging, it highlights health systems’ unique vulnerabilities. Information at hospitals is time-critical; a sudden lack of access to critical data in emergency rooms and operating rooms can result in substantial disruption and threat to patient lives and safety. The loss of, or inability to access, key information including patient records, lab reports, appointments and schedules can derail the day-to-day mission of hospitals. Thus, ransomware can disrupt daily operations even without a data exfiltration.

Moreover, many health IT systems are outdated. Additionally, federal officials have said this attack might have affected some medical devices.

Generally, law enforcement and health IT professionals recommend:

  • A fast response
  • Deploying required patches and security updates
  • User awareness and reinforcing safe email and internet practices
  • Communicating with other like organizations
  • Maintaining backup of critical systems
  • Deploying anti-malware and advanced persistent threat protection
  • Monitoring the network for timely detection of attacks and vulnerabilities
  • Maintaining cyber incident response plans and routinely exercise them

Ransomware is on the rise. Ransomware cyberattacks increased from the 22nd most common type of malware in 2014 to the fifth most common this year, according to Verizon’s 10th annual data breach report.

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Health care organizations ask HHS Secretary to include Medicare Advantage arrangements to count as MACRA APMs

Last week, a group of health care organizations wrote HHS Secretary Tom Price to ask the US Centers for Medicare and Medicaid Services (CMS) to allow risk-based contracts that clinicians have with Medicare Advantage (MA) plans to qualify as advanced alternative payment models (APM) under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Organizations such as CAPG, America’s Health Insurance Plans, the Healthcare Leadership Council, and the National Committee for Quality Assurance signed the letter.

Starting in 2019, CMS will pay physicians who participate in advanced APMs a 5 percent bonus under the Physician Fee Schedule. Advanced APMs are arrangements where physicians take on the financial risk of providing care to a patient population. Today, clinician’s risk-based arrangements with MA plans do not qualify as advanced APMs under MACRA. In the letter, the groups said that MA APMs have been shown to provide higher quality care at a lower cost than traditional Medicare. They suggested that CMS encourage physicians to take on risk both in traditional Medicare and MA. While MACRA created an “Other Payer Combination Option” that will allow physicians to apply APM arrangements from other payers (e.g., Medicaid, commercial), it does not begin until 2021. CMS has not issued regulations yet that would lay out how the other payer model will work.

Related: Last week, CMS again delayed the implementation and expansion of several cardiac and orthopedic bundled-payment initiatives. Originally slated to begin in July, the interim rule now would start these initiatives in January 1, 2018. The payment model demonstrations, piloted through the Center for Medicare and Medicaid Innovation, would have been mandatory for hospitals and health systems in some parts of the country.

The new rule delays the start dates for:

  • Two new mandatory episode-based bundled-payment demonstrations for cardiac episodes (bypasses and heart attacks) and one demonstration for orthopedic episodes (hip or femur fractures)
  • A program that provides incentives for cardiac rehabilitation services
  • Expansion of the Comprehensive Care for Joint Replacement Model to include a surgical hip and femur treatment bundle

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Fair Drug Pricing Act reintroduced in Senate would require companies to alert Congress when raising prices above a certain threshold

Last week, a bipartisan group of lawmakers re-introduced a bill, the Fair Drug Pricing Act, which would require drug manufacturers to provide a breakdown of their expenses before raising prices on some medicines. The sponsors of the bill include Senators Tammy Baldwin (D-Wisc.) and John McCain (R- Ariz.), and Representative Jan Schakowsky (D-Ill.) Under the legislation, companies would have to notify HHS and submit a report 30 days before increasing the price of certain drugs by more than 10 percent in one year, or 25 percent over three years.

The bill also would require drug makers to report costs related to manufacturing, research and development, and marketing, as well as net profits associated with the drugs. While the legislation would not prohibit companies from increasing prices, they would have to notify taxpayers about price increases.

Related: Deloitte’s 2016 health policy brief, Managing prescription drug prices: What policies are on the table? found that prescription drugs are a relatively small share of total health care spending. Some of the reasons for the increase in prescription drug spending are:

  • More patients gaining access to health care
  • An aging population
  • The introduction of innovative but costly new products

Prescription drugs can reduce total health care spending if they prevent expensive complications and hospitalizations. Many Americans rely on these therapies to improve their health and enhance their quality of life. However, stakeholders pushing to reign in health care spending are exploring a number of policy options to manage drug prices.

