Health Care Current: May 3, 2016

MACRA: Health care transformation is picking up speed

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.

MACRA: Health care transformation is picking up speed

A year and 11 days after President Obama signed the Medicare Access and CHIP Reauthorization Act (MACRA) into law, the US Centers for Medicare and Medicaid Services (CMS) released the first major regulation, setting forth the new rules under this game-changing law.

MACRA has been a bit of a sleeper issue, and although many are just waking up to realize the groundbreaking plan it has set in motion, it has been years in the making. MACRA is poised to drive payment and delivery reform across the payer mix for the foreseeable future. It doesn’t do Washington’s annual “kick the can down the road” on the “doc fix” that simply maintains Medicare payments to all physicians under an outdated payment system. MACRA is a transformative law that builds a new, fast-speed highway to take the health care system away from the fee-for-service system and toward new risk-bearing, coordinated care models.

Last week, CMS provided a comprehensive rundown of how new payment tracks will work and which current payment and delivery models are most likely to be counted as new advanced alternative payment models (APMs) under the law. But just as important, the proposed rule put a spotlight on the fact that clinicians have less than seven months to prepare for January 1, 2017 – the start of the first performance period under MACRA’s new payment tracks.1

The proposed rule on the Merit-Based Incentive Payment System (MIPS) and APM Incentive under the Medicare Physician Fee Schedule (PFS) could be one of the most eagerly anticipated health care regulations in recent memory. Since it was released on April 27, 2016, many health care stakeholders have been poring over its 962 pages and have been learning that this law has major implications for health systems and commercial health plans, too – not just clinicians paid under the PFS. The law will allow clinicians to develop new care models and may also motivate collaboration between plans and hospitals as it encourages organizations to enter into new payment and delivery models.

Much of the buzz on the proposed rule has been around CMS’ identification of which existing Medicare APMs are most likely to be considered Advanced APMs under MACRA – those that bear downside risk and achieve new quality standards. Clinicians who achieve certain revenue or patient count thresholds through such Advanced APMs can qualify for temporary bonuses for 2019 through 2024, and for higher payment updates beginning in 2026. Notably, only six current APMs made the Advanced APM list in the proposed rule, one of which is not available until 2018: 

  • Next Generation Accountable Care Organization (ACO) Model (21 current participants)
  • Medicare Shared Savings Program (MSSP) Track 3 (16 current participants)
  • Comprehensive End-Stage Renal Disease (ESRD) Care (CEC) - Large Dialysis Organization (LDO) arrangement (12 current participants)
  • MSSP Track 2 (6 current participants)
  • Comprehensive Primary Care Plus (CPC+) (available in 2017)
  • Oncology Care Model (OCM) two-sided risk arrangement (available in 2018)

In this context, it’s not surprising that CMS expects to pay APM incentives to between 30,658 and 90,000 clinicians in 2019. This is in contrast to the 687,000-746,000 eligible clinicians whom the agency expects to receive payment adjustments through MIPS in 2019.

Although CMS expects the number of clinicians qualifying for APM incentives to increase over time, most clinicians will be on the MIPS track in the early years of the new payment tracks, which CMS is now collectively referring to as the Quality Payment Program (QPP). Clinicians will need to consider carefully assessing their current performance in the four categories that will comprise the MIPS score: quality, resource use, clinical performance improvement activities and advancing care information (a change in terminology from meaningful use of certified electronic health record technology). The resource use category could be a particular area of concern for many clinicians in light of its goal of reducing utilization for unnecessary or duplicative services and its reliance on medical coding. In order to perform well in this category, clinicians and health systems alike will need to improve their coding accuracy and adapt their care models accordingly.

Given the heated political debate over health care in Washington, DC in recent years, many stakeholders have been predisposed to taking a wait-and-see approach to many health care regulations. MACRA is different – it is the rare health care law that was passed with overwhelming bipartisan support and continues to enjoy strong support from Republicans and Democrats in Congress. This all but ensures its continued implementation, regardless of the outcome of the November elections.

MACRA is a game-changer. It was designed to disrupt our health care system at all levels. And it’s doing just that: MACRA is already creating strategic discussions around new care, payment, and delivery models. In this case – and especially given the tight deadline – it is time for all to hop on this fast moving highway.

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PS. For more information on the proposed rule, see below and the Reg Pulse Blog post, “CMS releases comprehensive MACRA rules: New law poised to shape payment and delivery reform in the future.”