Last week, a coalition of health insurers, pharmaceutical companies, pharmacy benefit managers, and large employers released a set of proposals they say would reduce drug prices. Their white paper, “Prescriptions for Competition, Value, and Innovation: Positive Reforms to Increase Access and Affordability for Prescription Drugs” outlines proposals such as the creation of a priority review voucher for certain generics coupled with an expedited review of these drugs, exempting value-based arrangements from price reporting requirements, shielding value-based arrangements from anti-kickback and Stark laws, and encouraging data sharing.

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CMS winding down federally-facilitated SHOP exchange

Last week, CMS announced that it will end online enrollment for the Small Business Health Options Program (SHOP) on beginning November 15, 2017. While employers would still be able to use to determine eligibility for the Small Business Health Care Tax credit, they would need to enroll directly with a SHOP issuer, or through a registered agent or broker.

Employers already can enroll directly through an issuer, or with an agent/broker. The purpose of SHOP was to increase choices and competition in the small-group market. However, only a fraction of small businesses took advantage of the SHOP exchange. This lower-than-expected enrollment is one reason CMS cites for reducing federal SHOP functionality. Additionally, CMS claims that the change will reduce the burden on insurers, consumers, and taxpayers, and aligns with the Executive Order issued by the White House on January 20th.

The proposed change would affect roughly 7,500 employers in the 33 states that use the federally-facilitated SHOP exchange. States that operate their own SHOP exchanges can decide whether to continue online enrollment, or they could follow CMS and direct employers to enroll via agents and brokers. The change is expected to be finalized in forthcoming rulemaking.

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CMS gives states a checklist in preparing 1332 waivers; it prioritizes high-risk pools and reinsurance

Last week, CMS issued a checklist for states in seeking state innovation waivers. The waivers, available under Section 1332 of the ACA, allow states to implement innovative state-based health programs and waive specific ACA requirements. Statute requires that such proposals:

  • Provide coverage “at least as comprehensive” as ACA-mandated coverage
  • Limit out-of-pocket spending to ACA-approved levels (for the 2017 plan year, the out-of-pocket limit for a public non-group exchange plan is $7,150 for an individual and $14,300 for a family)
  • Cover at least as many people as would be covered under ACA rules
  • Not increase the federal deficit

CMS is interested in 1332 waiver proposals that include high-risk pools or state-operated reinsurance programs. According to the agency, state-operated reinsurance programs can help lower premiums. States could use any reduction in federally funded premium tax credits to pay for a portion of the state’s reinsurance program.

The checklist also outlines the procedure states should follow in designing and submitting proposals. They should:

  • Submit an application with enough time to allow for enough time for implementation
  • Include a comprehensive description of the state’s proposed program design and a detailed implementation plan
  • List the provisions of the ACA (e.g., the essential health benefits) that the state seeks to waive
  • Provide written evidence of the state’s compliance with public notice and comment requirements
  • Demonstrate that the state has held at least two public hearings on the proposal

Background: States became eligible to apply for Section 1332 waivers on January 1, 2017. The waivers, if approved, would allow a state’s innovation plan to run for five years, and are not renewable (see the Deloitte analysis).

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House Ways and Means reviews status of Medicare

Last week, members of the House Ways and Means Health Subcommittee reviewed the status of the Medicare program, Medicare’s payment policies (including post-acute care) and Medicare programs that are set to expire before the end of the year.

Along with the announcement of the hearing, Chairman Pat Tiberi stated the hearing was to examine the effectiveness of the Medicare payment policies and look for ways to strengthen the quality and delivery of care.

Mark Miller, the executive director of Medicare Payment Advisory Commission (MedPAC), provided testimony in addition to public statements submitted for the printed record. Mr. Miller referenced a number of recommendations made by MedPAC in its recent March report to Congress. MedPAC will release another report to Congress later this year in June.

In recent years, MedPAC has been particularly focused on post-acute care, including skilled nursing facilities, home health, inpatient rehabilitation facilities, and long-term care hospitals. The Commission has noted in its March report that post-acute care “payment systems do not encourage efficient care and are not equitable across different patient stays.” The Commission recommended changes to these payment systems. Miller stated that implementation of MedPAC’s recommendations could lower spending by $30 billion over the next 10 years.

Background: MACRA will likely provide more incentives for hospitals to track what happens to their patients after discharge (see the March 21, 2017 Health Care Current). The subcommittee previously held hearings on ‘Legislation to Improve and Sustain the Medicare Program’ and ‘The Evolution of Quality in Medicare Part A’ in June and September 2016, respectively.

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PTAC gets a proposal for a new payment model that aims to decrease hospital stays

The Icahn School of Medicine at Mount Sinai submitted a new payment model for the Physician-Focused Payment Model Technical Advisory Committee (PTAC) to consider. The model, called Hospital-at-Home Plus (HaH Plus), seeks to reduce the amount of time that elderly, medically frail patients spend in acute care settings. It would allow patients receiving care under certain billing-code groups to receive traditionally acute-based care services in their homes.

Acute care stays can often harm elderly and vulnerable patients; functional decline, additional illnesses or injury, and other adverse effects have been found in the research literature. The Icahn proposal says that traditional Medicare payment systems do not pay home health service caregivers or physicians to provide hospital-level services at home for frail beneficiaries. They estimate that 575,000 Medicare hospitalizations could be eligible for HaH Plus episodes per year.

The proposed payment model would apply HaH Plus bundled payments to almost 50 existing diagnostic related groups (DRGs), including respiratory infections, asthma, heart failure and peripheral vascular disorders, diabetes, urinary tract infections and fever or viral illnesses. Under the model, providers would get a lump sum for an acute care episode to be treated in the home, and for an additional 30-days of transitional services. An episode of care would be triggered by an acute episode. Similar to a traditional hospital admission, episodes could be identified in an emergency department, an observation unit, during an ambulatory care visit, or at home by a home health service provider.

The payment model would have two parts:

  • A base DRG HaH-Plus payment to substitute for the traditional inpatient payment to the hospital and attending or admitting physician. This payment would cover all services rendered in pre-acute care, acute care, and the 30-days of transition services.
  • A performance-based payment linked to the total cost to Medicare for the entire HaH-Plus episode and the provider’s performance. The quality reporting measures adapted from the National Quality Forum (NQF) and the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), would focus on process of care measure, beneficiary experience, safety, and functional outcomes.

Proponents say that the model could generate up to $720 million in savings, to be split between CMS and the HaH Plus participating providers. The model is available for public comment until May 31, 2017.

Background: MACRA established the PTAC to review new physician-focused payment models that stakeholders (e.g. health systems, provider groups) submit for consideration as an alternative payment model (APM). PTAC provides initial feedback for the proposed payment model’s sponsor, including how to adhere to the HHS Secretary’s criteria for APMs (see the March 21, 2017 Health Care Current).

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Breaking Boundaries

Urgent care centers targeted to cancer patients are improving outcomes

Urgent care centers reducing emergency department (ED) use is nothing new, but a small and growing number of hospitals and oncology practices are using urgent care centers specifically for cancer patients. These centers allow patients to have same day appointments with specialists with extended hours. The goal is to better manage pain, side effects, and keep patients out of the ED, which is not only costly, but may expose them to infectious diseases.

Patients arrive at these centers sometimes surprised that they do not have to bring the care team up to speed on their condition and background: their records are already there. In addition, they get care from nurses, physicians, and other members of the care team who specialize in cancer and know about side effects and drug interactions. Common side effects of traditional chemotherapy include severe pain, nausea, fever, and dehydration. Newer immunotherapy treatments activate the immune system and can result in serious reactions if the body also attacks healthy organs and tissues. Oncology specialists can quickly evaluate and make sense of these symptoms, ideally helping the patient feel better faster, and potentially avoiding unnecessary procedures.

Johns Hopkins Hospital has reported savings from oncology patients’ use of its six-bed urgent care center, which is located next to its infusion center. Approximately 80 percent of cancer patients who receive services at the urgent care center are discharged home, at an average total hospital charge of $1,600. This contrasts with the 20 percent of cancer patients who visit the hospital’s ED and go home. These patients have an average total hospital discharge of $2,300, plus the cost of the ED visit. Other hospitals reporting early successes include New Mexico Oncology Hematology Consultants in Albuquerque, and University of Texas Southwestern Medical Center in Dallas.

Analysis: Initiatives such as these oncology urgent care centers align well with emerging payment and delivery models to encourage high-quality care. The CMS Innovation Center is developing new payment and delivery models designed to improve the effectiveness and efficiency of specialty care, including the Oncology Care Model (OMC). Under this model, physician practices are entering into payment arrangements that include financial and performance accountability for episodes of care surrounding chemotherapy administration to cancer patients. CMS is also partnering with commercial payers in the model. The practices participating in OCM have committed to providing enhanced services to Medicare beneficiaries such as care coordination, navigation, and national treatment guidelines for care.

A final rule from CMS last November says that starting in 2020, hospitals may be penalized if patients who are receiving outpatient chemotherapy visit the emergency department or are admitted to the hospital.

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