1Proposed Rule, Medicare Program; Merit-Based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models, April 27, 2016

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My Take

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


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MACRA proposed rule sets the stage for MIPS and APM frameworks

Last week, CMS published a proposed rule on MIPS and APM incentives under MACRA. Taken together, CMS is now referring to the two payment tracks as the Quality Payment Program (QPP). In the proposed rule, CMS emphasized that MIPS and APMs are both tools to support three overarching goals: improving how clinicians are paid to incentivize quality and value, improving the way care is delivered, and making data more available and enabling the use of certified EHR technology to support care delivery.

CMS proposes that physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and groups that include such clinicians would all be treated as qualifying clinicians. Performance years would be based on the calendar year and payments would be adjusted in 2019 to reflect performance in 2017.

CMS expects most clinicians to fall under the MIPS track in 2019:

The proposed rule also establishes two types of advanced APMs through which clinicians can qualify for incentive payments under MACRA: advanced APMs and other payer advanced APMs:

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Implementation & Adoption

Final Medicaid managed care rule sets quality ratings, provider network, and medical loss ratio standards for states

Last week, CMS finalized changes to Medicaid managed care policies – the first update to the regulations in more than ten years.

The final rule:

  • Creates a quality rating system for Medicaid and the Children’s Health Insurance Program (CHIP): The new quality rating system will mirror the Medicare Advantage quality rating system and will be phased in over five years. CMS will also permit states to create their own systems, as long as they are comparable to the CMS quality rating system. CMS added to states’ required care quality strategies – finding and reducing health disparities and identifying people who need long-term services and supports. 
  • Implements network adequacy standards: States must establish provider network standards for Medicaid MCOs and review networks at least annually and whenever there is a significant change in program design. Notably, CMS amended the policy that services must be available in person, which may allow for greater reimbursement for telemedicine and evisits.
  • Requires health plans to meet a medical loss ratio (MLR): CMS finalized a new MLR requirement for Medicaid, setting the national MLR for MCOs at 85 percent. CMS said that this matches the industry standard for Medicare Advantage plans and large employers and that the policy is an effort to ensure health plans are prioritizing health care services, covered benefits, and quality improvement over administrative activities.

Analysis: More than 280 Medicaid managed care organizations (MCOs) care for nearly half of Medicaid enrollees, and the number has been growing in recent years. Some states have seen exponential growth in MCO enrollment, in part because states have relied on managed care to serve the new populations covered as part of the Affordable Care Act (ACA), but also because some states that had largely fee-for-service programs have migrated to managed care. For example, according to the Kaiser Family Foundation, MCO enrollment in Mississippi grew 142 percent from March to September 2015, and West Virginia enrollment nearly doubled (from 202,899 to 364,481).

As reported in State Medicaid programs: A tale of two Commonwealths, historically CMS has given states latitude to tailor their Medicaid programs. Federal law sets policies like mandatory benefits, minimum standards on what populations need to be covered, and the Federal Medical Assistance Percentage, which determines how much federal funding states receive for their program. Outside of these federal policies, state programs have varied along many dimensions.

Many consumer advocates say that this final rule creates more national standards for the Medicaid programs using managed care and aligns them with standards for exchange plans. Others say that setting an MLR for Medicaid managed care could penalize health plans that use administrative dollars for programs that aim to reduce health care spending, including fraud and abuse.

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Fewer than half of US hospitals rated “C” or below by Leapfrog

According to Leapfrog and the Johns Hopkins Armstrong Institute for Patient Safety and Quality, an estimated 33,439 lives could be saved annually if all hospitals boost their performance on key measures. Measuring performance based on medical errors, accidents, injuries, and infections, Leapfrog gives hospitals a grade from “A” to “F”. Forty-four percent of hospitals in the US got a “C” or below; 153 hospitals got the “straight A” designation for achieving an “A” grade three years in a row.

Every year more than 206,000 avoidable deaths occur in US hospitals and most of them (78 percent) occur in hospitals with a grade of B, C, D, or F. This year’s report included new data on two infection measures – MRSA Bacteremia and C difficile – that can be contracted in a hospital setting and can lead to fatalities.

(Source: Leapfrog, “Spring 2016 Hospital Safety Score,” 2016)

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Health care executives remain optimistic about revenue growth but hesitant about technology advancements and success measurement

According to a recent Harris Poll study commissioned by CIT, many health care executives are optimistic that they will see improvements in their financial performance in 2016, more M&A activity, and a sustained reliance on technology. The study asked 164 health care executives about a mix of financial and non-financial trends within the industry, including cost of care, government involvement, outcomes measurement, and support for electronic health records (EHRs).

The study found that executives had the following views:

Many health care executives also say they are concerned about data security as technology advances and about the burden of cost on consumers, and although most think that there is agreement on how to measure quality, the share of executives feeling this way has declined. More than 67 percent of executives with EHR systems say they are concerned about the security of the data shared through their system, and 63 percent say that health care costs are too high and undermine care. Nearly three in four (72 percent) health care executives believe that the sector is on track in terms of deciding how to best measure outcomes, which is a notable decrease from 83 percent in 2015.

(Source: CIT & Harris Poll, “CIT Healthcare Industry Outlook: Key Findings,” April 2016)

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Exchange customers access care like those with other coverage

According to the Urban Institute, exchange enrollees are just as likely to have had a routine physical checkup in the last year compared with people with employer-sponsored insurance (ESI) coverage. The Health Reform Monitoring Survey explored how exchange enrollees have fared in areas of access, affordability, and satisfaction in comparison to those with other types of insurance and the uninsured.

Some key findings include:

Overall, exchange enrollees with low- and moderate-incomes report having better access to affordable health care than uninsured people. Moreover, exchange enrollees report comparable access and affordability as individuals with ESI or non-marketplace non-group coverage.

Background: The Urban Institute collected its data from a sample of 18-64 year old adults that were surveyed for the September 2015 round of the Health Reform Monitoring Survey. The analysis focused on adults with incomes below 400 percent of FPL, an income group that is common in the exchanges and Medicaid.

(Source: John Holahan, Michael Karpman, and Stephen Zuckerman, Urban Institute, “Health Care Access and Affordability among Low- and Moderate-Income Insured and Uninsured Adults under the Affordable Care Act,” April 21, 2016)

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House committees move opioid bills forward

Last week, three committees in the House of Representatives passed bills to address opioid abuse. The package of bills is companion to the Senate-approved Comprehensive Addition and Recovery Act (CARA) (see the March 15, 2016 Health Care Current).

The Energy and Commerce, Judiciary, and Education and Workforce committees all advanced legislation to address this issue:

The Energy and Commerce Committee passed several other bills that are not highlighted above. These aim to encourage collaboration between criminal justice, mental health, substance abuse, and veteran’s service agencies to reduce opioid abuse. Representative Kevin McCarthy said that the House plans to vote on the bills during the week of May 9.

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On the Hill & In the Courts

MedPAC: Average margin for hospitals’ Medicare business is -9 percent

According to a Modern Healthcare analysis of the Medicare Payment Advisory Commission (MedPAC) March 2016 Report to the Congress, hospitals’ Medicare margins were -5.8 percent in 2014. However, at the same time, hospitals reported a 30-year high of 7.3 percent margins from all payers. Medicare margins are expected to still be negative in 2016, as MedPAC estimates that the Medicare margin over all hospitals will be -9 percent.

MedPAC found that hospitals that were “relatively efficient” (302 hospitals had 1 percent margin in their Medicare business) differ from the rest in several ways:

The reduced Medicare margins are likely the result of lower Medicare reimbursements, readmission penalties, inadequate quality metrics, and other stipulations set under the ACA. Hospitals with positive Medicare margins have implemented cost-cutting measures and improved productivity. To sustain profitability, many hospitals are streamlining their operations.

(Source: Dave Barkholz, Modern Healthcare, “Blog: Hospitals prosper on commercial payers as Medicare margins sink to -9 percent,” April 26, 2016)

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Federal Trade Commission says that Alaska’s telehealth expansion bill could increase access and lower Medicaid costs

The Federal Trade Commission (FTC) commented to the Alaska legislature that it expects proposed legislation to expand telehealth services could spur competition, increase access, and lower the state’s Medicaid costs. Alaska State Senate Bill 74 would change state rules and allow Alaska-licensed physicians located out-of-state to provide telehealth services in the same manner as Alaska-licensed physicians located in-state. It would also allow certain Alaskan licensed behavioral health professionals to provide services remotely.

The FTC’s Office of Policy Planning, Bureau of Competition and Bureau of Economics said it commented on the bill because the measure would remove a barrier to competition from out-of-state physicians licensed in Alaska. Because of Alaska’s size, harsh conditions, and provider shortages, the state depends heavily on telehealth services.

Alaska and Louisiana are the only two states that prohibit in-state licensed physicians from providing telehealth services without an in-person physical examination. Several Alaskan officials are focused on telemedicine as a way to alleviate the state’s shortage of physicians.

Related: A recent Deloitte Center for Health Solutions analysis, Accelerating the adoption of connected health, found that a well-planned connected or “cHealth” strategy that uses remote monitoring and telehealth services for a targeted, high-cost patient population could potentially increase cost-effectiveness under value-based payment models such as ACOs or global capitation.

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Around the Country

Hawaii governor authorizes state to apply for 1332 waiver

Last week, Hawaii Governor, David Ige signed Senate Bill 2775 authorizing the state to submit a 1332 state innovation waiver to CMS. In the state’s draft waiver, officials outlined why Hawaii is seeking to exempt itself from the Small Business Health Options Program (SHOP) and other provisions of the law (see the October 13, 2015 Health Care Current). They say those provisions interfere with the state’s 40-year-old “Prepaid Health Care Act,” which law requires employers to offer affordable coverage to all employees that work at least 20 hours a week.

As discussed in the March 22, 2016 Health Care Current, Hawaii, Vermont, Massachusetts, and other states are seeking to modify ACA requirements for their insurance markets. In March, Vermont became the first state to file a 1332 state innovation waiver. This small state is seeking to avoid building a SHOP website and instead have employers enroll directly through insurers. Colorado advocates gathered enough signatures to a ballot initiative for a single payer system, which would use a 1332 waiver for implementation. Massachusetts has posted a draft waiver for public comment that would continue to offer individual and small-group health insurance through the same marketplace.

Background: The Section 1332 waiver program was established to allow states to opt out of certain provisions of the law and experiment with other policies. Initially, Congress intended the 1332 waivers for states like Vermont, which was interested in a single payer system. However, three years later, the state decided the proposal was too expensive and decided against it. 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.

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Wearable data may assist in medical emergencies

Wearables are on the rise, and increasingly sophisticated biosensing devices have hit the market in recent years. Though the evidence on the best uses of wearable devices in improving outcomes for different populations is somewhat mixed, a recent case study published in the Annals of Emergency Medicine shows that a wearable activity tracker and smartphone app assisted emergency department (ED) staff when treating a man in his 40s in the midst of a self-limited grand mal seizure.

When the man came in to the ED, the staff noticed he had on a wearable device that tracks pulse rate. From there, they used the data to determine the timing of an arrhythmia episode and choose a rhythm conversion treatment approach. Typically in this kind of situation, the physician has to go on the patient’s self-reported symptoms to determine treatment. But in this case, having the pulse rate readings helped the medical team determine a more precise diagnosis and treatment course. Unlike a medical monitor that can identify the type of arrhythmia present, the wearable device only determined the pulse rate. However, other mobile apps can determine rhythm as well as pulse.

According to the case study, this was the first known instance of an ED team being able to use the information from an activity tracker to assist in specific medical decision-making. The increased use of these devices has the potential to provide physicians with objective information that could help guide diagnosis and treatment quicker.

Related: The need for improved emergency department decision aids has garnered attention in recent months. Another development that may help emergency department professionals is improved shared decision-making tools. Although shared-decision making between physicians and patients is common in outpatient visits, where physicians can share pamphlets, interactive computer programs, or risk calculators, the ED is sometimes considered a less-conducive environment for that type of collaboration. EDs often are chaotic and fast-paced in nature. But there is increasing evidence that decision-making tools can be useful in the ED, especially in non-life threatening situations. These may include patients with acute appendicitis who may be treated with antibiotics instead of surgery, adults with chest pain who are not having a heart attack and who may opt against more extensive tests, and mild head injuries that may not require imaging.

The Society for Academic Emergency Medicine is hosting a conference in May to identify which diseases and conditions seen in the ED would benefit most from shared decision-making aids. The Mayo Clinic is also developing such aids. The Mayo Clinic’s Chest Pain Choice includes information on the diagnosis, displays a 45-day risk of heart attack, and options for care such as observation testing. Early testing has shown that patients who use the tool increased their knowledge of options and were less likely to receive cardiac testing, without putting their health at risk. The Patient Centered Outcomes Research Institute (PCORI) authorized in the ACA to improve the quality and relevance of evidence available to help health care stakeholders make informed health decisions, recently announced funding for ED decision-making aids as well.

(Source: Joshua Rudner et al, “Interrogation of patient smartphone activity tracker to assist arrhythmia management,” Annals of Emergency Medicine, April 2016; Laura Landro, “New tools help patients make tough decisions in the ER, Wall Street Journal, April 25, 2016)

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Breaking Boundaries

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